International buyers beware
Thailand offers strong opportunities for property investors, but it is important to navigate the buying landscape carefully.
Ownership rights and financing issues are the major areas that need to be carefully investigated because Thailand continues to maintain highly protective policies that are quite different from many other countries'.
And it is unlikely to change any time soon despite calls from international investors, as successive governments grapple with the issue and typically drop it due to the highly sensitive issues surrounding national sovereignty.
'The key thing to understand is that Hong Kong and other foreign nationals are allowed to buy condominium apartments in Thailand on a freehold basis as long as 49 per cent, or less of the usable space of the condominium in which the apartment is purchased, is owned by foreigners,' says Chavalit Finch & Partners founding partner James Finch. 'They can also buy houses, but not the land on which a house sits. Typically, such land is long-leased.'
However, while the quota rules are clear many foreigners do buy land using Thai companies, in which Thai citizens own a majority of the equity. Variations on long leases also exist. For example, registering a 30-year lease at the relevant land office with an unregistered side agreement to renew for additional periods.
Regarding financing or mortgages for property in Thailand, only a few banks will lend to foreigners, including HSBC, UOB and the Bank of Ayudhaya.
'Foreigners also have to be working legally in Thailand at the time the loans are applied for,' Finch adds.
'The banks that will lend directly to foreigners will do so only for the purchase of condominiums in which the foreigners get freehold title. The only financing available for freestanding houses is via the guarantee by the foreigners of loans to Thai spouses.
'It is important also to speak to the banks in person to understand their individual requirements as each one has its own application process. All the banks also have minimum income levels for borrowers and won't lend to borrowers with lower incomes.'
HSBC and Standard Chartered are fixed at a monthly income level of 30,000 baht (HK$6,930) for a condominium. Others determine the required monthly income by a formula.
Siam Commercial Bank, for example, requires an income of three times the monthly instalment, while others base the required income on the amount of the total loan.
All of the banks have prepayment penalties for paying the loan off in less than three years. Some of the banks, for example, Kasikorn, Bank of Ayudhaya and Thai Military, deal directly with developers so, as a buyer, you may want to ask if you can apply for a bank loan through the developer.
Navigating your way through the maze of regulations can be daunting and in a country where English is generally quite poorly spoken, many investors take the wise step of finding legal representation. This will help with processes and also with ensuring the legality of the sale.
'Steps such as title search, review of the contracts and proper filing of the interests with the relevant land office are all vital when considering purchase,' Finch says.
'Real estate interests offered in Thailand may have legal problems. The vast majority of these problems are fixable, but foreign buyers do not like finding years after they have bought a house or condo that there are problems with their ownership.'
