Admit it: Somewhere on your bucket list resides a notation reading, “Buy home-away-from home in exotic country.” If your definition of exotic centers on nations in Southeast Asia, you couldn’t choose a better relocation destination than Thailand.
Once known as Siam, Thailand is full of charm, history, gorgeous scenery, sophisticated cities, gracious people and it’s become a popular landing spot for ex-patriots, and so if you decide to buy a condo there, you’ll feel right at home.
That stated, don’t sell your place and buy a plane ticket to Bangkok until you apply due diligence. Research the destination, the condo market and prepare to enlist professional help to minimize problems. Put the puzzle pieces into place and you won’t hesitate to crate your stuff, learn the language and relocate to your dream location.
1. Balance Romantic Notions with Reality. When blogger Andrew Henderson publishes news about buying real estate in Thailand, he knows the lay of the land because he lives there. Henderson says that while property values have risen over the past 15 years, buyer beware: A laissez-faire attitude exhibited by everyone from government officials to property developers can translate to shoddy construction, minimal regulatory oversight and property values can fluctuate so wildly, anyone new to the market in this corner of the world must seek professional guidance.
2. Compare Thailand to Competitors. Condo prices in Thailand are around 60% higher than they are in the Philippines where, according to Henderson, foreigners are better treated. That stated, hot Asian markets like Singapore or Hong Kong are more stringently regulated by their governments, so your Thailand purchase could be subject to fewer restrictions. Since foreigners can’t own land in Thailand, the condo market has become a favorite way to buy a home in Bangkok, Pattaya, Phuket and any of the other developed beach communities springing up.
3. Anticipate Worst Case Scenarios. Shop for a condo in Thailand and you’ll run into off-plan units (condos still in the planning or construction stage) and existing units. Both have benefits if you know what you’re getting into and your real estate agent who understands your purchase objectives. Of prime importance when considering an off-plan buy is understanding worst case scenarios: a developer goes bankrupt before the project is complete. The project loses financing. Vendors supplying materials can’t deliver due to myriad reasons. Such situations can leave you holding the bag after you’ve invested cash. Of course, advantages of off-plan buys is getting in on the ground floor, a prime location, bargain price and price freeze assurances. But here’s the bottom line: your cash goes directly to the developer and he holds it in his bank account.
4. Don’t Believe Everything You Read. Even if developers romance you with the word “quality” when describing condo offerings in Thailand, don’t assume that you’ll wind up with your definition of the word-especially if you’re accustomed to, for example, U.S. construction codes, standards, checks, balances, laws and regulations associated with the Thai real estate market. Even condo units promoted as luxury digs may not live up to the name. An absence of enforceable zoning laws is just one of the reasons you shouldn’t believe everything you read. Further, it’s a seller’s market, so even units adjacent to each other could have wildly different price tags attached.
5. Buy Because You Love It; Not to Make a Profit. Western minds are conditioned see the purchase of real estate as an investment, so even when markets are depressed, the hope of future appreciation remains. Not so in Thailand where the standard is around 5-percent growth on investment for everything from simple to luxurious units. There is fierce competition for condos, lots of new construction and soft profit margins, so this is not the nation to pick if you’re looking to make a killing in real estate. On the other hand, a 10-percent down payment is standard, so your initial investment needn’t be huge to snag an idyllic place.
6. Choose a Realtor There’s no shortage of realtors specializing in Thailand condos on the internet, so use your favorite search engine to sleuth them out. Links to sites like http://www.thaiproperty.net/, http://www.companyvauban.com/, http://www.thaiproperty.com/, http://www.premierinternational.com/ and http://www.fivestars-thailand.com/ come up early on search engines, so there’s an presumption that they may be the most popular. That’s not always true. Look for realtors with excellent credentials, recommendations and licenses. Little things mean a lot: A realtor using an English translator to develop copy for the website, for example, can give browsers a more accurate picture of condos than do those rife with misspellings or confusing sentence structure.
7. Engage an Attorney. Once you find the Thailand condo of your dreams, it’s time to get a real estate attorney who understands Thailand’s banking system, construction industry and the condo market; Preferably, someone well-versed in the 1979 Thailand Condominium Act that states “foreigners can own condominiums anywhere in Thailand 100-percent outright, as long as the building has not already sold its 49-percent foreign quota.” This policy underpins condo sales and it’s upheld by Thailand’s Land Department. Need help finding the right legal representation? The Thailand Law Forum http://www.thailawforum.com/bangkok-lawyer.html lists attorneys by area of expertise.
8. Yes, You Can Obtain Financing. If you’re moving from a country where you enjoyed plenty of financing options, you won’t find much variety in Thailand. Banks underwrite condo sales, but down payments and all-cash transactions take a circuitous route. Cash leaving your domestic bank will probably travel through the banking system of another Asian nation before it lands in the hands of Thai bankers handling your condo deal. It’s the law: According to section 19 of the Condominium Act, “the purchase price for the condo must have been transferred into Thailand as foreign currency and exchanged into Thai baht by a licensed financial institution inside Thailand.” If you transfer $50K USD or more, you must also sign a Foreign Exchange Transaction form (FET) and report this to the Bank of Thailand.
9. It’s All About the Paper. Ownership deeds issued by Thailand’s Land Department must include: 1) The position and location of the building, 2) The position, location and room measurements of the unit, 3) Ratio of responsibility for common areas, 4) The owner’s name, 5) An index for the registration of rights and juristic acts and 6) Signatures of officials plus stamps and seals. If you’re purchasing an existing unit, documents attesting to the 49-percent foreign ownership limit are important. You will likely have to come up with such documents as identity cards, passports, marriage, divorce or death certificates plus a power of attorney if your legal representative is handling the details of your condo purchase.
10. Expect to Deal with a Condo Association. If you’ve had the experience of living in a condo governed by homeowners association, you’ll probably find that condo ownership regulations dictating everything from move-in protocols to the payment of assessments aren’t as draconian. While there are rules-for example: you can’t run a business from your condo and there may be a limit on pets-as an owner you’ll share decision-making responsibility with your neighbors. Anticipate assessments and fees based on your unit size; the bigger the apartment, the higher your share. Worried about future assessment hikes? Scour association covenants for the existence of reserve funds to handle such situations.
11. Don’t Plan on Making Your Condo Part of Your Legacy. The reason foreigners aren’t permitted to buy land in Thailand involve the nation’s desire to preserve land ownership for future generations of Thai citizens, so while conventional wisdom may tell you that “back home” you could leave your condo to your kids, things are different in Thailand. Your heirs must be able to prove to the government that they meet every qualification for ownership that you did when you bought your unit if you leave the place to them. The only way to get around this is to stipulate-in your will or via another legal document-that your condo is to be sold following your death so your heirs receive profits resulting from the sale.
12. There is Good News. Condo property taxes in Thailand? They don’t exist. You read that right: Land and house taxes don’t apply to condo owners. The building’s owner is responsible for paying property taxes, but have your lawyer make certain there’s an escrow account tied to your purchase in case the matter of your responsibility for taxes is unclear. That doesn’t mean you’ll escape tax free: when you sell your unit, anticipate transfer fees, document fees and new taxes that may be levied over the time of your occupancy. Thailand’s government occasionally puts into place condo purchase stimulation programs underwritten by new taxes from time-to-time, so keep up with real estate tax news once you’ve made the big move.