More foreign investors put their money into Thailand property than anywhere else in Asia. There are many reasons why Thailand has become one of the top choices when it comes to investing overseas and is attracting the interest of real estate investors worldwide.
Thailand, the hub of Southeast Asia, has been a business haven for hundreds of years. Because of where it’s located, it was considered a highly strategic place to have control of for 19th-century colonial powers. Interestingly, Thailand was the only area in this part of Asia that didn’t end up being colonized.
Translate this into today, and you’ve got an incredibly strategic property market where you can reap the rewards. Vietnam, Laos, Cambodia, and Myanmar are all cities with rapidly growing property markets – and each one is located less than an hour by plane away from Thailand. The result is access to cheap labor with a consumer base of almost 60 million.
When it comes to the Thailand economy, it doesn’t just need fast-growing neighbors to stay afloat. In fact, Thailand has a pretty solid economy on its own, especially when you compare it with other markets that are still in the growing stages around the world.
One of the most significant buffers for Thailand’s economy is their exports. You will be able to find Thai exports in practically every supermarket in the world. For example, Red Bull can be found everywhere, and this giant, global brand originates in Thailand.
Bangkok is one of the biggest tourist cities in the world – even coming out on top of London and Paris. Thailand also has a robust startup network that has grown in leaps and bounds over the past few years.
Of course, this type of booming economy lends success to the property market in the area as well. There is a need for a middle class that up until a few decades ago didn’t even exist.
The Popularity of Thailand’s Property Market
Thailand boasts a property market that is ranked number one among foreign investors when it comes to Asia, making it highly sought after. Real estate investors and buyers from around the globe are working out how they can become part of Thailand’s real estate sector – whether they’re investing from overseas or have chosen to retire there.
So, while the popularity of Thailand’s property market is evident at this point, this is not to say that Thailand doesn’t come without its fair share of issues. In fact, a military coup took over in 2014 and are technically still in control even after the 2019 elections. What this means is that freedom of press and freedom of speech isn’t the most lenient here, and the Thai education system is also lacking.
However, Thailand does have its advantages as well. The country as a whole is incredibly welcoming and warm towards anyone from foreign investors to tourists – in fact, you can open your own Thai bank account in less than 20 minutes. As a result, there’s a lot less bureaucracy to wade through as a property investor – especially compared with the rest of Asia.
Thailand has also proved itself to be resilient and great at bouncing back when going through tough times. Economists have a nickname for this Asian country as a result: ‘Teflon Thailand.’
The proof is in the history of this Southeast Asian nation. Over the past 100 years, there have been 18 military coups along with countless recessions. However, Thailand has been able to bounce back from all of this and still end up a lot better than many of its neighbors. While Malaysia is an exception to this, Thailand is still up there when it comes to resilience.
With a new king and the current government, there are some fundamental changes that can be expected. In saying this, though, if you look back at the history of Thailand, there is a good chance that the property market will stand strong well into the future.
Can You Buy Thai Property as a Foreigner?
While we’ve indicated that Thailand is an easy place to do business above, this doesn’t mean that the entire process is going to be straightforward. In fact, one downside to Thailand is that it’s not as open as some other Southeast Asian countries when it comes to investing, and it does have specific rules regarding property. In fact, most foreigners are only permitted to own a maximum of 49% of a business or company – unless they’re from America.
Under the Thailand-US Amity Treaty, Americans are permitted to own 100% of a business or company. This makes Thailand a great place for an American to invest in a business. Of course, with bureaucracy paving the way, owning or forming a business in Thailand as a foreigner is still hard work that requires approval from many different government agencies.
When it comes to owning real estate, they’ve got some pretty specific regulations. Foreigners can only invest in condominium units that are located above the ground floor, and they’re only permitted to invest in a building where less than 49% of the units have been invested in already.
In addition, once you’ve bought your property it has to be registered at the Land Department where they will charge you a 2% duty fee. This can be divided between the vendor and the buyer.
If you are investing more than US 950,000, you can own landed property – however, you must get special approval for this, and there have only been a few people who have been granted such an investment.
There are some people out there who believe you can buy land in Thailand through what is called a ‘nominee‘ structure. However, in all reality, this is actually illegal, and according to the Thai constitution, it is forbidden. In fact, the government has recently cracked down on ‘nominee’ structures, making it a lot more challenging to do.
Usufructs in Thailand
A Usufruct is a scenario where a foreign investor can be granted temporary ownership rights of a property. While foreigners aren’t always prioritized for this type of investment plan, they are often granted permission by the Land Officer.
If a person enters into an agreement with the vendor or owner, it is termed an ‘usufructuary’. A lease of up to 30 years is the most common agreement term with a plan like this. Once the agreement has been signed, the owner is not permitted to transfer or sell the land until the contract is up. The usufructuary must also keep the property in the state which it was at the time of the signing, and they are responsible for managing the property, as well as any duties or taxes associated with it during this time.
If the vendor wishes, the usufructuary is also require to insure the property, and they must pay any premiums as well. An usufruct agreement cannot be inherited by next of kin as the agreement dies with the owner.
If the vendor wishes to transfer the rights of the property to a third party, they may do so, and the usufruct is still liable for any damages caused by the third party. Additionally, the usufructuary may also transfer rights to the land through inheritance. The last port of call, however, is the Land Department, who determine if this type of transaction is permissible or not. Interestingly, there is no annual tax.
Thai Condos: Buying and Selling them Off Plan
Many condo units in Thailand are sold by the developer either during or before they have been constructed. When things are done this way, buyers can enjoy large discounts, and the developer has access to loans for the construction itself, as well as being able to say that their project is in high demand and selling out.
Typically, it takes three to five years for a condo building to be built in Thailand. This is why there’s a market for buying Thai condos off-plan and then selling them on for a profit when the construction is almost completed.
You can buy and transfer the right to purchase a unit once the construction has been completed. This means that you don’t have to wait necessarily until the construction phase is finished before selling your property on – or at least pin down a sale agreement.
To put your name to a unit and sign the sales agreement, you’re required to have a deposit of 10%, along with another 10% that you can produce over the next few years. You are required to pay monthly installments of the second 10%. Of course, across a number of years, property values can go up significantly. There have been examples of foreign investors purchasing Thai condos off-plan and selling the sales agreement years before the condo has been constructed at premiums even beyond 100%.
Of course, this type of investment comes with its risks. The worst case scenario is that you have to scrap the contract, which would result in you losing your down payment and any installments you have paid off. If property values in Thailand decrease significantly, this could happen.
Property Taxes in Thailand
When it comes to purchasing a property in Thailand, you don’t have to pay an annual property tax. However, you do have to pay a yearly management fee that includes general upkeep, staff, cleaning, and any electricity costs. While this isn’t technically considered a tax, it’s still money that you will have to pay annually when you own a property in Thailand.
When it comes to the exact cost of this annual fee, it all comes down to the density, size, and standards of your building. If you’re buying the average Thai condo, you can expect to pay approximately 500 baht per square meter annually.
If you choose to transfer your property, you can expect to pay a fee of 2%, which is based on the appraised value that is given to your property by the government. Usually, half of this fee would be paid by the vendor and half by the buyer. You must also pay a stamp duty of 0.5%, and this is typically paid by the vendor.
If you sell a property within five years of purchasing it, then you may have to pay a business tax of 3.3%. This will waive the stamp duty fee, but this, of course, it more than you would pay for the stamp duty.
If you’re considering renting out your Thai condo, due to the high level of deductions rental income taxes are low. Of course, the exact amount of tax you’ll have to pay on your rental income will depend on the deductions you’re permitted.
Generally speaking, rental income tax isn’t more than 5% and can sometimes be a lot less.
Best Places to Invest in Thailand
Because Thailand is such a big nation, there are many towns, resorts, and cities that can be great locations for investing in foreign property. Remember, though, that foreigners are only permitted to own Thai condos which exempts villages and smaller towns. However, there are still plenty of options elsewhere.
One thing to mention before we talk about location is that selling your condo is not going to be as easy as buying it. This is because the rate that they’re constructing new condos is currently above demand. Additionally, Thai people tend to prefer to purchase a new condo as opposed to one that’s been lived in already. With this in mind, let’s take a look at some of the places in Thailand where you may want to invest in property.
Bangkok
Bangkok has a longstanding reputation as being a great entry point for businessmen and foreign traders that want access to Southeast Asia. While the city has clearly changed a lot over the past three hundred years, its reputation as one of Asia’s most significant towns remains the same.
Bangkok is so large, in fact, that you will find ‘sub-market’ within some of its neighborhoods that have their own mini-economies. The two most important things to consider when looking at property in Bangkok are access and centrality. This means that you want to try and remain as close to the city as possible.
For example, properties located close by BTS Skytrain station are worth double or even triple the price of properties that aren’t. In fact, any condo that’s located within 100 meters of a central transit station won’t be sold for below 200,000 baht per sq. meter.
When your condo is more than 500 meters away, the price is heavily reduced.
Lumpini
Lumpini Park is arguably one of Bangkok’s more exclusive areas to buy property, which means that these are some of the most expensive neighborhoods in the city. This is because not only is Lumpini central, but it’s also quiet, safe, and green. The sense of calm found in Lumpini is difficult to find elsewhere in a city that’s so populated.
Sathorn/Silom
These districts are where you’ll find the majority of Bangkok’s finance companies and institutions. As a result, similar to Lumpini, this is another wealthy area where both locals and expats live and work.
Because it is considered Bangkok’s CBD, property prices are going to be high. Those who live in Silom and Sathorn have easy, close access to the city, which drives up the price of the property. In addition, there are a number of international restaurants, as well as other amenities that are only a walking distance away.
You will find that Silom is one of Thailand’s most expensive property markets, but as soon as you go a bit further out of the CBD, prices begin to drop.
FAQ’s
Is it Safe to Buy Property in Thailand?
The first thing to address when answering this question is that foreigners are not allowed to own land in Thailand. This means that if you are interested in buying a property or land in Thailand, you either have to purchase your property through a limited company or sign a 30-year leasehold.
As we’ve outlined above, you can also own a Thai condo, as long as 51% of the building your condo is in is owned by Thais.
As a foreigner, you are permitted to lease land in Thailand for 30 years. However, this is a more unusual way to go about foreign investment, and only really occurs when a foreign man marries a woman who is Thai. The Thai woman then purchases the land and signs a lease agreement with her husband.
It’s essential to make sure that all the information on your deed is correct and accurate, no matter who you are leasing the land from. It’s also important to make sure that the land has the correct title.
When it comes to the land title, things are slightly different in Thailand. In fact, there are seven different types of land titles in Thai property, but only three of these can be leased.
One important point to note here is that there have been many examples of vendors or developers selling condos illegally for leases longer than 30 years. They would either sell them on 60-year leases or even 90-year leases, which was calculated by 30 + 30 + 30. However, this is illegal and many of these examples ended up in front of the high court in Thailand as a result. This is why it’s crucial that you read through each clause on your agreement, as has been discussed above.
Another alternative to investing in property in Thailand is by doing so through a company. Remember, though, that if you’re a foreigner, you aren’t permitted to own more than half of the company that you’re investing property through. The company can, however, choose to sign the rights of the company over to you if they want to. Thai immigration will be monitoring everything, though.
How Can I Invest in Property in Thailand?
We’ve gone through the different ways that you can own land or invest in a property in Thailand. Now, let’s talk about how you can invest I property in Thailand and what steps you need to take in order to do so.
- Legal
Advice: it’s essential that if you’re thinking about investing in Thai
property that you seek legal Advice. The main reason for this is to avoid
getting mixed up in embezzlement or fraud. A local Thai lawyer can provide you
with all the legal help you need to purchase the property. A lawyer needs to be
able to help you size up the title deed and make sure that everything on it is
accurate and true. You also need to make sure that the person leasing the land
or selling the property has the authority to do so.
- Go Slow:
while you may be impatient waiting to invest in Thai property, it’s important
to take your time. In fact, it could take a few months to find the right kind
of property, so it’s important not to rush things. There are many things to
consider when looking for the perfect property, including distance to public transport,
distance to amenities, and how much other properties are in the surrounding
area.
- Get a
Property Agent: recruiting the help of a real estate agent is going to be
extremely helpful, especially if you’re a foreign investor. The biggest
challenge with finding a property in another country is the language barrier.
If you have a property agent who speaks the language, you’ll be at an
advantage.
- Deposits:
if you are happy with the terms that the vendor has stipulated, they may then
ask you to make a deposit so that the vendor can reserve the land or property
for you. Make sure that both you and the vendor sign a clause, so you’re on the
same page when it comes to expectations regarding the deposit.
- Contracts: when signing anything, make sure that your lawyer is present and overseeing the transaction. If the property you are purchasing is still under construction, make sure that the agreement permits you to make monthly installments over time.
Common Pitfalls to Avoid
Now that we’ve gone through the do’s or property investment in Thailand, let’s talk about the don’ts:
- Lack of
Title Search: it’s crucial to thoroughly examine the title deed so that you
can verify that the vendor is legally entitled to the land you’re purchasing.
Investigating the title can also help work out zoning, planning, and
environmental codes. There have been examples of foreign buyers purchasing
property in Thailand only to discover that they are a lot more restricted when
it comes to regulations than they thought.
- No Due
Diligence: every time you make a big financial transaction like buying a
property, it’s important that you complete your due diligence to verify that
your investment is sound and you are aware of the risks involved. The more
research you do into the vendor or the company that you’re thinking of getting
involved in, the less chance you have of being caught up in something that you
can’t get out of, even if you want to.
- Not Using
a Lawyer: while it’s possible to invest in property or land in Thailand
without a lawyer, it is ill-advised. If you’re a foreigner and not familiar
with the legal system of the language, however, this is high risk. Remember
that you are investing hard earned money into this, and a lawyer can make sure
that everything in the contract is as it should be.
- Not Using a Real Estate Agent: if you look into a property where you’re from, you’re usually advised to do so through a real estate agent who knows the area, just in case there’s something that you’re missing. In a place like Thailand, if you’re not familiar with the areas and local neighborhoods, you’re going to find it difficult to know even where to begin. Recruiting the help of a local real estate agent can help you make the right decision when it comes to choosing Thai property.
Things to Consider
If you’re American, then you may have a slight advantage against British foreigners attempting to invest in Thai property. This is because the USD seems to be stable against the Thai Baht, whereas British Pound Sterling has weakened recently. When you purchase a condo in Thailand, you must wire the money from your country of origin into your Thai bank account. You also need to provide a letter of transaction so that you are able to prove the money was transferred from your bank account within your country of origin. This means that you are not permitted to pay cash for your property – but you can if it’s second-hand. Whether your property is new or not, you always have to prove the origin of your funds with a letter of transaction.
Another thing to consider when purchasing property in Thailand is that if you are married to a Thai woman and you purchase a property or land together, there is a 2% charge on the valuation of your home. However, if your wife passes away, the agreement becomes void. Additionally, their family members have the rights to choose whether you continue to have a stake in the property or not. This is a big reason why foreign investors often look to a usufruct as a way to avoid this scenario if it were to ever occur.
Final Thoughts
Thailand is clearly a stronghold when it comes to property and investment, and its robust economy is only getting better, allowing for more and more foreigners to settle down in this part of Southeast Asia and put their hard-earned money into something tangible. If you’re thinking of investing in land or property in Thailand, make sure to read this article first, so that you can educate yourself on the do’s and don’ts or investing in property in Thailand.
Charlot is a freelance writer and VA with over 7 years of experience. She’ve developed and produced original content for a variety of publications and audiences worldwide.