Published on 15 October 2005 at 03:49 pm
Filed under: Asia:- Thailand Property Guides » Thailand: A Guide for Property Investors
As Thailand has become far more universally popular as a tourist destination, so its real estate sector has benefited from increased foreign interest and investment.
A property investor has a wealth of choice and opportunity in Thailand and in recent years the entire real estate sector has returned impressive capital growth figures as well as increased rental yield returns - but issues still remain relating to freehold ownership and these present an investor with a series of challenges to navigate.
Thailand was once such an exotic long haul destination that it acquired an almost mystical appeal with adventurous Western backpacking travellers in search of destinations with a difference. But the sophisticated development of tourism in Thailand now means that it is universally popular and accessible for all types of holiday maker. It is of equal appeal to the young and adventurous in search of vibrancy and excitement with Phuket and Ko Samui offering great nightlife as it is of appeal to those in search of culture and relaxation.
As a result Thailand has become the most popular South Asian country for holidaymakers and has spawned a holiday home market off the back of its tourism sector, especially around the resort town of Phuket.
The 2004 Tsunami’s devastating blow has not dented Thailand’s appeal and it has not restricted tourist numbers or the numbers of those buying second homes, investment properties or retirement real estate in the country.
The rise in the appeal of Thailand was fuelled by the country’s sudden increased affordability for overseas investors and visitors that followed on from a brief but uncomfortable period of economic uncertainty in Thailand that began in 1997 and resulted in the country’s currency, the baht suffering severe depreciation. The depreciation of the baht made holidays and properties in Thailand effectively cheaper for overseas visitors and investors and increased their purchasing power. An increase in overseas interest led to an increase in foreign investment and in turn this helped Thailand recover its economic fortunes and tourism still remains a key sector for ongoing economic success.
Property investors who bought real estate in Thailand post 1999 have witnessed impressive capital growth figures as Thailand has been enjoying a strong period of economic recovery. The best returning investments are apartments in the major cities which rent out to the domestic market and which have been enjoying increasing rental rates chargeable, as well as resort properties for development and resale to overseas second homers, retirees and expatriates.
The appeal of Thailand is obvious, the attractions of the property and holiday market are intense and the future prospects for the profitability of the property sector are very good indeed - however there are restrictions placed on overseas buyers who wish to own land in Thailand. It is possible for a buyer to own a property but not the land it sits on. The majority of those who buy in Thailand are interested in a single property - a holiday home for example - and for these people the typical solution is to purchase a renewable thirty year lease on the land and to pay for up to three renewals upfront and have a contract giving them first right to buy should the laws in Thailand change.
For an international property investor interested in multiple properties or even land to develop this option is not suitable. But as with any restrictive clause like this there are always ways around the problem and in Thailand there are many consultancy companies wiling to assist the overseas investor establish a limited liability company with a local Thai majority holding and negate the effectiveness of the Thai majority through the issuance of preferred and ordinary shares for example. This is just one such solution to a problem that is predicted to change anyway, and basically an investor who can recognise the opportunity for profit in Thailand’s property sector will soon navigate the necessary restrictions and controls and access the market and profit from it.
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