Will Ownership Restrictions Lead To Panic In Propery Market?

[JRinger]

Sorry but I think you're the one who is confused. The 30% withholding "thing" does NOT include funds transferred with the purpose of buying a house. This was explained clearly the day after they made the law.

If your banker don't know the rule that you have to indicate funds are for purchasing a house you need to get a better informed banker.

No where did I mention "purchasing a house". I planned to build one. The bank manager was on the phone to Bangkok after I told him it was my understanding that the 30% "thing" should not apply.

Purchasing a finished house and building one seems to be a different kettle of fish.

[wilko]

Except that Thais generally will not buy 2nd hand property.

They prefer new for a variety of reasons like face, ghosts etc.

And if they are willing to do so and sense falang panic they will offer peanuts.

Just my opinion.

So no Thais will buy a second-hand house? So there's no second-hand house market in Thaialnd?????

Actually my friends' houses are mostly brand new.

I doubt if they worry about ghosts if they are going to rent it out ot a foriegner anyway

[martinhuahin]

Foreignors Warned on Land, Monday 29th Jan.

Foreign investors holding property through shell companies using Thai nominees have been warned to restructure their holdings or face prosecution.

''Foreigners using shell companies to buy housing across the country are violating two laws. One, the Land Act that forbids foreigners from holding land and two, the Foreign Business Act by using nominee structures. I recommend that they restructure,'' Commerce Minister Krirk-krai Jirapaet told foreign journalists at a dinner talk on Friday.

Under Thai law, he pointed out, foreigners can only own land if they have businesses promoted by the Board of Investment, under the Industrial Estate Act or with written permission from the Interior Ministry.

''Look around you _ all the land in Samui, Phuket and Koh Chang is in the hands of foreigners. They cannot take the land away but there's a sense of nationalism and therefore they should restructure,'' a combative Mr Krirk-krai said in response to questions from foreigners.

The resort islands of Phuket and Samui have been the focus of foreign investors who have snapped up million-dollar villas as second or retirement homes, but the imminent changes to the Foreign Business Act have begun to keep investors, developers and buyers at bay.

It is expected that among those to be hurt the most by the new rules will be companies selling villas to foreign buyers, as any foreigner will need to set up a company with at least a 51% Thai shareholding. To comply with the amendments, companies will need to change from freehold to leasehold contracts.

Market experts believe the villa-for-sale market in resort destinations will suffer as a result.

Mr Krirk-krai also said that the government would likely look at ways to plug the loopholes under which companies use Non Voting Depository Receipts (NVDRs) to circumvent FBA-mandated restrictions on foreign ownership.

''I will make sure that over the next three or four months we will plug this loophole,'' he said.

NVDRs are issued by Thai NVDR, a subsidiary of the Stock Exchange of Thailand, to foreign investors who have bought shares in listed companies that are already up to their foreign-ownership limits.

NVDR holders are entitled to full economic rights, including dividends and rights issues, but are not allowed to vote, except on motions involving delisting. Voting rights are automatically restored if the NVDRs are sold back to Thais.

Mr Krirk-krai said the military-installed government was in a rush to resolve this issue because abuse of the laws was a key reason for the fall of the previous government.

''It's not that we are backtracking from globalisation and not welcoming foreign investors, but what we want is good quality investors, not just any investors,'' he said.

''If the investors cannot observe one or two laws that are similar to those in other civilised countries, then we should not care about them.''

Taken from Bankokpost

http://www.bangkokpost.com/Business/29Jan2007_biz41.php

Well as previously said, it's going to be an interesting year....

[quiksilva]

"May you live in interesting times" is a curse in Chinese.

[johnnyk]

Except that Thais generally will not buy 2nd hand property.

They prefer new for a variety of reasons like face, ghosts etc.

And if they are willing to do so and sense falang panic they will offer peanuts.

Just my opinion.

So no Thais will buy a second-hand house? So there's no second-hand house market in Thaialnd?????

Actually my friends' houses are mostly brand new.

I doubt if they worry about ghosts if they are going to rent it out ot a foriegner anyway

I said 'generally'. Not samesame as 'no Thais'.

I did not say there is no 2nd hand market. There is. Mainly falang:falang.

You just said it yourself, Actually my friends' houses are mostly brand new.

[wilko]

What about areas where here are few or no farangs? No second-hand to speak of?

[quiksilva]

As JohnnyK said, most Thais prefer to buy brand new, actually Kasikorn Bank did an excellant survey on Bangkok based buyers regarding this topic in December.

Ok found it over at their site http://www.kasikornresearch.com/kr/eng/sea...=7924&cid=9

12 December 2006

Bangkok Residents’ Attitudes toward Buying Pre-Owned Homes(Current Issue No.1929)

KASIKORN RESEARCH CENTER (KResearch) has conducted a survey entitled “Attitudes and Behavior toward Buying Pre-Owned Homes”, focusing on those intent upon buying homes for private residence. The poll does not include purchases of pre-owned residences or assets for business purposes particularly in the central business district where vacant land is scarce. The survey, was conducted October 10-26, 2006, using a sampling group of 635 career people in Bangkok. Key points noted from KResearch’s poll are summarized in the following:

Bangkok Residents’ Attitudes towards Pre-Owned Homes –

With regard to consumer interest in new and pre-owned homes, as much as 61.1 percent of those polled opted to buy new homes; 27.8 percent wanted to purchase pre-owned residences and 11.1 percent cited that they had not made any decision yet. The reasons most often cited by those preferring new homes over pre-owned residences included uncertainty about quality (48.7 percent), high cost of renovation (31.4 percent), superstition (11.9 percent) and other reasons (8.0 percent), as well as unattractive design (in older homes), personal preferences toward new homes and prices that do not markedly differ from those of newly-built residences.

Factors toward Pre-Owned Home Purchases –

Based on the poll, the first and foremost reason mentioned by most respondents when deciding on buying a pre-owned home was the condition of the premises, mentioned by 22.5 percent of those polled. This may be because they had to take into account additional costs for renovation. The findings also showed that prices came in second as criteria for a pre-owned home purchase, quoted by 19.8 percent of these respondents. Most viewed that pre-owned homes were less costly than newly-built residences. Third was location, accounting for 17.3 percent of those surveyed. Other factors influencing respondents’ decisions toward buying pre-owned homes included the surrounding environment of the residential area, cited by 16.8 percent; design of the residence, by 11.1 percent; seller’s credibility, 7.2 percent; and tax incentives/real estate fees, 5.3 percent.

Summary and Opinions

KResearch is of the opinion that factors that prohibit pre-owned homes from receiving substantial attention include the following points:

Residence quality – We have to accept some pre-owned homes in the market have rather low market potential. This is because the sellers do not want to improve upon or add value to the property because they view that it would require substantial expense to repair or renovate and the seller could have cashflow problems, inhibiting them from undertaking such costs. Home quality includes structure, electrical systems, water supply and drainage, as well as the interior condition. If these factors are unfavorable, they will be obstacles that create a bad impression.

Price – Generally, price is the second most considered factor in buying a home. It is evident that prices inhibit the sale of pre-owned homes. Sellers want to sell them at the same price they bought them for, or higher. In some cases, sellers may have bought the property during a boom, when they acquired the real estate at a rather high price. Therefore, if sellers do not sufficiently discount or moderate their prices, after the potential buyer adds any necessary repair or renovation expense, the second-hand dwelling may not markedly differ in cost from a new home enough to motivate a potential homebuyer to opt for the pre-owned residence. Moreover, at present, new houses on sale are being competitively priced because real estate entrepreneurs have turned to developing more low-to-medium priced residences in both condominiums and single-family dwellings. So, this is placing new homes squarely in competition with pre-owned homes.

Newly-built housing projects – It is evident that newly launched housing projects, and completely built-up projects are competing rather seriously in the market. Sales promotion activities have been held in many forms, e.g., pricing strategies utilized by real estate entrepreneurs who are resorting to clearance pricing. Competition on location, e.g., advertising locations along the routes where commuter trains have been or will be built are receiving great popularity. This is particularly evident with new condo projects boasting proximity to the Skytrain, etc. Moreover, even suburban housing projects are now advertising commuter train convenience as part of planned government projects.

The behavior and lifestyle of Thais differs from that seen in countries with high pre-owned home purchase rates such as the USA, UK or Australia, etc. These markets may be influenced by such factors as city planning, conservation areas or municipal codes in those countries where real estate is more systematically controlled than in Thailand. As a result, new projects in some areas would be quite difficult to start because of legal strictures.

Due to the fact that the important business centers are primarily located in cities, this causes migration of workers. In Thailand, the major business areas are clustered within Bangkok Metropolitan Area (BMA). As a result, the migration of workers out of, or away from, BMA is rather infrequent.

However, there are some important factors that cause pre-owned homes to be more competitive than some new housing projects, such as location, particularly those in downtown areas, in a location near business areas, or in central Bangkok. Pre-owned homes in these locations will remain in demand because they are cheaper than a new house in the same vicinity. In addition, vacant land on which to build a new house is scarce and expensive. And also of importance, second-hand homes on large plots in good locations are sought after by real estate developers to base new projects.

Not sure what goes on the burbs to be on honest, but their findings above certainly tally with my experience in the LOS

[thaigene2]

Foreignors Warned on Land, Monday 29th Jan.

Foreign investors holding property through shell companies using Thai nominees have been warned to restructure their holdings or face prosecution.

''Foreigners using shell companies to buy housing across the country are violating two laws. One, the Land Act that forbids foreigners from holding land and two, the Foreign Business Act by using nominee structures. I recommend that they restructure,'' Commerce Minister Krirk-krai Jirapaet told foreign journalists at a dinner talk on Friday.

Under Thai law, he pointed out, foreigners can only own land if they have businesses promoted by the Board of Investment, under the Industrial Estate Act or with written permission from the Interior Ministry.

''Look around you _ all the land in Samui, Phuket and Koh Chang is in the hands of foreigners. They cannot take the land away but there's a sense of nationalism and therefore they should restructure,'' a combative Mr Krirk-krai said in response to questions from foreigners.

The resort islands of Phuket and Samui have been the focus of foreign investors who have snapped up million-dollar villas as second or retirement homes, but the imminent changes to the Foreign Business Act have begun to keep investors, developers and buyers at bay.

It is expected that among those to be hurt the most by the new rules will be companies selling villas to foreign buyers, as any foreigner will need to set up a company with at least a 51% Thai shareholding. To comply with the amendments, companies will need to change from freehold to leasehold contracts.

Market experts believe the villa-for-sale market in resort destinations will suffer as a result.

Mr Krirk-krai also said that the government would likely look at ways to plug the loopholes under which companies use Non Voting Depository Receipts (NVDRs) to circumvent FBA-mandated restrictions on foreign ownership.

''I will make sure that over the next three or four months we will plug this loophole,'' he said.

NVDRs are issued by Thai NVDR, a subsidiary of the Stock Exchange of Thailand, to foreign investors who have bought shares in listed companies that are already up to their foreign-ownership limits.

NVDR holders are entitled to full economic rights, including dividends and rights issues, but are not allowed to vote, except on motions involving delisting. Voting rights are automatically restored if the NVDRs are sold back to Thais.

Mr Krirk-krai said the military-installed government was in a rush to resolve this issue because abuse of the laws was a key reason for the fall of the previous government.

''It's not that we are backtracking from globalisation and not welcoming foreign investors, but what we want is good quality investors, not just any investors,'' he said.

''If the investors cannot observe one or two laws that are similar to those in other civilised countries, then we should not care about them.''

Taken from Bankokpost

http://www.bangkokpost.com/Business/29Jan2007_biz41.php

Well as previously said, it's going to be an interesting year....

Yes Matinhuahin - I read the hardcopy in the Bangkok Post too. The rest of you - forget the other stories posted above. They are nothing compared to this report. Look at who IS SPEAKING IN THIS REPORT compared with the other crap (real estate pundits, etc).

I'm afraid that's it..get ready.

[backflip]

In summary, thus far lots of panic in this forum, but none in the real estate market.

[pkrv]

"May you live in interesting times" is a curse in Chinese.

Bring it ON....

In summary, thus far lots of panic in this forum, but none in the real estate market.

In summary, lots of lemings, but no panic whatsoever!

[bingobongo]

no, no panic, just a slow grind downwards.......

The average selling price last year also dipped to 2.59 million baht a unit, compared to 3.08 and 3.73 million baht in 2005 and 2004 respectively.

http://thailand-property-guide.com/?p=news...&NewsID=300

Edited February 2, 2007 by bingobongo

[thaigene2]

Foreignors Warned on Land, Monday 29th Jan.

Foreign investors holding property through shell companies using Thai nominees have been warned to restructure their holdings or face prosecution.

''Foreigners using shell companies to buy housing across the country are violating two laws. One, the Land Act that forbids foreigners from holding land and two, the Foreign Business Act by using nominee structures. I recommend that they restructure,'' Commerce Minister Krirk-krai Jirapaet told foreign journalists at a dinner talk on Friday.

Under Thai law, he pointed out, foreigners can only own land if they have businesses promoted by the Board of Investment, under the Industrial Estate Act or with written permission from the Interior Ministry.

''Look around you _ all the land in Samui, Phuket and Koh Chang is in the hands of foreigners. They cannot take the land away but there's a sense of nationalism and therefore they should restructure,'' a combative Mr Krirk-krai said in response to questions from foreigners.

No. No need to panic.....

Mr Krirk-krai also said that the government would likely look at ways to plug the loopholes under which companies use Non Voting Depository Receipts (NVDRs) to circumvent FBA-mandated restrictions on foreign ownership.

''I will make sure that over the next three or four months we will plug this loophole,'' he said.

However, it would seem that time is of the escence..

Mr Krirk-krai said the military-installed government was in a rush to resolve this issue because abuse of the laws was a key reason for the fall of the previous government.

''It's not that we are backtracking from globalisation and not welcoming foreign investors, but what we want is good quality investors, not just any investors,'' he said.

''If the investors cannot observe one or two laws that are similar to those in other civilised countries, then we should not care about them.''

Now which part of his statements leaves anyone in any doubt that foreigners using nominee companies to own land/houses in Thailand must comply? Is there anyone left out there who thinks this is going to be swept under carpet with a subsequent mai-pen-rai?

Edited February 3, 2007 by thaigene2

[wilko]

As JohnnyK said, most Thais prefer to buy brand new, actually Kasikorn Bank did an excellant survey on Bangkok based buyers regarding this topic in December.

Ok found it over at their site http://www.kasikornresearch.com/kr/eng/sea...=7924&cid=9

12 December 2006

Bangkok Residents’ Attitudes toward Buying Pre-Owned Homes(Current Issue No.1929)

KASIKORN RESEARCH CENTER (KResearch) has conducted a survey entitled “Attitudes and Behavior toward Buying Pre-Owned Homes”, focusing on those intent upon buying homes for private residence. The poll does not include purchases of pre-owned residences or assets for business purposes particularly in the central business district where vacant land is scarce. The survey, was conducted October 10-26, 2006, using a sampling group of 635 career people in Bangkok. Key points noted from KResearch’s poll are summarized in the following:

Bangkok Residents’ Attitudes towards Pre-Owned Homes –

With regard to consumer interest in new and pre-owned homes, as much as 61.1 percent of those polled opted to buy new homes; 27.8 percent wanted to purchase pre-owned residences and 11.1 percent cited that they had not made any decision yet. The reasons most often cited by those preferring new homes over pre-owned residences included uncertainty about quality (48.7 percent), high cost of renovation (31.4 percent), superstition (11.9 percent) and other reasons (8.0 percent), as well as unattractive design (in older homes), personal preferences toward new homes and prices that do not markedly differ from those of newly-built residences.

Factors toward Pre-Owned Home Purchases –

Based on the poll, the first and foremost reason mentioned by most respondents when deciding on buying a pre-owned home was the condition of the premises, mentioned by 22.5 percent of those polled. This may be because they had to take into account additional costs for renovation. The findings also showed that prices came in second as criteria for a pre-owned home purchase, quoted by 19.8 percent of these respondents. Most viewed that pre-owned homes were less costly than newly-built residences. Third was location, accounting for 17.3 percent of those surveyed. Other factors influencing respondents’ decisions toward buying pre-owned homes included the surrounding environment of the residential area, cited by 16.8 percent; design of the residence, by 11.1 percent; seller’s credibility, 7.2 percent; and tax incentives/real estate fees, 5.3 percent.

Summary and Opinions

KResearch is of the opinion that factors that prohibit pre-owned homes from receiving substantial attention include the following points:

Residence quality – We have to accept some pre-owned homes in the market have rather low market potential. This is because the sellers do not want to improve upon or add value to the property because they view that it would require substantial expense to repair or renovate and the seller could have cashflow problems, inhibiting them from undertaking such costs. Home quality includes structure, electrical systems, water supply and drainage, as well as the interior condition. If these factors are unfavorable, they will be obstacles that create a bad impression.

Price – Generally, price is the second most considered factor in buying a home. It is evident that prices inhibit the sale of pre-owned homes. Sellers want to sell them at the same price they bought them for, or higher. In some cases, sellers may have bought the property during a boom, when they acquired the real estate at a rather high price. Therefore, if sellers do not sufficiently discount or moderate their prices, after the potential buyer adds any necessary repair or renovation expense, the second-hand dwelling may not markedly differ in cost from a new home enough to motivate a potential homebuyer to opt for the pre-owned residence. Moreover, at present, new houses on sale are being competitively priced because real estate entrepreneurs have turned to developing more low-to-medium priced residences in both condominiums and single-family dwellings. So, this is placing new homes squarely in competition with pre-owned homes.

Newly-built housing projects – It is evident that newly launched housing projects, and completely built-up projects are competing rather seriously in the market. Sales promotion activities have been held in many forms, e.g., pricing strategies utilized by real estate entrepreneurs who are resorting to clearance pricing. Competition on location, e.g., advertising locations along the routes where commuter trains have been or will be built are receiving great popularity. This is particularly evident with new condo projects boasting proximity to the Skytrain, etc. Moreover, even suburban housing projects are now advertising commuter train convenience as part of planned government projects.

The behavior and lifestyle of Thais differs from that seen in countries with high pre-owned home purchase rates such as the USA, UK or Australia, etc. These markets may be influenced by such factors as city planning, conservation areas or municipal codes in those countries where real estate is more systematically controlled than in Thailand. As a result, new projects in some areas would be quite difficult to start because of legal strictures.

Due to the fact that the important business centers are primarily located in cities, this causes migration of workers. In Thailand, the major business areas are clustered within Bangkok Metropolitan Area (BMA). As a result, the migration of workers out of, or away from, BMA is rather infrequent.

However, there are some important factors that cause pre-owned homes to be more competitive than some new housing projects, such as location, particularly those in downtown areas, in a location near business areas, or in central Bangkok. Pre-owned homes in these locations will remain in demand because they are cheaper than a new house in the same vicinity. In addition, vacant land on which to build a new house is scarce and expensive. And also of importance, second-hand homes on large plots in good locations are sought after by real estate developers to base new projects.

Not sure what goes on the burbs to be on honest, but their findings above certainly tally with my experience in the LOS

as I see it according to those figures for every 100 pre-owned houses sold another 300 new ones have to be built to satisfy the market.....does that add up?