Boom Time In Bangkok

[TizMe]

From Escape Artist.com by Andy Guest.

After years in the doldrums, Bangkok’s residential property market has re-awoken with a vengeance. Property prices in the capital surged by an average of 16% last year and the trend is set to continue, with new building projects dotting the city and new life being breathed into the ‘ghost-scraper’ construction sites abandoned after the 1997 economic meltdown. Major real estate developers have said that they will be investing over B100 billion (US$2.5 billion) in residential property in the central business district alone, within the next three years. With 24-hour working the norm on most construction sites, Bangkokians are likely to be lulled to sleep by the sound of jackhammers for some time to come.

The market has received an injection of confidence from the sustained recovery of the Thai economy – despite the effects of a severe downturn in the all-important tourism industry buffeted by the effects of 9/11, the Bali bombing, the SARS crisis, the war in Iraq and the latest disaster, the bird flu scare. The Taksin government is predicting economic growth of 8% growth in 2004, and Thais are figuring that if the economy can not only survive, but also grow, during these uncertain times, then it is fundamentally strong enough to keep them in their jobs for the foreseeable future.

Banks and finance houses that are lending money again for property purchases are fuelling the boom, with advertising hoardings throughout the city shouting out the latest deals available. Led by the Government Savings Bank, financial institutions are pumping billions of Baht’s worth of cheap credit into the marketplace. The bank loaned B68 billion (US$1.7 billion) in the second quarter of 2003, nearly doubling its lending of B37 billion (US$0.92 billion) in the comparable period in 2002. Housing loans from government sources amounted to 46% of the total in the first half of 2003. Thailand’s new found position as a net trading creditor, fuelled by rising exports to China and other East Asian countries, means the government has cash in hand to stimulate the previously sluggish housing and retail sectors.

The mix of new housing developments is changing. Real estate companies continue to focus on luxury developments of over B3 million (US$75,000) per unit to meet the demand of Thailand’s expanding middle class, but there is now greater emphasis on building houses and condominiums that meet the budget of the ordinary working family. New starts in the mid-range band of B2-3 million (US$50-75,000) per unit are increasing and developers are taking up the government’s challenge to build affordable homes that cost under B2 million for the army of workers previously shut out of the market. Thais are becoming much more demanding in terms of both the quality of building materials used and the type of property they want, with townhouses and detached homes on managed housing estates in the suburbs becoming increasingly popular. The reason is partly improved infrastructure, with the Skytrain and soon to be opened Mass Transit Subway system making the business districts more easily accessible from the outskirts of Bangkok. Northern districts such as Ram Intra, Rangsit, Nonthaburi, and Chang Wattana are the hotspots of housing estate development, while the downtown areas surrounding Silom, Sathorn, and Sukhumvit Roads remain the most active areas for new condominiums.

What does all this mean for the expat wanting to buy property in Thailand? Firstly, the rules governing foreign property ownership have not changed. In some respects, this is good news, since potential foreign investors have an established set of rules to follow, but the downside is that the rules are still overly complex and highly restrictive. Foreign nationals are not permitted to own freehold titles, the only exception being where the foreign national has invested a significant amount of money (about US$1 million) in stocks, securities, or companies, and has Board of Investment Promotion (BOI) approval, in which case the BOI may recommend that the foreign national be permitted to hold a freehold title not exceeding an area of 1,600sq.m. The only other ways for foreign nationals to own freehold titles are to form a private limited company that then owns the title, a mechanism the Thai authorities are starting to take a dim view of, or to have a Thai national (usually the foreign national’s spouse) hold the title – a very risky option. Officially, foreign nationals can hold leasehold titles and usufructs for a period of 30 years, but in practice, leaseholds can be obtained for a 90 year period using the “30+30+30” mechanism, whereby a 30-year lease is agreed between the freehold title holder and the lessee, and two legally binding extension contracts for further 30-year periods are concluded. The easiest way to own property in Thailand is still by purchasing a condominium. Foreign nationals wishing to buy a condominium have to fulfil one of the following three conditions:

• The foreign national must be a permanent resident, or
  
• Investment promotion privileges must be obtained from the Board of Investment, or
  
• The funds used to buy the condominium must originate from a third country.
  

The last condition means that anyone with sufficient funds is able to purchase a condominium in Thailand. Currently foreign nationals are restricted to buying condominiums only in Bangkok and Pattaya, unless approval has been obtained from the Board of Investment (BOI). There are some restrictions on the number of condominiums in a building that can be owned by foreign nationals. This is usually 49% of the total number of condominiums, but under BOI privileges, this can be waived.

Secondly, the real bargains to be had following the Asian financial meltdown of the late 1990s are becoming more difficult to find, as Thais are aggressively snapping up houses from desperate owners still in negative equity. The effect of inflation means that prices are starting to reflect their proper market value.

Thirdly, real estate prices are predicted to rise steadily over the medium to long-term, as long as the government takes care not to allow the kind of bubble economy that caused so much damage in the 1990s. This is a double-edged sword for the foreign property investor. On the one hand, people who enter the market early enough are likely to see a good return on their investment. On the other hand, getting in on the market is going to cost more.

The foreign property market has slowed down considerably due to increased competition and rising prices and consequently the market is starting to respond in an attempt to maintain inward investment. Many foreigners resident in Thailand ask whether they can get a mortgage or loan from a Thai bank to purchase property. Until recently, the simple answer was no. Even now, the “main street” Thai banks are unwilling to lend money to foreign nationals for almost any purpose –companies with foreign shareholders find it difficult to obtain business overdraft facilities. However, the more progressive finance houses are starting to take an interest in the market for financial services provision to expatriates. Leading the way is the TISCO Finance Public Company Limited http://www.tiscogroup.com/en/index.htm, which will consider giving housing loans of up to 90% of the value of the property to foreign nationals who are domiciled in Thailand and have the “right credentials”. Whilst each case is judged on merit, successful applicants are likely to be permanent residents, or be able to prove several years of residence in Thailand on a non-immigrant visa, and have proof of a secure monthly income in the form of offshore earnings or a permanent job in Thailand (for which a work permit must be presented). Applicants need to show evidence of solid banking record in Thailand, and lenders may seek additional evidence of long-term commitment to the country, such as having a Thai spouse or dependent children. Obtaining a loan from a Thai finance house is not likely to be easy, and negotiating the maze of foreign property ownership rules will possibly be made even more difficult by the fact that the funds for the purchase originate in Thailand, but the availability of housing loans for foreign nationals is at least a step in the right direction.

Bangkok is central to the Taksin government’s vision of making Thailand the hub of the Southeast Asian economy. With steady growth predicted and a revived housing market, there has never been a more exciting time to invest in property in the City of Angels. If only something could be done about the traffic.

Notes: Financial figures in this article were obtained from The Bank of Thailand. Exchange rate quoted: B40 to US$1

Waiver: Readers should obtain advice from a reputable professional before entering into contracts. The author accepts no responsibility for actions taken by third parties arising from the contents of this article.

Andy Guest can be contacted by e-mail at [email protected] -

[TizMe]

Currently foreign nationals are restricted to buying condominiums only in Bangkok and Pattaya, unless approval has been obtained from the Board of Investment (BOI).

Is this statement true?

[Basher]

http://www.tiscogroup.com/en/index.htm

is this an advert?

Is 'Tiz' co group your own little company?

we need to be told!!

Bash

[otherstuff1957]

The boom is real enough! I've been shopping for a Baan Teeow for the past couple of weeks and everytime I find the ideal house it's already sold!

[dr_Pat_Pong]

http://www.tiscogroup.com/en/index.htm

is this an advert?

Is 'Tiz' co group your own little company?

we need to be told!!

Bash

The link doesn't work for me. Thus I am wary. Very wary.

[dr_Pat_Pong]

The boom is real enough! I've been shopping for a Baan Teeow for the past couple of weeks and everytime I find the ideal house it's already sold!

The " ideal " ones usually are.

[Basher]

Will the same thing happen again same as 1997?

Another crash would do wonders for my bank account...

I was working for US$ then and it was great for me, not so good for others I know, but a lot of expats made a lot of money on exchange rates back then.

I feel a liittle excited ....

[Basher]

http://www.tiscogroup.com/en/index.htm

is this an advert?

Is 'Tiz' co group your own little company?

we need to be told!!

Bash

The link doesn't work for me. Thus I am wary. Very wary.

Doc try this link

Bash

http://www.thaipro.com/z1009b/748_thailand.html

[TizMe]

http://www.tiscogroup.com/en/index.htm

is this an advert?

Is 'Tiz' co group your own little company?

we need to be told!!

Bash

Got nothin' to do with me Bash.

Similarity to my Sign in is a coincidence only.

I think that you would make a good conspiracy theorist though...

[Basher]

I like to think of myself as a bit of a cage rattler....

But my mates just say ######....

Bash

[englishoak]

Tiz true it's going bananas here at the mo & has been for a year or so. A lot of land is being sold and a lot of thais are getting rich.

I hope the bubble dosnt burst too hard as I don't think it'll go on for that long. Seems to be too much spending by credit from almaost all the thais I know. But after you gotta pay and the Thais don't do too good on thinking of the future.

Savings & pensions are still not high on the list of priorities.

Buy now pay later.

[diaw]

IMHO, the Bubble will burst sooner than later...

This year will see major pressure on spare financial resources:

- Prawn exports down;

- Chicken exports frozen;

- Violence in the South;

- Drop-off in tourism;

- Low water level in Mae Nam Kong - affects crop planting;

- Impending drought -> fruit/crop export reduction;

- Excessive credit granted - bad-debts climbing - payback issues.

It may pay to wait a while before rushing out to make investments...

Diaw...