Property Firms Seek Clarity On Foreign Buying

[kokothemonkey]

So lets recap: oversupply in Bangkok to begin with, and now 30% of any money is locked up for a year......well done Thailand, well done

Thursday December 21, 2006

NINA SUEBSUKCHAROEN

The Bank of Thailand's tough capital controls, although slightly eased after the stock market crashed on Tuesday, are scaring off foreign property buyers and will add further pressure to the market, says a local lawyer with many foreign and expatriate clients.

Under the new rules, foreigners who want to buy a leasehold property in Thailand will have no problem doing so if they can bring in Thai baht for the purpose, said Sally Ann Lefley, an associate at the Bangkok-based firm McEvily & Collins.

However, those buying freehold property, such as condominiums, will see the Bank of Thailand retain 30% of foreign funds interest-free for one year.

Ms Lefley also said that even though Thai authorities are trying to stop foreigners from setting up Thai companies to buy land and houses, those who manage to do so can buy landed real estate without having to deposit 30% with the central bank by using baht for the transaction.

James Pitchon, executive director of CB Richard Ellis, said yesterday that the central bank needed to further clarify how the controls on foreign capital inflows would affect foreign property buyers.

''We are still unclear whether it will affect overseas buyers,'' he said.

Should foreign real estate buyers have to deposit 30% of the purchase price with the Bank of Thailand for one year, it would be extremely damaging, Mr Pitchon added.

He said property was not a short-term speculative investment but a medium- to long-term one with most people buying houses and condominiums to live in. For this reason, funds used to buy property are not ''hot money'' as it cannot be sold quickly. By nature, property is illiquid. Mr Pitchon added that even if a 30% deposit with the central bank was not required, more paperwork generated by the new rules would still hurt the market.

Aliwassa Pathnadabutr, CBRE's managing director, added: ''We've been contacted by many foreigners who are concerned about not only how these regulations will affect their property purchases, but also what the effect will be in the medium to long term on the condominium market.''

Ms Lefley said that investors should simply look to lease land because the government has been enforcing regulations that restrict foreigners from setting up companies to buy land.

''Just totally forget about trying to buy land through a Thai company,'' she said. ''Things have taken place since the coup; it got very, very strict thereafter. So if a Thai company wants to buy a piece of land now, if it's 100% Thai, it's no problem. But if there is a foreign shareholder or director then the Land Office will investigate that company and check if the Thai shareholders are actually nominees for the foreign director or shareholder.''

The maximum term of a lease in Thailand is 30 years and Thai law allows one renewal of 30 years.

''You can still buy a house or a villa; it's just the land that you can't actually buy,'' Ms Lefley said. ''So you can choose to lease the house as well as the land or you can choose to buy the house outright.''

However, she cautioned that once the lease expires, the house, unless the lease agreement says otherwise, would actually become the property of the landowner.

''So whereas before sellers and buyers were concentrating more on freehold aspects, it seems that the sellers now are really getting to grips with leases and putting in more provisions, not only to protect themselves but also to protect the lessees,'' she said.

Even so, Ms Lefley noted that foreigners are not shying away from buying land and houses as her law firm had feared.

''It seems more and more are quite accepting of the option to lease. They don't seem too concerned about owning a freehold so that they can pass it on to their family when they die; it seems a lot are looking at using the property for themselves and not looking to pass it down.''

[dsfbrit]

''So whereas before sellers and buyers were concentrating more on freehold aspects, it seems that the sellers now are really getting to grips with leases and putting in more provisions, not only to protect themselves but also to protect the lessees,'' she said.

Even so, Ms Lefley noted that foreigners are not shying away from buying land and houses as her law firm had feared.

''It seems more and more are quite accepting of the option to lease. They don't seem too concerned about owning a freehold so that they can pass it on to their family when they die; it seems a lot are looking at using the property for themselves and not looking to pass it down.''

Who are they leasing from ? I guess its a mixture of:

- wife

- develepor

- trusted friend

Issues with leasing from the wife or a trusted friend have been discussed at varying lengths in TV.

However, if the lease is from the developer - it will surely be a new minefield to consider.

What if the developer is a farang nominee company - surely thats just as bad - if not worse - than doing the 'company' thing for yourself. The land ownership by the developer and development itself may be deemed to have been 'illegal' in the first place.

Interesting times indeed and Thailand sadly continues to shoot itself in the proverbial foot.

By the way it appears the SET bounced back 10 percent yesterday from its 15 percent drop on Tuesday due to local money 'piling in' as stocks were cheap.

Foreign SET investors have fled (BBC news said last night).

I bet large companies like Tescos (who also cannot develop smaller shops now despite signed contracts) cannot wait to invest more money in Thailand with this latest news on money transfers.

I love Thailand, but sometimes you have to wonder how they make some decisions?

Merry XMas

Edited December 21, 2006 by dsfbrit

[Vespa]

I love Thailand, but sometimes you have to wonder how they make some decisions?

The same way they educated their children and drive their cars.

Expected

[quiksilva]

Come on this is Thailand, values might fall, but prices won't.

[Gary A]

Follow the money people. Do you think for a minute that the HUGE developers will allow the government to hold 30 percent of the money earmarked to buy a condo? If I were a betting man, I'd place a huge bet saying that condo sales will NOT be affected by this new scheme.

[jumnien]

We've been hearing people promise a downturn in condo prices for years; hasn't happened. Since I came here 9 years ago, I've been hearing how foreigners are just about to leave en masse; hasn't happened. More and more people find Thailand and attractive alternative to their native country. The wave of foreigners keeps coming; stop trying to pretend it isn't happening and simply welcome the newcomers and help them get settled.

[monty]

After letting my accountant call Bangkok Bank, they state that if the incoming transfer is clearly marked that the funds is to be used for purchase of a condominium, the 30% will not be locked up.

The full amount can be withdrawn in one time.

I other situations, the bankmanager will have a meeting with you, and if you can show that the funds are to be used for buying goods and services, the full amount will be available for withdrawal.

Practically, the decision lies at the bank which receives the incoming transfer, and as long you can show that the funds will be used for the buying of goods or services, including condo's, then he has the power to let you withdraw the full amount of the transfer

[samtam]

Oh well that's reassuring...I don't think.

[Burgernev]

After letting my accountant call Bangkok Bank, they state that if the incoming transfer is clearly marked that the funds is to be used for purchase of a condominium, the 30% will not be locked up.

Actually that's great news Samtam, for some of us

Burgernev

[dsfbrit]

Practically, the decision lies at the bank which receives the incoming transfer, and as long you can show that the funds will be used for the buying of goods or services, including condo's, then he has the power to let you withdraw the full amount of the transfer

And by definintion then he has the power to not let you withdraw the full amount of the transfer.

I suspect in nearly all cases there will be no problem.

Its just more uncertainty for us all to wrestle with along with visa changes, property ownership rules etc...

I personally have no idea what will happen with condo prices, but uncertainty its like the straw and the camels back - when does the next bit of uncertainty bring the camel down.

Lets face it uncertainty (even if in this case it does not directly affect condo transfers) certainly isn't going to increase condo prices - is it???

What briliiant scheme will there be next week.

Come to think of it - where was the warning the 3million baht investment visa would just be scrapped ?

I have no axe to grind - love Thailand - am a land 'owner' waiting to see what happens on that front.

But we surely all have to admit these are 'trying' times.

(A bit off topic here - I met a farang couple on Saturday who were talking to me about buying a House - I asked them if they were aware of all the issues relating to land ownership - what issues they said

I suggested they dont buy anything until they understood all the issues and gave them the URL for TV.)

Wonder what they will decide?

Edited December 21, 2006 by dsfbrit