New Investment Rules / Condo Market

[moo9]

Market for condominiums badly hit

The financial authorities' miscue on currency control will hurt the local condominium market, as foreigners would balk at paying the 30-per-cent deposit and that could delay transactions, CB Richard Ellis, an international property consulting firm, said yesterday.

Foreign investors and exporters also urged the government to gauge investor sentiment before implementing any new measures to slow down the baht's rise and to restore foreign investor confidence after the capital-control measure routed the stock market and left investors in shock.

Aliwassa Pathnadabutr, managing director of CB Richard Ellis Thailand, said that if foreigners were required to deposit 30 per cent of their purchase price with the Bank of Thailand for one year without interest, this would be very damaging to the condo market and present a significant barrier to demand for units from foreigner investors.

"Property is a reasonably illiquid asset that takes longer to purchase and to sell than shares, bonds and other financial instruments. Property is not a short-term investment and therefore should not be targeted in an effort to control short-term capital inflow. Any additional paperwork or approval to purchase a condominium will restrict demand and may be impractical to implement because of the timing issue," she said.

A foreigner has complained to The Nation that he had to delay the purchase of a Bt7 million residence due to the measure. His money was transferred into Thailand on Tuesday and subjected to the deposit. That means he has to bring in Bt2 million more to acquire the reserved property or he has to win a central bank exemption from the deposit requirement.

Aliwassa said that requiring Bank of Thailand approval to pay a non-refundable initial down-payment would significantly impact the sales process. Thousands of transactions are at stake where a down-payment has been made or contract has been signed for projects under construction and purchasers are still making monthly stage payments.

"We have 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 to the condominium market," she said.

The Bank of Thailand needs to clarify how these regulations will affect existing and future purchasers and what effect these regulations will have on the Thai property market, she said.

Following the immense impacts on Tuesday, Winston Doong, a board director of the Singapore-Thailand Chamber of Commerce, suggested that the government consult with foreign investors and businessmen before introducing any regulations.

Once the impact or damage is done, it is difficult to remove, he said. The government should hold a brainstorming session to consider what is the best outcome from the government's regulations.

Foreign investors are also disturbed by the baht's appreciation. However, the government should consider carefully whether its actions would affect other investors such as those in the capital market.

Some foreign investors have switched to other stock markets such as in China, Malaysia and Vietnam because of the measure imposed on Monday, he added.

Chookiat Ophaswongse, president of the Thai Rice Exporters Association, agreed with the government's immediate response to roll back the stringent measure to improve the situation in the capital market.

However, the government must seek a new plan to control the baht appreciation problem and protect the Kingdom from short-term speculators or the baht could move to Bt32 per dollar next year, said Chookiat, who is also the president of the Federation of Thai Capital Market Organisations.

Nipon Surapongrakcharoen, vice chairman of the Federation of Thai Industries, said the government was on the right track. Only some aspects of the measure were too harsh. He also noted that exporters should help themselves and not depend on the government to come to their assistance.

Pornsilp Patcharintanakul, deputy secretary-general of the Board of Trade of Thailand, said the government might want to take a pause before deploying further moves to control the baht's movement.

Thanawat Phonwichai, director of the Economics and Business Forecasting Centre, said the fallout from Monday's measure would be felt for six months. The government should monitor whether this measure can really help relieve the baht's volatility.

Petchanet Pratruangkrai

The Nation

[Thaising]

Malaysia have gripped this opportunities and one step ahead of thailand concerning property ownership and it regulations.

Continue here: http://www.thaivisa.com/forum/index.php?showtopic=97787

[jumnien]

Looks like the surge in foreigner condo purchases is going to accelerate - seems like you just can't stop them. Conditions in their home countries make relocation to Thailand easy and affordable.

[moo9]

Malaysia have gripped this opportunities and one step ahead of thailand concerning property ownership and it regulations.

Continue here: http://www.thaivisa.com/forum/index.php?showtopic=97787

Smart step and good timing.

[Naam]

Market for condominiums badly hit

The financial authorities' miscue on currency control will hurt the local condominium market, as foreigners would balk at paying the 30-per-cent deposit and that could delay transactions, CB Richard Ellis, an international property consulting firm, said yesterday.

The Nation

Mr. Ellis didn't do his homework! purchase of immobile property was never touched by the (meanwhile LIFTED) restrictions of the BOT.

[moo9]

Looks like the surge in foreigner condo purchases is going to accelerate - seems like you just can't stop them. Conditions in their home countries make relocation to Thailand easy and affordable.

Hmm, you might have understood this wrong. According to the new regulations, any foreigner, who intends to buy a condo in Thailand, financed by foreign funds, would have to pay an interest free deposit of 30 %, which will be returned after one year.

Example:

Buy a condo at 4 Mio THB, you would have to pay an additonal 1.2 Mio THB when transferring foreign funds into Thailand. And: you won't get any interest on that.

Will be interesting to see, how this all develops.

Greetings

Moo9

[jumnien]

Yes, I know, and according to rules and regulations prostitution is illegal, alcohol ads are just about to be eliminated, spaghetti straps are illegal, and all drivers must have insurance and motorcyclists must wear a helmet, etc. etc. Really, I don't think it will end up as the most gloomy predict. If you are right and I have the opportunity to pick up beautiful seaside properties at rock bottom prices, I guess I'll just have to tip my hat to you.

[moo9]

Market for condominiums badly hit

The financial authorities' miscue on currency control will hurt the local condominium market, as foreigners would balk at paying the 30-per-cent deposit and that could delay transactions, CB Richard Ellis, an international property consulting firm, said yesterday.

The Nation

Mr. Ellis didn't do his homework! purchase of immobile property was never touched by the (meanwhile LIFTED) restrictions of the BOT.

Are you sure? The restrictions were however ONLY lifted for stock market investments. Anywany, another chaos created. TiT.

[bendix]

Looks like the surge in foreigner condo purchases is going to accelerate - seems like you just can't stop them. Conditions in their home countries make relocation to Thailand easy and affordable.

Hmm, you might have understood this wrong. According to the new regulations, any foreigner, who intends to buy a condo in Thailand, financed by foreign funds, would have to pay an interest free deposit of 30 %, which will be returned after one year.

Example:

Buy a condo at 4 Mio THB, you would have to pay an additonal 1.2 Mio THB when transferring foreign funds into Thailand. And: you won't get any interest on that.

Will be interesting to see, how this all develops.

Greetings

Moo9

Oh <deleted>. Which part of the following don't you understand? That ruling has been reversed. It no longer applies. Zip - zilch - gone - kapput.

Understand?

[Livinginexile]

I have paid my deposit on a condo still under constrution. I can't seem to get a clear answer on weather the bank will keep 30% of my money when I send over the final payment.

Does anyone know what is going on as far as property investment is concerned?

[jumnien]

Looks like same, same - mai pen rai. Be patient a few hours or days... all will be well.

[samtam]

The foreign exchange controls have only been reversed regarding buying shares on the SET. They remain for all other investments, including property. Call the bank to check.

[Naam]

The foreign exchange controls have only been reversed regarding buying shares on the SET. They remain for all other investments, including property. Call the bank to check.

that's RUBBISH! all restrictions have been lifted except for foreign capital buying short term THB denominated bonds.

[Naam]

where are the moderators to stop misinformation?

[samtam]

I have just called HSBC again. The rules have NOT BEEN LIFTED for property. Where are you getting your info from?

[samtam]

Please enlighten us with your source in this very important subject.

[CRUNCHER]

where are the moderators to stop misinformation?

I do not think there is misinformation. Problem is BOT is not be explicit enough.

http://www.bot.or.th/bothomepage/General/P.../Eng/n5149e.htm

This is the BOT original press release. Does not make it clear if it relates to property buying. (To me that is not short term, but others do not see it my way) No mention of US$ 20,000 limit.

http://www.bot.or.th/bothomepage/General/N.../Relaxation.pdf

is the latest BOT release. Property is not mentioned. So, if it was included in the first place, it still is. Most press comments are speculation, some obviously ill informed..

Confused? Me too. And so is BOT!! Until BOT gets it's act together there will continue to be confusion.

[SeanBangkok]

no one knows what is going to be the happenings in thailand. dont invest any money that you cant afford to lose. study thai history and you will not feel too great about what might be up in 10 years. it is a very fragile political situation, and certain events in the next 10 years could set things off in many different directions.

[cclub75]

where are the moderators to stop misinformation?

Well, you are surely contributing to the malinformation...

Don't be so assertive. Because the situation is not clear.

The truth is :

-the initial rules were excluding trading (goods/services). Which make sense.

In this regard, buying a condo is trade. So it should be exempted.

However, and this is why we are receiving conflicting signals, what happen if :

-you send money to Thailand and you declare that this money will be used to buy a condo

-and then, you change your mind... and you transfert the money (THB) on another thai bank account, and then you buy short term bonds, because of course you are an uggly farang speculator ?

It's exactly the same with the U-Turn regarding stock market. With the exemption, it's now possible to send money to Thailand, buy some stocks, sell, and then use the funds to do something else.

On all the solutions to decrease value of THB, BOT has chosen the worst = the one that it's difficult to implement in an efficient way.

The second truth : they never thought about the consequences and especially the secondary effects of such decision. This is why, any rational minds (and banks are rational) will wait to receive proper , detailled, and specific orders regarding procedures.

So at that point, from a logical point of view you are right. But on a practical one, you are wrong.

[Burgernev]

Can anyone help out us uninformed types on clarifying the following:

1) The BoT talk about the restrictions still applying to - Short-term capital inflows - What exactly does that mean ? Any transfer made into Thai Baht from a foreign currency, or something more specific ?

2) The deputy PM said in an interview yesterday the measures still apply to the - Commercial paper market - What exactly is that ? Again any buying of Thai Baht from a foreign currency or something more specific like "short term THB denominated bonds" as Dr Naam mentioned earlier ?

Cheers,

Burgernev

Edited December 21, 2006 by Burgernev

[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]

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

This statement of course allows for complete confidence for any would-be foreign property investor. Transfer the money and then let the bank decide whether they will allow you 100% usage or only 70% usage of those funds. How can we stop the stampede to buy property under these circumstances? Oh I know, let's not clarify for a few more days, weeks, months....

[Burgernev]

Monty,

What about purchasing property/land that are not condo's ?

Burgernev

[moo9]

TiT, This is Thailand.

Thinking about the consequences in a 3D way is not the strength of the Thai Mind, however, in this case one could have been expected, that the BoT is a kind of more mature.

So, on order to summarize, nobody really knows the consequences of the new rules and we all leave it up to the individual banks to decide whether you get 100 % or 70% of your transfer. Wow, this is another regulation which opens the doors wide for corruption....

[monty]

Other property will be a bit more difficult I guess.

Unfortunately this does leave the door open for corruption...

Anyway, the BOT clearly states that the 30% rule does not apply when buying goods or services, so it would be hard for the bank to hold on to the 30% if you actually want to buy goods or services...

[quiksilva]

SOURCE: HSBC Markets Asia Limited (Hong Kong)

After the storm: quick thoughts on Thailand’s capital controls and beyond

The dramatic events in Thailand yesterday, which saw the stock market plunge and the baht weaken considerably, lead us to reassess the outlook for the Thai economy. The fall in share prices came on the back of a surprise announcement on Monday night on the imposition of capital controls aimed at curbing the rapid appreciation of the Thai currency. The measure requires financial institutions to withhold 30% of inward transactions, keeping the amount in a non-interest bearing account at the central bank, to be refunded only after one year. In case of withdrawal of funds from Thailand in less than 12 months, a third of the deposit – or 10% of the overall amount initially transacted - will be retained by the authorities as a penalty.

Initially, this rule was to apply to all capital inflows over USD 20,000, except for trade-related transactions, the repatriation of profit by residents, and, after proper certification as such, foreign direct investments. However, after seeing share prices slump by almost 15% in one day, the authorities narrowed the scope of the new exchange controls. Crucially, equity investments are now exempt from the new rule, setting the stage for a rebound in share prices. Moreover, the notification requirement for foreign direct investment-related transactions has been scrapped, removing a layer of bureaucracy, which would have acted as a deterrent to FDI inflows. Essentially, the withholding requirement now applies only to bond and property investments in Thailand.

The macro view: 3 implications

While the verdict on the new measures’ impact on capital flows into Thailand is still out, we draw three preliminary conclusions.

(1) immediate economic impact still uncertain

The imposition of capital controls and their spectacular partial reversal are likely to have a negative effect on economic growth. The slump in the stock market, and the government’s evident disregard for the wider implications of its new policy, are likely to depress consumer confidence further. Following a year of political upheaval, private consumption is already lackluster. But we remain skeptical whether a rebound in household expenditure will materialize soon given the administration’s erratic policy course. Moreover, private investment remains subdued. However, while we were looking for a recovery in capital expenditure on the back of a stabilizing political outlook, we now believe that in wake of yesterday’s events, a return of investor confidence will be delayed.

Still, the imposition of capital controls and their severe initial impact on asset markets is likely to strengthen the case for a loosening of monetary policy. The central bank will seek to cushion the economy from a fall-out from yesterday’s events by reducing interest rates in the first half of 2007. We expect the Bank of Thailand to cut interest rates by 25bp in 1Q07 to 4.75%, and by another 25bp in the second quarter. Moreover, fiscal expenditure is likely to rise as the military-backed government remains conscious of the need to support economic growth in order to shore up its own credibility.

In short, while private demand might be negatively affected as a result of the announcement on capital controls, looser monetary and fiscal policies are likely to soften the blow somewhat. We therefore maintain our growth forecast for 2007 of 4.6%, although our projections are tinged with considerable downside risks.

(2) Policy credibility questioned

The erratic policy course steered over the last few days raises questions over the credibility of the current administration in its macroeconomic management. While some measures aimed against further baht appreciation were expected, actual policy announcements have far exceeded these expectations causing confusion in capital markets. Moreover, the authorities provided little guidance as to the actual implementation of their proposed rules leading market participants short of information. Crucially, however, the administration appears to have misgauged the impact of the new exchange controls, giving the impression that the measures had not been well thought out.

These concerns add to the impression that the government might steer away from Thailand’s long-held tenet of relatively free financial markets. Pronouncements by the military-backed government about the adoption of a “self-sufficiency” economy had already raised doubts in some quarters about the direction of economic policy in Thailand. Moreover, efforts to rewrite the Foreign Business Law, essential to revive foreign direct investment in the country, have so far yielded little visible results, giving the impression of foot-dragging over an essential element of economic strategy for the Southeast Asian nation. In short, questions linger over the economic policy credibility of the government, which will retard the resumption of capital inflows and investment in the country for quite some time.

(3) Rising political risk

While the direct economic repercussions of yesterday’s policy reversal might blow over in due course, there remains a substantial risk that political stability has suffered. To a degree, the military-backed government already suffered from a legitimacy gap, coming to power after the removal of a democratically mandated government. As underlined by senior officials themselves, one of the objectives of the coup was the restoration of principles of sound economic management. On that note, the credibility of the government has suffered, strengthening the hand of opposition forces who are already jostling for pole position for next year’s election.

Support for the current government comes largely from the urban middle-class, which regarded the prior Thaksin-led government as bent on undermining government institutions and questioned the expediency of populist economic policies. However, the slide in the stock market yesterday hurt precisely the key constituency of the new military-back government. Even if stocks quickly rebound, the financial effects for retail investors have been severe. Therefore, support for the administration, tentative as it was, is bound to wane further, potentially undermining political stability. While we still believe that democratic elections will be held on schedule at the end of next year, we would expect political news to remain volatile and would not rule out a reshuffle among senior officials.

http://www.austchamthailand.com/AustCham/a...p;SponsorID=409

I understand that they may lift restrictions on condo purchases but not for housing.

Edited December 21, 2006 by quiksilva