Investing in property in Thailand : How to do ?
Thailand is part of the privileged destinations for the international investment. To invest in the country of the smile, it is to benefit from an extraordinary quality of life while carrying out a very profitable investment.
Here are the instructions and the essential information to know to pass from the dream to the reality, in the best conditions:
1. DEFINE YOUR INVESTMENT PROJECT
Before even starting to look for a property, it is important to define your project in order to determine the purpose of your investment. This is what will determine the type of property to choose and its location.
Is it a vacation project (to live there all year round)? Is it a rental investment project (to benefit from regular and guaranteed rental income) or is it a “mix” of the two: with the aim of spending several weeks or months a year and renting out the property when it is available.
It is possible, for example, to benefit from rental guarantees that ensure the payment of monthly or annual rents by contract.
If you opt for a residence with hotel management, a profitability of around 7% with contractual commitments from the promoters is possible.
Another important point, on the financial level, it is important to know that the Thai banks do not grant credits to foreigners (except if you are resident in Thailand and have incomes on the spot).
2. TO BE ACCOMPANIED BY EXPERTS
The real estate market in Thailand is flourishing. It benefits fully from the economic dynamism of the country as well as from the excellent health of tourism. Billions of dollars are invested to support this growth and this attractiveness, in particular in the infrastructures.
Since the crisis of COVID, we can see the resilience of Thailand through a rapid and significant recovery. The assets of the country are for a lot and nobody even with the COVID forgets Thailand.
These assets offer the market an environment:
- Healthy, unlike other countries it is not “overheated”,-
- Framed, in the Thai law, the acquisition to the property is legislated,-
- Very attractive, it offers a very good quality/price ratio.
The general context is therefore very attractive. And since the post COVID recovery, there is business to be done.
But as everywhere in the world, it is important to be accompanied by an expert (real estate agent, lawyer, legal counsel) in order to benefit from sound advice and avoid unpleasant surprises.
Not knowing Thai, not knowing the laws governing real estate or simply not knowing the local market (and its planned changes), are all pitfalls and sources of difficulties, even trouble.
To be accompanied by a specialist of the real estate in Thailand, who speaks your language, is all the more important that he will be able to bring you personalised answers in domains like the taxation, for example.
3. BUYING PROCESS: THE MAIN STEPS
The first phase consists in making a choice from a particularly rich offer.
– Definition of the real estate investment project
– Selection of a range of products corresponding to your expectations, needs and budget.
– Choice of the product that best meets your expectations and objectives.
Once your choice is made on an apartment or a villa, the sale procedure is started:
- Your advisor will take care of the administrative procedures with the developer and will make sure you benefit from the best conditions,
- The purchase price, the payment terms, the schedule will be defined,
- Generally, at the end of this first phase, you will be asked for a deposit in order to secure the procedure.
Your advisor will then be responsible for obtaining and validating a series of documents: reservation contract, copy of passport, receipt of deposit, etc. In the case of an apartment purchase, he or she will also make sure that the foreigner quota is not exceeded (see regulations). Once the verifications have been made and the contract drawn up, an appointment is made for the signature.
You will then be able, in a second time, to open a bank account in Thailand in order to transfer the necessary funds. This account will also be used to collect your rents, if necessary.
You will be then owner and will receive as such, all the documents attesting it as well as the keys of your property. The entire transaction procedure can be completed within one month depending on the availability of the required documents.
4. WHAT ARE THE COSTS TO BE BORNE BY THE BUYER?
The transfer fee is between 1% and 6% depending on whether you are buying a freehold or a leasehold (in addition to the amount of the lawyer’s fees, if you use the services of one of them).
They are divided between 4 different taxes and are shared equally between the seller and the buyer.
To become owner in Thailand: what the law says
For a foreigner, it is completely possible to become owner of a property in Thailand, but that imposes to respect certain conditions.
To buy an apartment, it is imperative that this good is located in a residence of types condominium and in this case, 2 possibilities are offered to you:
- Buy in full ownership and in your own name in the “foreign quota” representing 49% of the property sold in the project.
- To buy in “leasehold”, corresponding to the “Thai quota” but which in the case of rental investment offers additional advantages (guarantee of repurchase).
For the purchase of a villa (or a house), it is important to know that a foreigner cannot buy land in his own name.
On the other hand, he has the possibility of buying a leasehold, which is a lease for the land only, for a period of 30 years, renewable twice, and to build a house of which he will be the full owner.
5. AN ATTRACTIVE TAX SYSTEM
It is particularly soft. Land income is taxed at a rate of around 12% of annual income (this varies from province to province).
But it is generally less, in fact.
It is also important to know that there is no housing tax or property tax to pay.
As far as charges are concerned, it depends on the residence, but they are very low compared to those charged in Europe.
The taxation on the capital gain at the time of the resale is also attractive: maximum 20% of the capital gain before deductions per year of ownership.
No capital gains tax if you have held the property for more than 5 years.
No inheritance tax up to 100 million baht (2.6M euros), beyond which the taxation is 5 to 10% maximum.
The low tax rate added to the excellent quality/price ratio of Thai real estate, contribute to the attractiveness of the guaranteed rental yields which can reach 7% in the case of a rental investment in a hotel residence.