Investing in real estate in Thailand: opportunities and challenges

At the heart of Indochina lies Thailand – the second largest economy in Southeast Asia.

Having missed the types of catastrophes that some other countries in the region suffered, though, such as the Vietnam War and Pol Pot, the nation ranks better than most of its neighbors in wealth.

Thailand benefits from a strategic location, as it’s the only country in Southeast Asia to share borders with four others, besides the much smaller, poorer, and landlocked Laos.

Because of this, Thailand is being used as a gateway for investment into its smaller neighbors, Cambodia, Laos, and Myanmar. All are frontier markets and have great potential for investment, but due to the lack of infrastructure in these countries, investors often find it easier to go through and/or base themselves in Thailand.

Another benefit of Thailand’s geographic location is the possibility of turning it into a transportation hub – something that’s already being done.

China is now building and financing a high-speed rail link from its southern city of Kunming to Bangkok, and plans for this line to eventually expand south into Kuala Lumpur and Singapore.

Of course, all of these things are beneficial for Thailand’s economy and real estate market. While the exact locations of many soon-to-be transportation hubs and special economic zones are not yet known, it’s a given that the price of real estate in Thailand will benefit.

Buying a Condominium in Thailand

Unfortunately, anyone who is not a Thai citizen cannot legally own land in the country – at least, not if you don’t count an obscure regulation that allows anyone with 40 million Thai Baht and the willingness to deal with bureaucracy to own a limited amount of land.

Foreigners can, however, own condominium units in their own name under two conditions.

First, the money used to purchase the unit is not sourced from Thailand.
Second, the total amount of foreign owned units in a condominium does not exceed 49%. In practice, it’s very rare for the 49% threshold to even come close to being approached.

One thing common in Thailand is selling condos “off-plan” – essentially reserving a unit in a building that has yet to be constructed.

While the merits of buying a condo when you haven’t even seen it yet can be debating, it’s a fact that you can get great deals when you buy off plan.

The reason for this is that in Thailand, real estate developers must show they have a certain amount of units pre-booked before a bank will lend them the full amount for construction.

Of course, because condo developers want to hurry up and start making money, they are willing to sell condo units at a low profit during the pre-construction period.

Usually, the payment period for buying a unit off plan is 10% of the unit’s price up-front, 10% over a period of anywhere from twelve to thirty-six months and 80% upon the unit being transferred to you after it’s built.

real estate in Bangkok

This could be considered risky activity by many – but that doesn’t negate the fact that plenty of people have made money signing a contract for a $150,000 condo, putting a down payment of $15,000, and having the same piece of property be worth over $300,000 a few years later once it’s transferred to them.

The “off-plan market” in Thailand means that the country also has another quirk which makes it far easier to speculate on real estate. Rather than selling properties, people will often sell their contract and, in effect, the right to buy a soon-to-be-built condominium.

Because of the low down payment required, along with the fact that off-plan purchases can be done as long as several years before a piece of property is actually built, purchasing a unit this way means that it is a bet on the future of Thailand’s real estate market.

This could be considered risky activity by many – but that doesn’t negate the fact that plenty of people have made money signing a contract for a $150,000 condo, putting a down payment of $15,000, and having the same piece of property be worth over $300,000 a few years later once it’s transferred to them.

If the property is worth less upon transfer, you back out of the contract and lose the down payment. This is a common procedure in Thailand.

And of course, it’s very important to research the property developer you buy a condominium unit from.

There are several different developers in Thailand who have a history of completing several dozen projects on-time, to good specifications, and with little hassle. If you buy from a name-brand, you’re unlikely to run into trouble.

More about flipping condominiums in Thailand, along with the safest and most profitable circumstances to do so under, can be found in our Foreign Real Estate Guide.

A Hedge Against the Dollar

When you buy a foreign real estate, it’s important to remember that you aren’t just investing in the property itself – you’re also investing in the future value of the currency it’s denominated in.

In 2014 we have seen currencies across Asia in free-fall, and those in Southeast Asia, in particular, have been among the worst affected.

At the same time, currencies such as the US Dollar are at decade highs against them.

This is unlikely to last. A similar depreciation of currencies in the region happened during the Asian Financial Crisis of 1997, and anyone who bought and held the Thai Baht, Malaysian Ringgit, Singapore Dollar, or any similar currency were happy they did so a decade later.

Over the longer term, the financial center of the world is likely to move eastward. As this happens, the U.S. Dollar will decrease in its importance and other currencies should gain from its loss – especially those in Asia.

Last updated: Dec 27, 2019 at 11:06PM

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