Thread: Revenue from Phuket real estate deals plummets

MARKET OVERVIEW

The real estate market in Thailand’s beach resorts is fed mostly by foreign buyers, who make up more than 90 percent of the market share, according to Frank Khan, the director of Knight Frank Thailand’s residential department.

Because of this dependence on incoming foreign money, which has become scarce because of the global economic crisis, the second-home market in Phuket and Pattaya has ground to a halt.

Mr. Khan said the exception was the adjacent resort town of Hua Hin, which has remained a popular second-home destination for wealthy Thais, including the king of Thailand himself.

Mr. Khan says homes priced below 10 million baht (about $290,000) are selling, but the market above that threshold is stagnant, even in Hua Hin and Bangkok, where some investors are still buying at the lower end.

The large expatriate community in Bangkok mostly revolves around the international businesses there, said David Gray, the director of East Coast Real Estate, based in Pattaya, and there is not much of a high-end second-home market in the city itself.

Currency fluctuations are also affecting the Thai second-home market, according to Mr. Gray. He said the baht’s relative strength against foreign currencies, including the ruble, the British pound and the Australian dollar, was motivating cash-strapped foreign second-home-owners to sell their Thai holdings.
“A lot of people are cashing in on the exchange rate right now,” he said. “People can take much less for their homes and still not lose anything.”

Second homes in Phuket cost about twice as much as comparable homes in Pattaya, Mr. Gray said, because Phuket is an island and developable land is more limited.

He is seeing more second-home-owners moving away from the beach resorts and into the countryside, many building retirement homes. North of Bangkok, for example, it is possible to find an acre for a couple of thousand dollars. “For Thailand, that’s cheap,” he said.

WHO BUYS IN PATTAYA

Thailand attracts buyers from all over the world, according to Mr. Gray. He has sold properties to Europeans, Americans and Australians, as well as people from other Asian countries.

Until a few years ago, British and German buyers were the most prevalent, but interest from German as well as Russian buyers has decreased, he said.

“Americans seem to be buying at the moment,” he added, “or whoever holds American dollars,” because the dollar is relatively strong.

BUYING BASICS

Foreigners cannot own stand-alone houses in Thailand, but there are a number of common ways to work around that stricture.

Mr. Gray says foreigners can set up a Thai company through which to buy property (though new regulations may soon make this method more difficult).

It costs 30,000 to 50,000 baht (about $880 to $1,460) to set up a company for this purpose, Mr. Gray said, and running costs after that come to about 20,000 baht (about $590) per year for accounting fees and taxes.

Many foreigners buy property in the name of a Thai person they trust, according to Mr. Gray. They can then lease the property back from the official owner for up to 30 years. The lease can be renewed at the end of its term, Mr. Gray said.

Foreigners are permitted to own a condominium or apartment outright, as long as more than half the development is owned by a Thai entity. “Any building can be up to 49 percent foreign owned,” Mr. Gray said. “There has to be majority Thai ownership in the building.”

When property changes hands, the buyer pays transfer taxes, fees and stamp duties to the local land officials. Mr. Gray says these costs are normally 5 to 6 percent of the declared value of the property. (Declared value is determined by the government, and is usually 50 to 60 percent of market value.)

But Mr. Gray also said that the government, in an attempt to stimulate the market, had reduced all taxes and fees to less than 1 percent of declared value until April 2010.

The seller pays the real estate agent’s commission, which ranges from 3 to 5 percent of the sale price.


http://www.nytimes.com/2009/05/27/gr...ref=realestate