Last week we started looking at overseas property investors buying property in Thailand, considering locations and property options.
This week we look further at the process of buying property in Thailand.
With the exception of condominium units – where many can be offered freehold to overseas property investors, provided less than 49 per cent of the development is owned by foreigners – most property in Thailand can only be purchased leasehold by overseas investors.
While you may be accustomed to using ‘apartment’ and ‘condominium’ to mean the same thing, they have two very different legal definitions in Thailand. Apartments are only available on a 30-year leasehold basis, regardless of the nationality of the buyer.
It is important to hire a real estate attorney when purchasing property in Thailand, as the property industry in the country is still largely unregulated. A good lawyer will be able to provide more security than a mere real estate agent.
The Thai legal system is unforgiving, and great care needs to be taken with ensuring that any monies to Thailand are clearly designated for property purchase on all legal forms – and that the correct forms are used and properly filled in.
Due diligence should be conducted prior to signing agreements and paying deposits. It is wise to ask the lawyer to do a caveat search and verify the property’s actual condition before engaging in purchase transactions. Once the seller accepts the offer, his lawyer will prepare a purchase agreement. This should include, among other things, which party pays the legal fees, transfer fees, and taxes.
A deposit of 10 per cent will be paid upon signing but the use of escrow accounts is still rare (escrow generally refers to money held by a third party on behalf of transacting parties, such as a mortgage lender). Furthermore, deposits are non-refundable unless it is the seller who backs out. In that case, he will need to pay you double the amount for damages.
Taxes and Fees
1) A transfer fee is levied at a flat rate of 2 per cent on the agreed purchase price though it has been reduced until December 2020 to 1 per cent on properties valued below THB3,000,000.
2) A withholding tax is levied at 1 per cent of the declared amount or the assessed value of the property, whichever is higher.
3) Stamp Duty is 0.5 per cent of the declared amount or the assessed value of the property, whichever is higher.
4) There’s also a registration fee of around 2 per cent of the declared amount or the assessed value of the property, whichever is higher.
5) Then there’s a Special Business Tax levied at around 3.30 per cent of the property value. It is imposed on sale of immovable properties in lieu of VAT.
6) And there’s also Municipal Tax, at 10 per cent of Special Business Tax added on as well.
7) Legal fees are negotiable.
Renting Out Property in Thailand
Many overseas property investors will want to rent out their property in Thailand to receive income from their investment.
As one of the world’s most visiting destinations, there’s always a demand for rental properties.
If you want to go the short-term rental route, you’ll need to find someone who can turn your property around for new arrivals and keep an eye on things. And there are ample websites that can look after bookings online – and all will charge a set nighty fee or a booking surcharge and administrative costs.
Finally, you need to be sure that investing in Thailand property is right for you, and aware of the current situation.
There is a glut of unsold property units available across Thailand at the moment, where development has outpaced demand. This may be enough to put overseas property investors off buying property in Thailand.
However, with excellent deals available from developers looking to sell their units this could be a perfect time to bag a property bargain in Thailand.
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