Phuket Realty

Construction materials to cost more

Original article: The Nation September 25, 2009 

Producers deny home prices being pushed up. Prices still below those in first quarter. 

Although prices for construction raw materials are expected to rise significantly in the fourth quarter and early next year, the increase will not effect residential prices, because it will not force materials prices above those in this year's first quarter, producers and building experts say. 

SCG Distribution president Kajohndet Sangsuban said cement prices had already risen from between Bt1,400 and Bt1,500 a tonne in the second quarter to between Bt1,500 and Bt1,600 a tonne in the third, an increase of 6-7 per cent. 

The increase followed higher demand for cement as developers raised their construction rates to replenish shrinking residential inventories, he said. 

However, the new price is still lower than in the first quarter, when cement cost Bt2,200 a tonne. 

The present price of steel is Bt19,000 a tonne, well below the first-quarter price of Bt37,000. 

Kajohndet said he believed the higher cement price would not raise residential prices above those in the first quarter. 

Prices for other construction materials, such as tiles, paint and sanitary-ware, remain about the same as those in the first quarter. 

"When the cost of construction is compared with that in the first quarter, we believe residential prices will remain about the same as those in the first half of the year," he said. 

Chantana Sukumanont, executive-committee deputy chairman for marketing and sales at Siam City Cement, said despite the significant likelihood of higher prices, cement would remain cheaper than in the first quarter. There will therefore be no affect on residential prices. 

SCG Cement president Pramote Techasupatkul said demand for cement had improved "step by step". 

"We saw it drop 10 per cent and 4 per cent, respectively, in the first two quarters of the year but believe it will show modest growth in the second half," he said. 

Total cement consumption is expected to be about 24 million tonnes this year, slightly lower than nearly 25 million tonnes last year. 

SCG plans to sell 17 million tonnes of cement this year. Of this, 9 million tonnes will be sold in the domestic market and the rest exported. The company is focused on boosting its cement exports to South Africa, the Middle East and Asean countries, Pramote said. 

Earlier, property developers warned residential prices would increase 7-10 per cent next year. Of this, 4 per cent will come from the expiry of property tax incentives next March 28 and the rest from rises in the cost of construction materials. 

If the government extends the period for tax incentives, residential prices will increase 5-7 per cent, because of higher prices for construction materials alone, said Thai Condominium Association president Atip Bijanonda.

Getting away with it...

Original article: Property Report September 2009

When it comes to tax planning, and investment in Thailand’s residential market, an important aspect to consider is how to minimise the tax payable on capital gains when selling your property. 

Far too many real estate owners involved in property disposal simply pay the capital gains tax because they are unaware of the provisions in the Thai tax code that allow for exemption. 

Since early 2003, the Thai government has been granting a tax break to homeowners and residential condo owners who sell off their property and then purchase another to be used as their primary residence. The tax break ultimately allows the individual tax payer a tax-free property exchange in which he or she walks away with the profits of the sale without owing any capital gains tax to the Thai Revenue Department.

The policy behind this tax-free exchange aims to encourage expansion of the real estate business in Thailand as well as provide tax relief for residential property owners who wish to move on to a new property commensurate with their standard of living. Unlike US Section 1031 tax exchange (like-kind exchange or starker deferred exchange), the tax free exchange under Thai law does not require the use of an intermediary professional.

Pay attention to certain conditions

How a tax fee property exchange is accomplished can be complex as there are a number of conditions the real estate owner should be aware of before committing to any sale-purchase transaction.

First, the seller must live in the existing property as the primary residence and have registered the household in his/her name for a period of at least one year from the date of acquisition. The tax break does not apply to properties held solely for business or investment purposes, where the regular capital gains rule applies.

Second, such sellers must purchase a new property within one year prior to, or one year after, the sale of the existing property. In addition, the new property must be used only for residential purposes.

The amount of exemption is calculated by reference to the official estimated price of the property at the time of sale, which may be lower or higher than the market value, but must not exceed the price of the new property. The types of property that qualify for capital gains tax exemptions are house  structures, houses with land, structures with land and residential condos. The exemption does not apply to vacant land.

Therefore with some prudent planning, it is possible to make some gains from the property exchange tax exemption.

Our examples below cover some typical situations that illustrate just how the exemption applies in practice.

Case 1

Mr. Smith, a western expatriate, arrived in Thailand two years ago and has been living in a Bt7m condominium unit he purchased in the Sukhumvit Road area of Bangkok. Immediately after buying the condominium, he managed to register the unit in his name.

Two years have now passed since he first settled in Thailand and Mr. Smith is keen to make a move to a new luxury low-rise condo recently completed in the prime Sathorn-Silom business district. 

Taking advantage of the tax-free exchange scheme, Mr. Smith can now sell his Sukhumvit condominium and purchase the new condominium in Sathorn-Silom without the need to pay any personal income tax on the capital gains derived from the sale of his first condo. 

Given the official estimated price of the Sukhumvit condo of Bt8m, under the tax break, Mr. Smith can save up to Bt146,000 of his personal income tax liability, which under normal circumstances he would otherwise need to pay in the form of income tax.

Mr. Smith enjoys not only the tax-exemption on his condo sale, but the increase in value of his property, because his Sukhumvit condo is being snapped up for Bt10m – thanks to the strong demand for condos in the Sukhumvit area. 

The questions is then raised, whether it is possible or not for a non-permanent resident alien to register his name in the household registration when purchasing a condominium unit in Thailand. 

The answer largely depends on the type of immigration visa the person holds and the discretion of the officials of the District Office. Therefore, even for foreigners who do not hold permanent residence in Thailand, it is still possible to register a household in their name.

Case 2

When Mr. Ryan came to Thailand he decided life outside the city suited him better and consequently moved to Pattaya where he purchased a long-stay villa near Mabprachan lake, east of the resort town.

Due to restrictions on foreign ownership of land, Mr. Ryan needed to enter into a land-lease deal offered by a local developer who owns the land, which features a 30-year initial leasehold with the option of renewal for another 30 years. Under this lease agreement, Mr. Ryan has the right to sell the lease for the remaining years of the leasehold whenever he wishes to do so. 

Mr. Ryan then went on to hire a contractor to build a Thai-Bali style four-bedroom, two-storey pool-villa complete with a tropical landscaped garden and an automatic gate. Upon obtaining the household registration – a yellow book – Mr. Ryan registered his name in the book, and so he has now been the registered owner for almost 5 years.

One day while strolling along Pattaya beach, a new luxury beach-front condominium caught his eye, and he decided to reserve one unit facing the beach as his future primary residence.

With the help of a real estate broker, Mr. Ryan managed to sell his remaining 25 year leasehold (plus options to renew for another 30 years inclusive of the house) to another expatriate for Bt14m. When the official estimators priced the property at a mere Bt10 Million, Mr. Ryan was told by his tax advisor that he would be required to pay a personal income tax of Bt355,000, unless he opted to follow the tax-free exchange under the Thai Revenue Code – which he promptly did.

Within a year of selling his old property and the leasehold, Mr. Ryan reinvested all the proceeds into the new condo and managed to transfer the ownership of the new condo. All this was done without incurring any tax liability on the capital gains of his property sale.

Making use of this tax-free exchange can lead to some very significant yet lawful tax savings. Of course, careful attention must be paid to all the terms and conditions of these rules. Failure to follow them can result in your tax- free exchange being challenged or even disallowed by the Revenue Department. Your tax advisor should therefore work with you to try and capitalise on the potential gains of this truly beneficial text exemption.

This article was written by Narit Direkwattanachai, a corporate tax attorney for Narit & Associates. He can be reached at: narit@naritlaw.com

State of Play of 37 Phuket Development Projects

Original article : Phuket Wan Sept 9, 2009 

TWO OF 39 projects for Phuket have ceased development plans. They were Karon Heights Residence (15 plots) and a five-storey building intended to contain 79 rooms on Chaofa East Road. 

Another 37 projects are seeking approval. Here is what the governor's review panel decided: 

Agreement for Two Projects 

Surin Estate Condominiums (157 rooms) at Surin beach. 

The owner: RMTC Thailand 

The Lofts Resort at Laguna Phuket (95 rooms) 
The owner: Laguna Grand 
--- 

Agreement to Supply More Documentation 

Miracle Lake View (39 plots) at Chaofa Road West 
The owner: Chalong Miracle Lake View 

Supalai View (184 plots) Pa Klok, Thalang 
The owner: Supalai Ltd 
--- 
No Agreement on Developers' Report 

Dala Resort (202 rooms) Bang Tao beach 
The owner: Phudalew 

waste waster runoff remains an issue 
--- 

Agreement to Go Ahead 

Spectrum (44 rooms) at Cherng Thalay 
The owner: Spectrum Asia 

Mai Khao Dream Resort and Spa (22 villas) at Mai Khao 
The owner: Mai Khao Dream 

Chalong Interview Condominium (72 rooms) at Rawai 
The owner: Phuket Intervilla 

Baan Prapatsorn (76 plots) at Thalad Yai, Phuket City 
The owner: Layan Burin 

Four-storey building (27 rooms) at Kathu 
The owner Wiroj Phutong 

Litte Mermaid (40 rooms) at Karon 
The owner: Sudhujai 

Jhomtong (22 rooms) at Wichit, Phuket City 
The owner: Boonma Huber 

Rompattana (21 rooms) at Wichit, Phuket City 
The owner: Wantana Prachumpan 

Three-storey building (38 rooms) at Rassada 
The owner: Yuparat Ritmethree 

Juntamas Hotel (56 rooms) in Phuket City 
The owner: Juntamas 

The Cape Estates (17 houses) at Patong 
The owner: Kedsavilla Development 

Sun Peung Condo (64 rooms) at Patong 
The owner: Sun Peung 

Romsowan Apartments (26 rooms) at Patong 
The owner: Chakorn Sermtokul 

Vises Hotel (79 rooms) at Patong 
The owner: Pothiphumi 

Neptuna Hotel (79 rooms) at Patong 
The owner: Udomeak 

Four-storey building (16 rooms) at Phuket City 
The owner; Chulee Thanakit 

Thawasin Place (79 rooms) at Rassada 
The owner: Thawasin Place Committee 

Prompan Condotel (78 rooms) at Rassada 
The owner: Baan Prompan 

Prateep Project (69 rooms) at Kathu 
The owner: Prateep Reaksomroj 

Three-storey building (19 rooms) at Kathu 
The owner: Jaroon Prateep Na Thalang and Jaroi Prateep Na Thalang 

Sai Tong-Na Yai (30 plots) at Chalong 
The owner: Gold Future Development 

Poonsab project (78 rooms) at Chalong 
The owner: Phuket Shinawat Property 

Silver Palm Rawai project (51 rooms) at Rawai 
The owner: Phuket Boutique Development 

Two-storey building (18 rooms) at Rawai 
The owner: Surasak Subjui 

Kata Rocks (30 rooms) at Karon 
The owner: Kata Rocks 

Excavation project Kata Rocks 
The owner: Kata Rocks 

Pornsawat Project (36 rooms) at Karon 
The owner: Tantipornsawat Kata 

Natalee Place (19 rooms) at Karon 
The owner: Nattakah Chukhoawong 

Six-storey building (45 rooms) in Wichit, Phuket City 
The owner: Sanfanpoo 
--- 

Agreement With More Details Required 

IEE to be supplied 

Patcha Resort and Hotel ( 61 rooms) at Kamala 
The owner: Patong View Thalay Studio 

Four-storey building (20 rooms) at Cherng Thalay 
The owner: Puttirat Rattanakong 
--- 

Agreeement Not Reached 

EIA still required 

Marina, Taj Exotica Resort and Spa, Koh Lon, Rawai 
The owner: Taj Asia Thailand 

SIGNS OF RECOVERY IN THAILAND: Developers snap up land

Original article: The Nation August 31, 2009 

Confident that the country's economy is recovering, property firms have revised their investment plans to allow for the purchase of more land in the final four month of this year on expectations that prices will rise after a period of stability. 

According to a survey by The Nation, property firms including Preuksa Real Estate, Land & Houses, Sansiri, LPN Development, Noble Development and Asian Property Development have increased their investment budgets to buy land between now and the end of the year for the purpose of developing residential projects next year and in 2011, believing the economy will return to strength in 2010. 

Most are convinced that land prices are likely to rise after remaining flat since 2008. 

Land & Houses senior executive vice president Naporn Soonthornchitcharoen said the company has enough cash to revise its spending plans and buy land worth Bt3 billion to Bt4 billion by the end of the year. 

"When the government begins construction on the [next phase of the] mass-transit system, that will affect the property market, especially land prices in areas near the rail system, which will increase. So this is a good time to buy land," he said. 

Preuksa Real Estate director and chief operating officer Prasert Taedullyasatit said the company will buy another Bt3.5 billion to Bt5 billion worth of land this year for new projects to be launched this year and next, taking the firm's total from 22 to 30 projects. 

"We have seen signs of economic recovery since May, and believe this sentiment has sufficient momentum to drive demand in the residential market in the second half of this year. As a result, we've decided to collect land to support our business expansion in the last four months," he said. 

Noble Development president Thongchai Busrapan agreed that now is the time to buy. 

"We believe this is a good time to pick up land, before prices rise on an economic recovery and construction on the government's mega-projects - especially the rail system - gets underway," he said. 

According to a study by the Agency for Real Estate Affairs (AREA), the new rail system development will drive up land prices by between 20 per cent and 100 per cent, depending on the location and type of property. 

As an example of this process, he cited land prices on Silom Road, which have increased from Bt500,000 to Bt800,000 per square wah since the opening of the Skytrain in 2000. (One square wah is equal to 4 square metres.) 

The area around Times Square Building on Sukhumvit Rd has seen the strongest growth, rising from an average of Bt400,000 per square wah in 2005 to Bt750,000 now - an increase of nearly 97 per cent. The area near Soi Ekamai on Sukhumvit has seen prices rise an average of 89 per cent to Bt500,000 per square wah.