Phuket Realty

How much house can I afford in Thailand?

Recession has affected consumer spending drastically so before you buy a house in Thailand answer this: how much house can I afford? 

Investing in a house requires a lot of speculation and it means exploring different possibilities if a particular option isn't working well for you. There are many factors that determine your house affordability. The most important is your income. Your income should be enough to support your monthly mortgage payments. The other factor that decides the size of the mortgage you can take out in Thailand is your recurring expenses every month. 

In case you are already having credit card debts, a student loan or an auto loan and you are making payments for the same, you should take out a mortgage that will enable you to meet your existing debt payments as well as the payment which you are required to make in case you take out a mortgage. 

Your credit rating is also an important factor that will help you to decide the size of the mortgage. In case you have a very bad credit rating, lenders will perhaps shy away from giving you a loan that will have favorable terms. It doesn't necessarily mean that you don’t stand a chance to get a mortgage. You can shop around for different mortgage rates that are being offered by the lenders in Thailand. 

As far as selection of property is concerned, you can lay your hands on any of the following depending on your affordability and interest. Check it out. 

1.  Thailand Usufruct
   A Thailand usufruct gives the right to an individual to use a particular premise for a lifetime and to derive profit from the property that belongs to someone else. However, the property should be used with utmost care so no damage is inflicted to the property. It has many legal aspects that can be best handled by a lawyer.
   
   
2. Thailand condominiums
   You can also own a Thai condominium provided you are able to fulfill the criteria of owning a condo as per Thailand Condominium Act.

There are many other options to own property in Thailand. 

A new draft bill related to land and property tax in Thailand may not go down well with many homeowners in Thailand. The main aim of the bill is to help property owners so that they can make optimum use of their land and property as far as selling unused property is concerned. It may be mentioned here that the Land and Construction Tax Bill that is expected to be taken up for discussion in the month of August may be approved towards the later part of 2009. 

A common fear that is haunting homeowners in Thailand is that they will not be able to enjoy tax exemptions any longer. Currently, homeowners enjoy tax exemptions under the prevailing land and tax law that is in force for more than 80 years now. Consumers believe that there will be an escalation in taxes. Currently, property tax revenue makes up approximately 10 percent of the total budget. People are also anxious to know about the pricing of homes as per the new tax regime.

Revenue from Phuket real estate deals plummets

Phuket Gazette May 27, 2009 

PHUKET CITY: In an indication that the Phuket real estate market is not quite as robust as some like to suggest, statistics released by the Phuket Provincial Land Office reveal that income on land and property sales transactions was down over 70% year-on-year over the first four months of 2009. 

There were a total of 1,945 transactions involving land title deeds for the period from January to April. 

The total value of land transactions for the period was Bt883.24 billion baht, with the vast majority (Bt881.52bn) for land with pre-existing structures. 

Income from transactions from January to April 2008 totaled Bt333.5 million baht. 

Income for the same period this year was just Bt97.8m, down almost 71%. 

The largest reduction was in business tax collection, which is normally paid for by the seller at a cost of 3.3% of appraised value. This figure fell from Bt132.0m to Bt18.2m year-on-year. 

There was a similar downward trend in income from transfer fees, normally paid for by the buyer at 2% of registered value. These plummeted from Bt104.3m to Bt13.6m year-on-year. 

Withholding tax, paid for by the seller at 1% of appraised value, fell from Bt85.7m to Bt58.6m year-on-year. 

Stamp duty, paid for by the seller at 0.5% of registered value, fell from Bt11.6m to Bt7.5m. 

Property analyst Bill Barnett told the Gazette that the figures reflect a "wait and see" attitude on the part of Thai investors, many of whom speculate by buying several units at a time without the intention of living in them. 

Describing the figures as somewhat volatile, he cautioned that they are not a reliable yardstick for trends in the upscale villa market, where many sales are to foreigners on a leasehold basis or though offshore accounts, and thus not included in the Land Department figures. 
________________________

Expat Residents by Nation for Phuket

Original article: http://phuketwan.com/tourism/latest-expat-totals-nation-phuket/

By Shanya Phattrasaya and Alan Morison

Monday, March 16, 2009

Phuketwan Statistical Analysis

DEBATE often surrounds the number of overseas residents who live on Phuket. The official figures, obtained by Phuketwan from Phuket Immigration, provide the most accurate guide.

They show that a total of 18,475 visas were extended in 2008, 9159 short-term (tourist, 60 days, 30 days, 15 days, seven days) and 9316 long-term (non-Immigrant B or O or student-teacher, plus others).

The figures include all those who sought to extend visas at Phuket Immigration. 

The top 10 nations: 

1. Britain, 2722 (1125 short, 1597 long);
2. Sweden 1404 (988 short, 416 long);
3. France 1321 (716 short, 608 long);
4. Italy 1278 (892 short, 386 long):
5. Germany 1261 (456 short, 805 long);
6. US 1143 (503 short, 640 long);
7. Philippines 875 (367 short, 508 long);
8. Australia 870 (396 short, 474 long);
9. Switzerland 762 (328 short, 434 long);
10. Canada 585 (340 short, 245 long).

Where are you from? What are you doing on Phuket? Please tell us in the Comment box below

At the other end of the scale with one visa each are Armenia, Bahrain, Belize, Botswana, Costa Rica, United Arab Emirates, Ecuador, Georgia, Guinea-Bissau, Kenya, Liechtensein, Nigeria, Paraguay, Panama, Peru, Syria, Kyrgyzstan, El Salvador, Gambia and Macau. 

So you just never know who is on that lounger alongside you at the beach. 

If national characteristics can be extrapolated from the figures, then Swedes and Italians seem to prefer short-term visas while Germans prefer the long-term ones. 

An important point is perhaps that people from colder climates seem to come to stay in substantial numbers. The Top 10 visa countries are at odds with the Top 10 nations as tourists. 

We are still waiting for a comprehensive report on Q4 arrivals by nation. 

The best comparison we have is with 2007, where the Top 10 tourism countries were: 

1. Australia
2. Britain 
3. Sweden 
4. Korea 
5. Germany 
6. China 
7. Russia 
8. Japan 
9. USA 
10. Malaysia 

Of interest because of the numbers of guides who operate from those countries are Korea (2 short term, 276 long term) and Russia (289 short-term, 113 long-term.)

From looking at both lists, we can state the obvious: that most people who come to stay for longer than tourists are from countries where English is relatively widely spoken, and that most come from cold-climate countries. 

They are also predominantly Western and therefore probably better placed economically to make the shift. 

Tourist numbers are in retreat across Phuket's traditional Asian sources: China, Korea and Japan. 

But these countries are also not yet at the stage as travelling nations where the concept of spending a long time in another country has become accepted. 

Japan and to a lesser extent Korea are now exporting plenty of independent travellers, but in China, it's still mostly all packaged tours. 

Perhaps as English becomes more widely spoken and prosperity swings towards Asia, that all might change over the next 20 years. 

We'll let you know.

Real estate prices are falling in Phuket !

    Since the sub-primes bubble burst, Thai authorities keep churning out that Thailand - whose GDP depends for over 70% on exports and tourism - is immune to the economic crisis.

Now property prices are finally decreasing in Phuket.

Even if, officialy, prices are still increasing, in fact, everything is negotiable and some property owners have already reduced their asking price by as much as 45% !

    For example, this house, located in Rawai in the South of the island, which was initially advertised at THB 10.5 million ($ 315,000), has recently been sold for THB 5.9 million ($ 175,000). 

 

Another example is this 5-star hotel of 41 luxury villas, for sale at THB 380 million ($ 11.3 million), was advertised at $ 14 million one year ago.

But, it with property developers in difficulty that best bargains can be found.   
 

For example, this unachieved project in Cape Yamoo (click here for details) whose asked price dropped from  $ 1,790,000 (THB 60 million) to $ 1million (THB 35.4 million). The project includes 4 villas under construction and a land plot with services to build 3 additional villas. one of the 4 villas under construction is worth alone 40 millions Baht which would cover the asking price for the whole project.

Or the land plot of this 60 condos + 6 villas project in Bangtao (click for details), which was for sell on the basis of Baht 11,5 million per Rai (about $19 per sq.ft) is now priced at THB 10 million per Rai (about $16 per sq.ft).


In Botan Village, a 3,800 sq. ft villa was bought for THB 25 million ($715,000). The buyer was not able to come up with the money so the villa is back on the market at only THB 16 million ($335,000).

Then does it mean that we are in crisis?
For, even if there definetely are some good bargains at the moment, the downward trend has not become widespread yet. Especially the prices drop shown here tally the asking price of the properties not a loss compared with the price the property was previously bought.

    I will first list the negative arguments, which would cause a lasting drop in prices, then the positive arguments, which plead for a stabilization of the market; then I will try to forecast a trend for the short  / medium term.

1. Negative arguments
   
1. Political Instability:
   The conflict that broke out in 2006 has two consequences.
   First, it revealed the deficiency of the Thai legal system in protecting ownership rights especially in the real estate sector.
   Second, the sight of the airport held up by demonstrators gave fear that the country could go out of control.
2. The international crisis has repercussions on the Phuket market.
   Before, local banks did not offer loan to foreigners. Foreigners willing to purchase a proprerty in Thailand used to pay "cash", but with money that they borrowed to a bank in their country of origin; this loan was secured by the purchaser's personal assets. This is no more possible today.
   A Colliers International Thailand survey showed foreign purchasing power, especially among home-buyers from the US, Europe, Hong Kong and Singapore, had already dropped 20-50 per cent. Nevertheless the grounds of this study are questionable since Colliers is not really involved with the Phuket market.
3. A "P/E" (price/earning ratio) deeemed too high: a low rental yield due to high purchase price.
4. High maintenance cost.
   Generaly, maintenance fees in gated communities in Phuket are around 50  ฿ per m². owners who pay over $500 fees every month are not unusual.
5. The fall in row material cost, and consequently the fall of construction costs, will lead to a decreasing of price of new properties and therefore will lead the whole market down.
6. An anarchic development that takes no care of the environment.
    
2. Positive arguments
   1. Even if the political crisis is far from over, troubles have apparently calmed down. It is noticeable that there is in Thailand a feeling of safety that does not exist anymore in Europe.
   2. Yes, Thailand is hit hard by the economic crisis, but its impact on the local real estate market, especially in Phuket, is different than in the rest of the world.
      First, there was not here really any "sub-prime" effect, since the banks were previously not or rarely granting loans.
      When a market flourishes, a certain part of speculation is unavoidable.
      Nevertheless, what I have observed here since 2004, as a real estate broker and as a property developer is not a pack of investments funds looking for the best return and building up a bubble, but rather individuals who were buying a property for their own use, i.e. holiday or retirement. Since the main goal was not to make money on a short term, and since these pruchases were paid up cash, finally few property owners really need to sell there property at this point.
   3. The P/E is indeed high, in particular for properties located near the West Coast beaches and oriented toward the seasonal market. However, it is still possible to find properties with a decent rental yield for properties oriented toward the resident market -instead of the seasonal market- and bought at a reasonable price.
   4. The deflationist argument will stand only over a very short period of time, since we are talking about limited (non-renewable) ressources: steel, copper, cement, without talking about oil -which multiplifies cost rise with transportation cost- all these commodities are "exhaustible". Besides, since we are on an island that is even smaller than Singapore (respectively 543 m² and 693 m²), the price  of land for development is likely to remain high. Moreover, many projects have been canceled or suspended, which reduces steeply the offer.
   5. At last, there is what I would call the "non-quantifiable".
      Here are a few shots of the islands of Phang Nga Bay. It's an hour drive away from Phuket and it's wonderful.It's an essential factor; people come to Phuket for i's quality of life.
       

    Before concluding, I would like to highlight that the Phuket real estate market is, by essence, slow. We are evolving into an 'international" market, which means that, once the property is put for sale, that it is advertised on an international medium, we still need to wait for the prospective buyer to organize a trip to Phuket (i.e. that he/she makes some free time, books a plane ticket etc...) in order to visit it.  This lengthens the time during which the property stays on the market. When it is counted in days in Singapore, in Phuket, a property is rarely sold in less than 6 months.

Therefore, when I speak about short term, I look at the high season 2009-2010 or even 2010-2011. 

At a national level, analysts working for big real estate companies such as Supalai, Land and Houses or  Asian Property Development forecast less transactions for 2009, even thought the value of properties should decrease by 5 to 10% due to construction cost fall and despite the fiscal incitation created recently by the gouvernment.

This analysis cannot be applied directly onto the Phuket market, because of its specificity. 
On one hand, fiscal incitations (tax allowances on sales would raise from  ฿ 100,000 to 200,000) will have a an impact only on sales inferior to THB 3 million (about $80,000), and Phuket market is rather high end.
On the other hand,  it is rahter a second home market than a main home market: the buyers' concerna are different.

Nevertheless, I also think that few transactions will occur during the next 12 to 18 months.

Afterwards, it will depend on 2 parameters, i.e. the international economic situation and the local political situation, but I would rather be inclined to think that the market will consolidate and even start raising again.

Oodles of room at Phuket inns

Bangkok Post Jan 1, 2009

The number of new hotel rooms in Phuket will increase by 38 per cent this year notwithstanding the current domestic political situation and the international financial downturn.

Popular tourist destination Phuket could well suffer from an oversupply of hotel rooms in 2009.

In addition, 30 new hotels on the island are at various stages of development with over 4,918 rooms becoming available within the next three years, according to market research carried out by C9 Hotelworks, a hospitality consulting firm.

It found that there are nearly 40,000 rooms on offer in Phuket at the moment, ranging from guest houses to branded hotels. Approximately 10,000 of these are in international hotels.

There will be a 50 per cent increase in the number of international-standard units there, with 47 per cent of that figure being upscale and luxury hotels, 41 per cent midscale, nine per cent budget/economy and three per cent extended stay (villas/condominiums), according Bill Barnett, managing director of C9 Hotelworks.

2009 is set to see the largest surge in supply with 1,850 new rooms scheduled to open, he noted.

"Branding of hotels is also on the rise with 27 of the 30 hotels operated by international, regional and domestic chains. Thailand-based brands such as Anantara and Centara are growing at a rapid pace and regional chains such as Langham are now expanding into the country," he said.

The firm's market research also revealed that two locations, the east coast of Phuket and Phang Nga Bay, are set to define a whole new era in the luxury-property sector.

Tourism statistics in Phuket and Thailand

According to the Tourism Authority of Thailand, the number of tourist arrivals to Phuket almost doubled to 4.7 million in 2007 from 2.4 million in 2005.
Total foreign tourist arrivals to Thailand in 2007 were 14.5 million, of whom one-fifth or 3.1 million went to Phuket.