Thailand Real Estate – Phuket Buyers Guide
If you are looking to buy Real Estate in Thailand, it’s good to be informed of the local laws and regulations on property ownership, which can appear complicated at times. This Phuket buyer’s guide is intended to provide you with sufficient information to get started.
Why Invest in Phuket Real Estate?
- Phuket is Asia’s premier resort island with amazing natural beauty including white sand beaches, amazing diving, first- class resorts and spas, championship golf courses, yacht marinas, fine restaurants, vibrant nightlife and excellent shopping.
- Phuket has one of the fastest growing property markets in the world with an increasing number of high quality projects by internationally-renowned real estate developers. Environmentally friendly planning and zoning laws ensure that developments are low key and low density.
- Phuket is Thailand’s wealthiest province and also the jewel in the crown of Thailand’s tourism industry, therefore receiving a high degree of protection and investment from the central government in Bangkok.
- The cost of living in Phuket is low compared to Australia, North America and Europe or other premier resort destinations. Fortune magazine recently named Thailand as one of the top ten places in the World to retire, “where you can still live like a King on your savings”.
- Phuket’s appeal is so strong that it was one of the only places in Asia that was unaffected by the Asian economic crisis during the 1990s and the World economic crisis of late. Property values rebounded quickly after the 2004 Indian Ocean Tsunami which was the last market low.
- Rental returns on condominiums and villas continue to remain high as more and more holiday makers are opting for the privacy of a rental property over a resort accommodation. With visitor arrivals predicted around 6 million annually and the demand for holiday rentals continuing to grow.
- Infrastructure and services continue to improve at a fast pace. With two international standard hospitals on the island, quality healthcare is available at a fraction of the cost in the West.
Thailand Property and Land Ownership
There is a general perception that Thai property law is complicated. Actually, the opposite is true: The laws relating to foreign property ownership in Thailand are quite clear. This Phuket buyer’s guide helps to briefly explain the difference relating to real estate.
- Foreigners can buy and own “freehold condominiums”.
- Foreigners can buy and own buildings and structures, such as Villas (distinct from the land on which it sits), and foreigners can take leases on land or property.
- Foreigners cannot own land.
This Phuket buyers guide suggests professional legal advice so you can be aware of the legal aspects of a real estate transaction in Thailand. We work together with some of the most reputable property lawyers in Phuket and in Thailand.
Land Titles in Thailand
As a buyer you need to be aware of the various land title deeds which exist and to understand what you are being offered. A large percentage of the land in Phuket is not titled or even accurately surveyed. Actually, it is because there is a lack of complete surveys and comprehensive titling does not exist yet. As a foreigner buying property in Thailand, you should consider land that comes with a registered Chanote land title.
Financing and Mortgages in Thailand
Mortgages in Thailand are still relatively difficult to arrange.
- Bangkok Bank recently became the first Thai bank to offer mortgages targeted at foreigners wanting to buy property in Thailand. The mortgages are fairly limited in scope and can be applied only to condos. They will loan up to 50% for a maximum of 10 years.
- UOB also offers a selection of mortgage loans for real estate investors. Lending is offered up to 70% on the banks own valuation methods. This may vary widely from the actual purchase price. Interest rates are usually variable rates on a base rate plus a percentage.
Property Taxes and Fees in Thailand
Explained in this buyer’s guide for Phuket, it is important for buyers to know exactly what will be the payable in property taxes & fees upon transfer of property. These costs are calculated relative to the government’s “Tax Assessment Value” of the property, which is usually well below the real estate market value.
- Withholding Tax: 1% payable by the seller.
- Stamp Duty: 0.5% in the case of freehold or 0.1% in the case of leasehold. Stamp duty is charged only where (SBT) is not payable. This tax is payable by the seller.
- Specific Business Tax (SBT): 3.3% payable by the seller only if the property has been transferred within the last 5 years.
- Transfer Registration Fee: 2% and usually this is shared equally between the buyer and the seller but needs to be agreed on and noted.
- Lease Registration Fee: 1% of the rent for the entire lease period, which is payable upon registration of the lease at the Land Department. Transaction costs for leasehold are therefore 1.1% on real estate.
Yearly Property Taxes
This is an annual tax levied on land ownership equivalent to just a few Baht per Rai. The amount is often so minuscule that in practice the body charged to collect it rarely bothers to do so. When they do collect it, it’s usually after several years when the amount has accumulated.
Personal Income Tax
Foreign individuals earning income from property situated in Thailand have a duty to file a personal income tax return. This is calculated on net income after deductions for expenses and allowances. The first 150,000 baht is exempt from personal income tax.
The Initial Purchase Agreement (Reservation Agreement)
The initial purchase agreement or reservation agreement will detail price, terms and conditions, settlement date etc. and in most cases a reservation payment will be required to secure the property. This reservation payment is usually refundable should the sale not go through, as long as it is not your fault.
Using an Agent
A good Agent is essential when buying a property in Phuket. You should be aware that Agents in Thailand are not required to be licensed. Agent fees are paid by the seller in Thailand. This Phuket buyer’s guide is intended to be used as only a rough guide to real estate transactions in Thailand.