It is important to be aware of Thailand’s buying procedure for land or property, which at times may appear complicated. The research and advice below will help ensure you a trouble-free property purchase.
The information below is intended as a general guide to the property buying procedure in Thailand. We will gladly guide you through the procedure and help you avoid any pitfalls.
As a foreigner, if you plan to buy land or a villa then you will be required to set up a Thai limited liability company which will cost around £1,000 and will also have ongoing fees of approximately £50 per month. Alternatively you will need to purchase through a leasehold agreement. Although a freehold title could be regarded to be a distinct advantage, in reality, a leasehold title bears no specific disadvantage to the purchaser. Both forms of purchase are safe and effective means of property ownership by foreigners in Thailand.
Non-Thai nationals can generally purchase units in new developments throughout Thailand without significant restrictions, while avoiding the occasional inconvenience of nationality restrictions. The one provison is that the foreign ownership ratio must not exceed 49% (some units in central Bangkok may not be subject to this restriction). Condo purchase is popular for investment as well as residence and retirement purposes.
Condos can be bought as either leasehold or freehold properties, depending on the development in which you buy. Units can be leased to foreigners for periods of up to 30 years and may have options to renew. You will need a lease of at least 3 years to register your property with the Land Department, an advisable step in the case of buildings that have exceeded their foreign ownership ratios.
Using an Agent
A good agent is essential when you buy a property in Thailand as they can always carefully examine your particular investment requirements and provide you with a selection of options from database. In addition, they will recommend all related professional services you will require to make a safe and reliable purchase.
Appointing a Lawyer
It is wise to appoint a lawyer who is fluent in your language so that you understand properly all the legalities and proceedings. Professional real estate agents will be able to recommend a good lawyer who can carry out the necessary checks on the property or land in Thailand and complete the legal requirements of the sale.
Check the current owners have the correct title to the property
Check for any charges and liabilities still owed on the property
Check your contract and advise you on the obligations for both parties
Help you through the payment/funds transfer
Ensure that the property is registered appropriately and in your name
The Initial Purchase Agreement
The initial purchase agreement will detail price, terms and conditions, settlement date etc. and in most cases a 10% deposit will be required to secure the property. This deposit is refundable should the sale not go through, as long as it is not your fault.
When buying a new condominium, an initial reservation deposit of about USD 1,500 is required and this amount is deducted at a later stage from the total price. Once an agreement is signed, usually 10 to 15 days after the reservation, the buyer is required to pay 10% of the total price. Depending on the terms of the contract, the balance then could be due in installments or as a lump sum at the time the title is transferred.
As a general rule, for residential sales you can expect the total fees and taxes to work out to be approximately 2 to 3% of the property market value.
Stamp Duty of 0.5% and transfer fees of 2% have, for now, been waived for the short term as the government entices buyers to the market.
A business tax of 3.3 % (levied against a vendor who has been in registered possession of the property less than 5 years) is also charged, along with income tax (similar to capital gains tax) at a variable rate.
Mortgages in Thailand are still relatively difficult to arrange. However, recently a new branch of the Bangkok Bank has opened in Singapore, which has created borrowing possibilities for foreigners living in Thailand, offering finance of as much as 70% over a maximum of 20 years.
You can choose between three currencies: Euros, Singapore Dollars and US Dollars, and the currency will affect the rate of interest which is payable on the loan. This is a very new service and you are urged to do your homework before opting for a Thai mortgage.
HSBC has a presence in Thailand and can also offer loans of between 1,500,000 and 35,000,000 Thai Baht. Typically they will lend up to 80% of the purchase price and interest rates can be fixed for up to three years.
To buy a condo or another property with a loan, many purchasers obtain a mortgage in their home country and then transfer the money to a Thai bank account, while using a lawyer to oversee the logistics of the process.
This is an annual tax levied on land ownership. The amount is often so small that in practice the body charged to collect it rarely bothers to do so. When they do collect it, it is usually after several years when the amount has accumulated.
Structures Usage Tax
This only applies to commercially used properties. The rate is 12.5% on the actual or assessed gross rental value of the property. However, this notional value is well below the commercial market rental value.
If the property is purchased through a company, you need to consider that corporate tax is higher than personal tax, and the cost of setting up the company must be considered as part of the initial investment.
Capital Gains Tax
Capital Gains Tax is very low in Thailand, in the region of 1 and 3%, depending on your level of income.