Today there are around 3.9 million foreigners living in Thailand, the majority of who live in rented condos. This figure is made up of people from around the world living and working in the country and expats that have chosen to live in Thailand for their retirement. Figures show retirement visa applications over the last three years have almost doubled.
We can also look at the 30 plus million tourists that visit Thailand each year. An increasing number of visitors are choosing to privately rent property short term for the duration of their stay.
So, Thailand remains an attractive proposition for property investors looking at the buy to let market. The International Monetary Fund is predicting continued growth for 2020, so there are no signs that the buy to let investment lure is going to abate.
Historical View of Thailand’s Condo Investment Market
Foreign owned property Investment in Thailand, historically, can be dated back to 1979. The turning point? The Condominium Act.
This new piece of legislation allowed foreign nationals to own condominiums and to rent them out, should they choose to do so. This act is still pertinent today to all foreign property investors.
And so, post 1979 Thailand’s real estate boom was on. Within just a few months, this constitutional change became the catalyst to what is now an essential, multibillion-dollar element of the Thai economy.
By 1988 the first of many international real estate development companies were operating in the country, specializing in the condo buy to let market. All of these companies were, and still are, eager to quench the thirst of the influx of foreign property buyers.
By 1997 it was the norm for real estate developer’s business models to include expansion into Thailand’s buy to let market. Developers had been attracted by 9% year on year economic growth. However, there were problems on the horizon.
Uncertainties Appear in the Condo Investment Market
Since 1956 the Thai Baht had been pegged in value to the US dollar. In 1978 the peg was raised to the level of $25 to the Baht. But Thailand lacked the reserves to support the increase of the currency peg. Speculative attacks on the Thai Baht followed. But the Prime Minister steadfastly refused to devalue the currency.
Eventually the government realized they were left with few choices. The government took the decision to float the Baht. This allowed the currency to fluctuate on the world currency markets. The initial consequence of this was a region wide crisis. It soon became necessary for The International Monetary Fund to inject a $17 billion rescue package into the Thai economy.
By 1998 the Asian Economic Crisis slowed the flow of foreign investment for a couple years. Many international development companies scaled back their operations to wait out the storm.
The Condo Investment Market Reemerges
The economic stagnation did not last long. Due to IMF intervention very soon confidence in the market returned and in the year 2000 $2 billion USD was invested in Thai property. Thailand’s economic Teflon qualities prevailed. By 2003 the country had paid off its debt to the IMF, four years ahead of schedule.
Further good news for investors was on the horizon. This was in the form of continued integration of the ASEAN (Association of South Eastern Asian Nations) member states. ASEAN member states agreed and adopted new, higher standards and regulations to administer and govern the construction industry. This has created development projects of a quality and standard that has further enhanced the international appeal to foreign property investors.
Today’s Foreign Investment in Condo Developments
The largest part of the foreign investment has been focused on the condo buy to let market in the capital, Bangkok. Of course, this was the obvious focus of investment for foreign companies. As a result of this investment, we have seen Bangkok change, esthetically, economically and culturally.
Talk to older generation Thais about the Bangkok they remember, then the city has a very different complexion. Walk down any street in the city and you are sure to see old buildings being torn down for redevelopment and every empty plot of land being built on. This is also true of Bangkok’s suburbs, the Bangkok building drive seems to be relentless.
You May Have Heard that Thailand’s Unrelenting Condo Market is Causing a Glut?
It is easy to see that continued multibillion-dollar investment has created jobs and raised living standards in Bangkok. However, the city is rapidly heading towards an over supply of residential property, rental condominiums in particular. The scales are starting to tip away from Bangkok as being the best location in Thailand for buy to let condos.
A similar trend is also being seen in Chiang Mai and Pattaya. Many of the quoted projected investment return rates, in view of the glut, are now viewed with a degree of skepticism. Capital gains and rental yields are very likely to level off at the lower end of expectations.
You May Wish to Look Beyond the Cities to Invest in a Condo Development
That is not to say that Thailand is no longer an attractive proposition for buy to let condo investment. We are beginning to see the shrewd, discerning investor casting their eyes over developments in other areas, where development is being undertaken with sympathetic appreciation of the surroundings.
We are seeing developments that have a longer-term view as to the sustainability of the overall buy to let market. We have undertaken research into planned property developments outside the capital. We have concluded that Hua Hin, as a location, ticks more boxes than any other popular area for foreign buy to let condo investment.
Why Would You Invest in Thailand’s Buy to Let Condo Market?
For many years people from across the world have been looking at investing in property in Thailand. More and more Westerners see Thailand as the ideal retirement location and are purchasing condos to accommodate their vision of living their dotage in paradise.
However, principally, the most common reason for purchasing a condo in Thailand is for financial gain. Potential gains can be through capital growth and rental yield. The wise investor looks at these two areas in order to decide whether or not investing their money in Thailand is an efficient use of their capital.
Your Realistic Margins from Buy to Let Condos
In most countries around the world, the general principle of property ownership is that bricks and mortar will, year on year, always appreciate in value. In this respect Thailand is no different to any other country. But to what degree?
The Bank of Thailand figures show that in 2018 the Thai economy expanded by 4.4% which is reflected in the condo market with capital growth up to 4.9% from 3.9% in 2017.
Rental yields in condos across the country also reflect this growth. Although, with a note of caution there are signs that the rental yield in Bangkok may be slowing down.
In Pattaya we are seeing the glut of rental condos is starting to point to stagnation in the market. Pattaya has also started to suffer from negativity in the resale market of condominiums.
Overall, in 2018 rental yields were between 5.6%-8.0% with the higher yields being from the medium sized condominium units. These yields buck the trend of most Western nations where the higher rental yields are predominantly gained through the letting of smaller properties.
Consider Your Aspirations from Buying a Condo
Having made the decision to enter into the buy to let condo market, our first piece of advice is, don’t rush! The choices are almost infinite. As well as renting out your property, you may also be looking to spend some holiday time at the condo yourself. So, ask yourself a few questions.
“What do I want from my holiday, what facilities do I require, what would be my ideal location? Select the area that you are sure you would be happy with. Look closely at the market in that area. An investor must bear in mind the indicators that show the likelihood of a rental glut in some major cities.
Identify Your Renters Aspirations from Condo Living
Then give thought to what a renter may desire from a property. A large growth area is with the renter who is looking for sites that offer more than basic, convenient accommodation. Recreation and relaxation and quality of life are becoming increasingly important. Renters want their accommodation to reflect this.
Renters are looking for an enhanced, better quality of life, not just functionality. This is apparent for a short-term holiday lets or long term lets accommodating retirement or working in Thailand. Take all these factors into consideration to create a broad vision of your ideal property in the ideal location.
A number of established companies are now acquiring sites where they can construct residential developments that reflect the noticeable shift in the market trend. Developers have taken on board the wider spectrum of investor aspirations.
Buy to Let Condo Investment Trends are Changing
We are aware of reputable companies putting together new condo design concepts for the discerning investor in and around the area of Hua Hin. These developments are sure to be exciting and innovative in a desirable part of the country that can boast 200 Kilometers of un-spoilt beaches.
Also, Hua Hin is unlikely to ever become spoilt through over development due to it also being the location of Klaikangwon Palace. This was the first of numerous royal summer residences built in the region.
Do You Need Assistance in Purchasing a Condo?
You may feel it necessary to employ the services of a real estate agent. There are many of them and the majority market themselves as offering a “Western Service”. They will search properties for you and guide you through the buying process, to a degree! Then take a percentage of the purchase price, typically, 3% of the sale price.
They target their service at Westerners simply because Thais look upon the service as unnecessary. Thais will automatically go direct to the seller. In truth, if you are buying a condo as part of a new development, a real estate agent is not necessary.
You Should Seize the Moment to Agree Your Condo Investment Deal
With so many new condo developments rising up out of the ground across the country the buyer can secure significant discounts. The best way to do this is to buy a condominium “Off Plan”. This is when a buyer agrees the purchase of a unit either before or during the period of construction. Offering good discounts before or during the early stages of construction makes good business sense for the developer. It helps to maintain their cashflow and gives them a tempting advertising angle, “Units selling fast”.
There are some shrewd buyers that will make a purchase reservation before construction. They will then sell the contract, at a profit, once the development has been completed. Typically, deposits to reserve a condo unit before or during construction are around 10% of the negotiated sale price. With larger developments taking up to three years to complete, a well-chosen purchase and well negotiated price can see condos significantly into profit by the time of completion.
Don’t Overlook the Finishing Touches to Your Condo
It is very common in Thailand for new properties to be sold furnished and with a choice of decoration. This is always worth considering as the price of furniture and décor can add up to a considerable additional cost.
On the other hand, you may have particular, individual ideas as to the interior look of your condo. If this is the case you may prefer your purchase to be transferred to you unfurnished.
If you have decided to purchase a condo in a development, where the policy is to transfer the completed units to the buyer as fully furnished, then you will have extra leverage when negotiating a discount by declining the company’s offer of furniture and décor. On this point you must think ahead. Raise this issue when negotiating your discounted sale price. Once you have paid your deposit it will be very difficult to renegotiate the price.
After completion and before transfer, we recommend that you commission a third-party inspection of the condo. Rarely are condominiums in perfect condition on completion, there will always be snags that need to be corrected. The developer will correct any problems prior to transfer free of charge. Identifying these snags before transfer can save you significant amounts of money in the longer term.
What are Your Fixed Ongoing Liabilities?
In addition to the full purchase price of the condo, investors must be aware of the ongoing costs of owning a unit. Condominiums in Thailand are not subject to any annual property tax, and we can find nothing to suggest that this is likely to change. However, there will be monthly costs to be considered.
You will be required to pay a monthly fee to the management company. This will cover maintenance and utilities of the building’s communal areas as well as the ancillary facilities provided within the development, gym, pool, marina etc.
There is no precise calculation we can give as a guide to work out the cost of the maintenance fee. We can tell you that the fee is usually levied as per square meter of each condo. In our experience this can range from 10 to 60 baht per square meter.
What are Your Variable Ongoing Liabilities?
The cost of water and electricity are the responsibility of the owner or resident of a condo. Historically, this has been an area where residents were often over charged by the building management company. The unit cost of utilities to an individual condo would often be increased above that of what was being charged by the utility supply company.
This practice has now been outlawed by the Consumer Protection Board, as of May 1st 2018 under the Electricity and Tap Water Fee Control Act. We recommend that investors check with the utility supply companies to confirm the unit rate that it charges for the area in which you are investing your capital. It is also important to be sure that the water and electricity meters for your condo are easily accessible for your inspection.
Your Newly Purchased Condo is Now Part of Your Estate
You have selected the ideal property and agreed a price. You have paid the balance and the transfer of ownership has been completed. The condo is yours. The condo is now, in law, an asset as part of your estate. Should the worst happen and you die, do you have a will?
You will probably have a will in your home country that deals with all your assets that make up your estate. You may have chosen to list your Thai assets in your will. In most countries, including Thailand, this is perfectly legal.
However, this can cause problems for the executers of your estate regarding your Thai assets. All documents relating to the execution of your estate will need to be translated by a translator authorized by the Thai government. All of these documents then need to be notarized.
This is sure to cause stress to those acting as your executors. This will also put an additional financial burden on your estate. The alternative is simple and not expensive. Make a separate will that covers all of your assets in Thailand. In Thai law it is perfectly legal for a foreigner to have an additional will to cover their assets within the country.
What are the Pros to Investing in Thailand’s Buy to Let Condo Market?
Perhaps most importantly, purchasing a condo in Thailand gives you an asset you can enjoy. You have your own ready-made base for your holidays, for as long as you wish. Alternatively, you may see your condo as a place to live, for work or retirement. There are now many new, exciting choices of location in which to invest, away from the cluttered cities.
You have an, almost endless, choice of size, designs and prices from which to choose. Looking at the Thai economy, your investment is as safe as it would be in any other country.
You will benefit from capital growth on your original purchase investment. In addition to this, you will gain financially from a steady rental yield. In the event of your death, the asset is fully transferable.
What are the Cons to Investing in Thailand’s Buy to Let Condo Market?
Capital growth in Thai property, although steady, doesn’t increase at a similar rate to that of many other Western countries.
In some areas, particularly the larger cities, finding renters is becoming more difficult due to an oversupply within the market. In these same areas, rental yields are beginning to show levels lower than those of just a few years ago.
If you are considering a large investment, you are restricted by Thailand’s 49% ownership by foreigner’s regulation.
Our Conclusions of Today’s Buy to Rent Condo Market
In summary, investing in a Condo is always a big decision. It should be thought through methodically and with logic. There is great enjoyment to be had from owning a condo in Thailand, not to mention good financial gains.
We have been looking at the market in depth across the country. We have assessed developments in both city and rural locations. Our conclusions see us viewing investment in the major cities as becoming less profitable. In the current climate, we are less inclined to promote the major cities as the best possible location for capital growth and rental yield at this present time. We believe this trend will continue for the foreseeable future.
In pursuing the perfect site for your current investment our research has led us to Hua Hin. One development stands out above the others, Grand Marina Pranburi. This is an exciting development that ticks all our boxes, plus some. Grand Marina Pranburi is a reputable company, with quality units, excellent facilities and a private marina. Currently, we don’t believe there is a better opportunity in which for you to invest available at this time.