Property In Thailand
Wise investment or Money Drain?
Now I'm the kind of guy who will listen to all sorts of investment opportunities. Stocks and shares, high risk enterprises and even madcap business ventures but something about putting money in what is effectively a third-world economy like Thailand always seems off the mark. Its not just because of the horrendous 1997 crash or the fact that of late some of Thailand's financial decisions are haphazard. The whole idea of bringing vast sums of cash into what essentially is a one way black-hole doesn't fill me with confidence. Firstly take the thirty-percent of capital being withheld on foreign investments (admittedly for bonds only). When this was first brought in the Thai stock market almost crashed!
Property investment at face value would seem a fair enough prospect to many westerners. Money is used to obtain a property and short of anything apocalyptic or disastrous it usually appreciates in value faster than high interest accounts do. Its with this in mind that many retirees flock to Thailand with the idea of buying land to develop and / or houses. Now for me personally this on the surface is wisdom. A lifetime of hard work and plenty of money to show for it should be used to good effect and what better way than bricks and mortar. The relative cheapness of Thailand's housing compared with my home country is vast. Typically Thai housing land is over half the price of Western Europe in many cases. Someone with around £25,000 or $50,000 could easily buy land and have property built on it with some money left over at the end. A place in the sun for peanuts is what many would regard it as. Unfortunately there is one massive catch in Thailand (and many countries in S.E Asia) with regards to home ownership. The catch is that it is against Thai law for a foreigner to own land, yes you heard me right you cannot register land or even own housing (apart from a condo) in Thailand.
That should end the argument for home ownership there and then you might think. Unfortunately one of the best kept secrets that gets money flowing into Thailand non-stop is the 'Wife's' name-loophole. I've only lived in Thailand for less than ten years, but In my short time of living in Thailand I have seen more of this 'Put the (Insert car / bike / house as appropriate) in the wife's name madness than I care to remember. Countless men, some good, some bad, marry bar girls, either 'serving' or retired and get taken to the cleaners financially and more. The new-comer will likely of heard off the money sent/given to the wife / girlfriend due to a 'sick' buffalo. The 'Wife's Name Housing Loophole' is an altogether bigger lure. Typically its a fifty or sixty-something male divorcee / widower who falls head over heels in love for a farm girl he meets in a bar. They marry and he is coerced or wishes to buy a plot of land / housing or paying off the mortgage on property owned at his new wife's village. Now I'm not suggesting that the 'Wife's Name Housing Loophole' is a scam for every man who marries a thai girl, in fact giving her money for building a house isn't a bad thing. Unfortunately there are a lot of money harvesting women out in Thailand (and the world no less) and I've seen more folk than I can remember lose their family fortunes in these dealings.
Despite this I can see the reasoning behind a countries land ownership laws barring a foreigner from owning land. After all, it only takes a rich millionaire to come along from farang land and towns and cities could be bought outright. The prices would be so high that no local can afford the property. Its actually happened in areas of the UK and the USA. Therefore only a foreigner wishing to commit to marriage is therefore wanting to invest. Now that's fine for the marrying type of person who wants to settle down. Over-generous and spendaholic types come into this category also of housing investment. For me personally and most savvy investors, doing this not conducive to investment. Its more of a 'borrowed ball and chain' investment, yes you have attained land / property but you don't own it, in fact given that most thai women who marry foreigners come from a poor region of the country and support children and family it amounts to financial suicide as you've likely inherited every debt of hers and her kin. This method of owning a house only 'works' if you are happy for your 'family' to own the house while you live in it. Just because you've paid the money for it means very little for it in the 'Wife's Name' ownership.
Having 'family visits' takes on a whole new meaning, expect to have family members turn up with their hands out for coin. Its not unknown for thai wives to divorce their farang husbands and keep the house lock, stock and barrel. Meanwhile the poor husband is on the first flight to farangsville penniless! Yes this has happened (and continues to happen!) although it is an extreme situation. A hidden agenda you may be thinking, quite possibly. One of the most famous scam stories I've known is the one where the Thai girl met a guy on the Monday, was married by the Wednesday and was back on the game by Friday having only hours previously waved goodbye to her husband at the airport! Unrelated to housing but always good for a yarn!
From the very late 1990s some 'shrewder' farang began to register property in a company name in greater numbers. This dubious loophole 'unlocks' the housing / land market to single folk not wishing to marry a thai girl and also to married couples who are not Thai. 49% of the company ownership can be in a foreign shareholder with the remaining 51% is usually in the name of several thai people (who are unaware who the others are to prevent a majority takeover or sign witness statements relinquishing ownership). Known as the 'Company Ownership Loophole' (COL)the whole process is, predictably a legal minefield, lawyers and the masters of Illusion also known as Sunbelt Visa are among some of the many 'experts' at this and will sing a song and dance on selling their technique. A favourite method is using white foreigners to try and sell the 'service', the modus operandi being 'I'm a farang! You can trust me!' Typically for a big fat fee they will line up property and set these 'companies' up for eager house hunters.
Up until 2005 many (including yours truly) doubted the wisdom of using non-trading, paper companies as a means of owning land and property. However many of us were on the verge of admitting that this method could bear fruition. That was until late 2005 when the Thai Government announced it would be investigating many of these so-called 49% / 51% companies and go as far as auditing the accounts. To many this was the death knell of the 'COL'. Only the most foolhardy and those with genuine company business register houses as business premises.
The only remaining investment open to investors is the Condo market. It is the only 'housing' as such that a foreigner can own outright without the complications and risk of the above mentioned. The snags come in the following:
The Inflated price. Even when selling to their own, thai condos are a law unto themselves in pricing, especially in population centers.
Condos are not subject to the stricter building regulations of a first world country. This can mean that after a short space of time sub-standard building standards can manifest themselves. Also foreign ownership of the condo, while 100% per condo unit is restricted to a certain number of condo units for the entire building. The reasoning behind this is likely to prevent a condo complex being owned outright by a foreigner or a group of foreigners.
Another hitch can be that the land the condo sits will (usually) be the land of the thai condo developer. No great problem unless after a few years he decides to demolish the entire to site for a development project. Not likely but stranger things have been known to occur in Thailand.
A final word on housing in general is the pricing and thai mentality. If the property is being sold to foreigners the price is almost always inflated. This can mean that if, when you go on to sell it you may not get your asking price. Also the Thai mentality of buying brand new and shunning previously owned properties means that if demand from foreign buyers slumps finding local Thai buyers (especially in non-tourist area) can mean taking a massive price drop.
This section is hosted by our resident columnist Johnny B. who has been living in Thailand for seven years now and currently is based out of Bangkok.