Facts about Thailand real estate
The last decade has seen a massive growth in the number of
people, particularly from the West, investing in property overseas. Some buy
principally as an investment, while others buy a holiday home and some a
permanent residence, having taken the decision to emigrate.
Over the last twenty years or so, Thailand has firmly
established itself as a favourite holiday destination for tourists from far and
wide. More recent years have seen vast numbers of Asian and Eastern European
tourists join the multitudes from the UK and Western Europe, Australia and the
United States as key contributors to visitor numbers. There have also been
rapidly increasing numbers of foreigners retiring to Thailand, notably to
Pattaya, attracted by the fantastic lifestyle, the wonderful climate and the low
cost of living.
It is no surprise then that many thousands of foreigners
have become interested in the possibility of investing in real estate in
Thailand. The key tourist areas of Phuket and Koh Samui have seen significant
growth in so far as foreign buyers are concerned, as has Bangkok, albeit more
typically with expatriates living and working in the Kingdom. However, it is
the Pattaya market that has really taken off, particularly over the last five or
six years, with purchasers from overseas having accounted for the vast majority
of units sold in numerous housing developments and large condominiums.
Part of the attraction of Pattaya, over and above markets
in places like Phuket and Samui, is the relative cost of properties. Typically,
similar units in Pattaya will be significantly cheaper. Moreover, Pattaya is
extremely convenient; being located only about an hour’s drive from the new
Suvarnabhumi Airport in Bangkok, along recently upgraded and widened highways
In addition, the infrastructure in Pattaya is not only
good, but improving rapidly. There are quality international hospitals, highly
regarded international schools, excellent dining options from cheap and cheerful
to haute cuisine and a vast number of wide ranging entertainment
options. On the shopping front, there are huge Western style hypermarkets in
which foreign products are widely available. A huge new Central Mall is close
to completion and due to open in the near future, while MBK have announced plans
for another big shopping mall, with construction due to begin in a couple of
In simple terms, living in Pattaya for most foreigners is
extremely straightforward, very pleasant and wonderfully affordable. Even for
the most parochial of foreign visitors, there are few challenges given the
existence of well established expatriate communities from all over the World.
Therefore, friends, golf partners or drinking buddies who speak your own
language are easy to come by.
When it comes to purchasing a property, there is a massive
variety of houses and condominiums to choose between, which, in general terms,
represent outstanding value for money, particularly when compared to the cost of
real estate in the Western world. Like most places, there is a wide range in
terms of size, price and quality. Accordingly, taking advice from a
knowledgeable and trustworthy real estate broker can be extremely useful,
particularly for individuals who have not previously owned property in the local
Foreign Ownership Law
In terms of Thai law relating to the ownership of real
estate by foreigners, it can sometimes be quite confusing. While an article
such as this cannot be a substitute for taking specific legal advice, which one
should always do before making a significant financial investment, it is
possible to give a broad outline of the way the system works.
The Thai system of property ownership is actually a well
organized, very practical one based on a system of title registration via local
Land Offices. While there are other, less secure titles available, as a
purchaser you should only ever consider buying property that has either a
Chanote, Nor Sor Sam Kor or Nor Sor Sam title. These are titles in which the
registered ownership is secure. The main practical difference between Chanote
and Nor Sor Sam Kor / Nor Sor Sam is that the boundaries of a Chanote title have
been more accurately surveyed.
When it comes to condominiums, foreigners are entitled to
own up to 49% of the floor area of a particular development. The remaining 51%
of floor area can only be owned by Thai nationals or Thai companies. Thus, so
long as there is foreign quota available within a particular condominium
development, a foreigner can purchase a unit and own it in his or her own name.
However, upon registering a transfer of ownership to a foreigner’s name, the
foreigner in question must produce an official bank receipt (a tor tor 3)
at the Land Office to prove that the purchase money was brought into Thailand
from overseas. Moreover, the money must arrive in Thailand as foreign currency
and then be converted into Baht within the Kingdom.
Own, Lease & Mortgage Option
The situation with respect to land, and thus owning a house
in Thailand is significantly more complicated. The starting point is that,
under Thai law, a foreigner may not own a freehold title to land in his or her
own name. However, a foreigner may own a leasehold title to land. Thai law
dictates that the term of a lease may be up to 30 years in length. Moreover, it
is legally permissible to enter into an agreement with the owner of the freehold
land to renew such a thirty year lease upon two occasions, effectively providing
a total extended term of 90 years. That said, when doing so great care must be
exercised so as to avoid potential issues with enforcing the extended terms. It
should be noted that any lease of more than 3 years in length must be registered
at the Land Office.
It should also be borne in mind that, while a foreigner
cannot own land upon which a house is built, he or she can own the actual
house. Thus, as a foreigner, one option is to lease land for up to 90 years and
own the house that you build upon it.
It is also perfectly legal for a Thai company to own land
in Thailand and for up to 49% of such a company to be owned by a foreign
shareholder or shareholders. Moreover, such foreign shareholders can have
majority voting rights within the company. However, it is illegal for the Thai
shareholders in such a company to be nominees, although the questions of what
are and what are not nominees and how to prove that a shareholder is a nominee
are not ones that are necessarily easy to answer.
In practical terms, many thousands of foreigners have set
up Thai companies, with 51% or more Thai shareholders and adjusted voting rights
which give the minority foreign shareholder control of the company, in order to
purchase and effectively own properties in Thailand. Whether or not the Thai
shareholders in such companies would be classed as nominees depends to a large
extent upon how the company has been set up, and obviously this is an area in
which it is important to take good legal advice. I know of one lawyer who put
his company set up “model” before the authorities in order to test its validity
and received confirmation that it was perfectly legal and legitimate, that the
Thai shareholders would not be classed as nominees. Other companies set up
differently, if ever they were “tested” may fare differently, so taking the
right advice is important.
Personal Expertise on Real Estate
Again looking at things on a practical level, I have been
advised upon several occasions by various Thai lawyers that, in practice, the
authorities are unconcerned with foreigners using the company route to purchase
up to one rai of land (1,600 square metres) upon which to have a private
residence. Of course that does not come with any form of guarantee and one can
properly argue that “policies” such as this are subject to change. However, it
is relevant to how much, if any, risk actually exists in using the company route
to own a house.
That said, I, personally, derive greater comfort from the
fact that many thousands of foreigners own properties in this way quite openly
and yet I am not aware of anyone ever having had a problem with the
authorities. Moreover, my lawyer has advised me that, under Thai law, if a
foreigner is in fact proved to own land, whether by using nominees within a
company or otherwise, the remedy is for the authorities to require that the
foreigner in question sell the land. In such circumstances, the foreigner would
have to be given a minimum of 180 days to do so and if he was unable to find a
buyer within that time frame the authorities would be able to sell the land for
him, although they would be obliged to obtain market value in doing so. In
other words, the property would not simply be seized and the foreign owner
should recover most, if not all, of the money originally invested in the land.
All that having being said, if you are planning to purchase
a house and land using the company route, take proper advice. Speak to
experts. Pattaya is famous for having lots of “bar stool know-it-alls”, some of
whom spend much of their time on internet forums and who dispense advice on all
sorts of subjects about which they actually know very little. It may sound like
common sense, but avoid them at all costs. Their lack of actual knowledge
rarely stops them from trying to tell you what you can and cannot do. The best
advice will not necessarily come from real estate brokers either. Some will
advise you correctly, but not all. If in doubt, speak to a well respected,
independent lawyer, who does not have any financial interest in whether or not
you buy a house.
"Easy but Risky Property Purchases"
Other foreign buyers decide to purchase property in the
name of their Thai husband, wife, boyfriend or girlfriend. Experience tells me
that this is certainly the most risky way to buy property in Thailand. I have
lost count of the number of times I have seen foreigners lose the full extent of
their investment in such circumstances.
The reality is that lots of relationships in places all
around the World end every single day, and relationships in Pattaya, for a wide
variety of reasons, tend to be especially brittle. While blinded by love,
no-one ever thinks their relationship will end, but facts show that more often
than not they do. If a Thai who is married to a foreigner buys property, the
foreign spouse is obliged to sign an affidavit at the Land Office stating that
he or she has no claim on the money used to buy the property. Thus,
irrespective of who actually provided the money, once a property is in the name
of a Thai national, their foreign spouse will have no claim upon it if and when
their relationship breaks down. Some foreigners seek to protect themselves by
taking a lease of the home from their Thai spouse who is the legal owner of the
property. However, in spite of the existence of this option, my own experience
leads me to believe that for most foreign buyers the best way to purchase a
house is undoubtedly via the company route.