Monday, 22 February 2010

The Rental Market in Koh Phangan and Thong Nai Pan

There seem to be three distinct stages in the development of the accommodation market in Thailand, especially for beach destinations. Phuket, Koh Samui and Hua Hin have all followed a similar evolution in their development. Below are the three stages.

1) The first visitors to a beautiful beach are invariably intrepid backpackers who are prepared to take long bus and boat journeys, hike and trek and really embrace the adventure that sometimes can be involved in getting to a destination. Backpackers will take cheap basic accommodation such as simple no bathroom bungalows or even just a hammock. Just being in a beautiful place with access to the basic necessities of food and water is enough. 

As more backpackers arrive so the locals are able to offer better accommodation and perhaps a generator for electricity in the evening and cold drinks. 

Businesses quickly become established and the locals start to make good money catering for the larger number of visitors to their little bit of paradise. With this improvement in income usually comes the financial incentives to improve infrastructure: better roads go in, better boat links become available, taxis appear and electricity arrives.

With these improvements come backpackers and tourists who want a bathroom, hot water and air-con. And thus mid-range accommodation options appear. At the same time travel guides start to publicize a location.

2) It is at this point that phase two starts. And that is high end tourism arriving. This is driven by the building of a '5 Star Hotel'. The hotel offers lots more amenities and facilities to a location. Not to mention more employment opportunities to the locals. Behind the hotel is investors who want a return for their money. They spend money on advertising the hotel and the location. The hotel works hard to liaise with travel agents, offering commissions and making promotional materials. This is when a location really explodes in popularity. TV and mass media exposure are sure to follow.

For a while the beautiful location is shared between the cheaper more basic operations geared towards cost conscious backpackers, the mid-range places and the high-end hotels. A bohemian vibe with better facilities. 2 dollar noodles and 100 dollar dinners. The choice is great for the visitor and allows maximum employment opportunities.

3) Stage two to stage three is a gradual progression more and more towards catering to high spending short stay tourists. Prices go up. The cheap bungalows are torn down and replaced with sealed concrete units with air-con, hot water and bathrooms.

A successful hotel in Thailand invariably creates copycat business plans. If an area can make good money for one 5 star hotel it can make good money for two 5 star hotels. This is especially true during times of  economic prosperity in the developed world.

At the same time a fledgling land market is normally to be found in the area. When hotels move in with tourists who spend money so the dream is created - the possibility of owning a house in paradise. As the land market becomes more established so prices start to rise. The 5 star hotels offer more and more luxury, everyone upgrades and prices rise. This creates confidence in the commercial strength of a location. With this land prices further increase.

And this is when a location really happens as a money-maker. It has everything going for it: a large turn over of high-spending tourists, a great profile as a must-visit place, and a growing reputation as a new real estate hotspot. Land prices increase year by year but are still well below the average for similar land in places like Phuket.

This is where Thong Nai Pan is at. Namely at the start of phase 3 where land prices have sharply risen and the profile of the average visitor has changed from backpacker to 2-week holiday maker or honeymooner.

In Thong Nai Pan Noi there are three 5 star hotels - Panviman, Santhiya and Ra Sa Nan Da. The latest Ra Sa Nan Da is directly on the beach with boutique villas with private plunge pools. The cheapest villa costs 22,000 Thai Baht a night ($688). That is serious money.

Now all the essentials are in place for a luxury villa rental business to flourish. Big spenders are coming to Thong Nai Pan, 5 Star Hotels are charging 5 star prices and people are starting to build their own luxury villas.

Unlike in Haad Rin and other beach resorts in Koh Phangan the tourism is not dependent on the few days surrounding the Full Moon Party. Furthermore, much of the rental accommodation in  Koh Phangan is mid to low range in quality and geared towards a long-term rental market. The returns on such a business are small but steady.

Whereas in Thong Nai Pan people want luxury and are willing to pay for it. Amongst those higher-end tourists visiting Thong Nai Pan will be a growing proportion who have already been before. They will be looking for a bargain. Why spend nearly $700 a night for a small villa when you could rent a private villa for $300 a night? These people will be wanting more space and privacy and extra amenities such as a fully fitted kitchen. For a family this makes perfect sense, and for those with food allergies it is crucial. This is what happened in Koh Samui. First the expensive hotels, then the land market, then the villas-for-rent market. One step creates the next step.

The key to making money under this paradigm of development is to know where the market is at. Things can change quickly and the market can tip into the negative situation of supply far outweighing demand.

I believe the time is right in Thong Nai Pan for money to be made in the rental market. At the moment in Thong Nai Pan the supply of luxury villas to rent is minimal yet the demand is there. It is just a matter of correct promotion to get the message out to those who would definitely be interested. Luxury villas can offer maid service, cleaning services, car rental etc. that hotels offer, but most importantly they can offer real value for money compared to thousand-dollar-a-night places.

No where else in Koh Phangan has the same cachet as Thong Nai Pan, and nowhere else in Koh Phangan has such an active land market. Now is the time to build a villa and rent it out, or buy a villa and rent it out. By the time the next up-cycle in the world economy comes around it will be too late.

Friday, 5 February 2010

Finding Reputable Lawyers in Thailand

Finding a reputable lawyer in any country is not a simple task, and this is especially true in Thailand. All lawyer firms will tell you how competent they are. Every firm of lawyers in Thailand probably has a website full of testimonials from satisfied customers. So what can you do?

Well despite its shortcomings the internet is still a good place to start. Here are a few guidelines to help you in an internet search for a reputable lawyer to help you deal with the complexities of Thai law in regard to buying and selling property, and setting up your own Thai company.

1) The first place to go is a forum. Forums give you information and advice from people who have been in similar situations to you. One of the biggest forums for issues related to buying property abroad is: http://www.propertycommunity.com/

2) A forum specifically for Thailand that is well subscribed is: www.thaivisa.com/forum. You can post nearly any question here and get a host of answers.

3) It is worth looking at several websites for Thai lawyers. You will soon begin to notice which websites look more professional. Looks can be deceptive, but on the internet a really professional looking website with clear easy to understand text is a good indicator of a reputable law firm. Have a look at www.limcharoen.com. This site provides a good bench mark for what a serious law firm's website should look like.

Other things you should consider when choosing a law firm:

1) Is there any connection between the developer and the law firm? It is worth asking. There is an obvious conflict of interest if a law firm represents both seller and buyer.

2) Following on from the previous point, be wary of taking the advice of a property developer when choosing a law firm in Thailand.

3) If you are buying property or land in Koh Phangan, then it is a very good idea to seek legal council in Koh Samui or further afield. The law firms on Koh Phangan have an unproven track record. Whereas, law firms in Koh Samui, Phuket, Hua Hin and Bangkok have been operating for much longer in the property field and can provide much better legal advice.

4) Word of mouth is an invaluable resource. If you meet anyone who has experience of the property market in Thailand then you should pick their brain.

5) When buying property or land in Thailand or when leasing land in Thailand the first thing any lawyer should do is check at the land registry office to make sure the seller really does really own the land; and what type of land title the land has It sounds obvious but people continue to fall prey to this scam.

6) Finally, don't buy land or property on Koh Tao. The island is a legal oddity because it is a former prison colony and no proper land titles exist for the place.

Once you have decided on a few lawyer firms that seem legitimate and competent then the next step is to contact them. The promptness of the response as well as the professionalism exhibited by the response is another good indicator as to the quality of the law firm. Finally, arrange a meeting. The first meeting should be free. Ask difficult questions and use your intuition.

If you follow these guidelines you should be able to find a reputable law firm in Thailand. There are many to choose from.