Buying Off Plan Property in Thailand - the Advantages and the Disadvantages

Advantages

1) The main advantage of buying an off plan property in Thailand is the price. Off plan properties are nearly always cheaper than a comparative built property. Off plan in Spain and other countries around the world are investment opportunities. The same is true in Thailand. The earlier you invest in a development the bigger the potential profit is. As the development progresses so the prices for remaining off plan properties also increase.

2) If you invest with a developer with a proven track record your investment is usually safe.

3) It is sometimes possible to sell on your off plan before construction has finished. Thus making a quick profit.

4) Once the property is built you have a brand new house or villa. This villa because it is new will usually come with a structural warranty. Second hand houses and villas rarely come with a structural warranty.

5) Your new villa has had no previous owners so you won’t have to pay for alterations. Furthermore, most developers allow customers who purchase off plan property to customize their villa in terms of interior design, tile colors etc. This means you can really get the villa of your dreams with off plan.

Disadvantages

1) The main worry for the purchaser of an off plan property is that the constructor and/or developer will go bankrupt before your off plan property is completed. In which case you will have to apply to the Thai courts for compensation.

2) Time can be a negative factor. Often things take longer to build than expected in Thailand. It can be frustrating making plans to stay in your new villa only to discover that it isn’t ready for occupancy yet.

3) In the current economic climate the housing market has seen a considerable slow down. This means that off plan investment is unlikely to result in a quick purchase and re-sale to make a tidy short term profit. In the longer term property prices will increase and so will demand in Thailand. This means off plan property is more suitable for those able to wait a few years to make a profit on their investment.

4) You cannot see the property before you commit to buying. You have to make your decision based on computer renditions of the off plan property or from viewing a show house. It is the technical competency of the constructor, the reputation of the developer and the real estate agent that you have to place faith in. This is faith that the villa will be completed to set out specifications. It is important to get an independent building inspector to visit the property as it is being built to make sure the building plans are being followed.

These are the major issues of buying off plan in Thailand. It is always advisable to do your homework before committing to an off plan project. Remember that in Thailand real estate agents and developers are often one and the same thing, so don’t expect independent advice from the real estate agent. If you are keen to buy off plan property in Thailand always check around and compare the prices with finished houses on the market. If there is no considerable saving in buying an off plan property then it is not a good investment. And finally, it can never be stressed enough, get a good lawyer to advise you about the issue of foreign ownership in Thailand; and get a lawyer to check with the land registry office who actually owns the land you are intending on purchasing or leasing.

Property Law in Thailand

It is very hard to get a clear and objective overview of property law in Thailand because often the people who put out the information have a vested interest in the topic, principally estate agents/developers and law companies. So, as a consequence developers usually stress that it is illegal for a foreigner to own land in Thailand and so a 30 year lease with the option of 2 further 30 year leases is the only legal available option. For the developer this means less legal fees and less hassle getting land from a land lord. Obviously if the landlord is allowed to maintain ownership of a piece of land he or she is happier.

On the other hand, if you go and see a lawyer firm they will often push you down the route of setting up a Thai company. At least 51% of the shares of the Thai company must be owned by Thai nationals. This Thai company then purchases the land in question. The trick is that in the memorandum setting up the company the foreign share holder(s) (who only have 49% of the company) are given preferential voting rights. Which means that although the foreigner owns less than half the company (and so less than half its assets) he/she has CONTROL of the company. Added to that a good lawyer firm will usually have a list of 'safe' Thai partners who are usually relatives of the people working at the law firm. Furthermore, they sign a waiver whereby they forego their rights to the dividends or assets of the company. The obvious advantage of this method of purchasing land in Thailand is that you get a freehold as opposed to a lease. Whatever developers tell you, a freehold is more valuable than a lease. However on the downside, setting up a Thai company involves quiet a few costs. First you have to pay a lawyer for the services involved; and then you have to pay for accounting for your Thai company. Also since it is a Thai company it is expected that sooner or later the company will do some sort of business. And if there is any profit then the company is liable to pay company taxes.

When deciding which path you should take it is worth bearing in mind these points:

1) Why are you buying the land? If you just want a retirement home and you are not concerned about selling in the future then obviously a lease is preferable.

2) Who is the landlord? Never forget that NO MATTER WHAT THE DEVELOPER TELLS YOU THE LEASE RENEWAL IS NOT AUTOMATIC. In order for a landlord to regain ownership of a piece of land all he or she has to do is fail to show up at the land office to register a new lease. There is nothing you can do about this. For example if the ownership of the land passes by inheritance to the first son then that person might not feel any obligation to honour the lease renewal agreement.

3) As a foreigner, the best legal right you have is that you are allowed to own a property. So you get the odd situation where you can own personally a property but not the land it is on. Owning the property means that even if the lease is not renewed you have some legal recourse to get compensation for the loss of your property.

4) A lawyer is very useful to check what sort of title a piece of land has and if the piece of land you are intending to buy has been registered separately. Too many people just accept the word of the developer/real estate agent about this issue.

5) Don't believe the developer when they show you a contract in English and Thai and say that it is the English version that is legally binding. It is a lie. In Thai courts it is the Thai version that takes precedent.

6) A foreigner may buy a condominium unit freehold as long as less than 49% of the residential space of the entire building is owned by foreigners. This means it is possible to own an apartment in Thailand without setting up a Thai company. It also means that it is theoretically possible for a foreigner to get a mortgage. Thus condos are very popular in Pattaya and Bangkok. How developers find the 51% of Thai national owners is a bit of a mystery.

Property Sale Thailand

Property Sale in Thailand

The complete guide to property in Thailand

Property sale Thailand is a blog that showcases certain finished houses and off plan projects for sale in Thailand. It also provides valuable information concerning the legal aspects of non-Thai nationals owning property in Thailand, and gives up-to-date advice about how to avoid the many possible pitfalls involved in the processes of both buying property or land in Thailand; and also building your own villa in Thailand.

Property Sale Thailand is also a resource for design materials. Included are many pictures of the various aspects of villa design - both architectural and interior design. There is also a section on landscaping and garden design.

Further useful information is provided about web design and effective blogging strategies with several useful links to get you started with promoting your own villa for sale or rental.

I will add information, pictures and links to this blog regularly.

This is intended as an-opened blog and a forum for discussion about the many aspects of building villas in Thailand, buying land and real estate in Thailand and selling or renting luxury accommodation in Thailand.