Expat property: time for a Thai buy

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Little-known island destinations are stoking investor interest in the Zen paradise of Thailand

Published in 1997, Alex Garland’s bestselling novel The Beach plugged a gap in the Generation X book market with its “new age” utopia tale of a disaffected back-packer in search of an exotic hideaway untouched by the cancer of tourism.

It was the start, perhaps, of the British love affair with this karma-fringed part of Asia. These days, worldwide demand for beach tourism means you’re unlikely to find an undiscovered cove all to yourself, although Thailand’s recently elected PM Yingluck Shinawatra is working hard to deliver the next best thing, with the launch of a sustainable tourism directive targeting lesser-known island havens, including the Koh Chang archipelago on the country’s eastern seaboard corridor.

A destination that relies heavily on foreign exchange, finding new markets is a must for Thailand. The county’s largest island, Phuket, is testament to this. Attracting over 40 per cent of tourists to the country, land prices have doubled here in the past ten years, translating into healthy returns for foreign investors. Like many of the country’s hotspots, however, oversupply, coupled with a fall off in buyer demand means the “squeezed middle” is feeling the pain.

“Popular destinations such as Phuket, Koh Samui and Pattaya have been heading for ‘burn out’ for over a decade,” confirms Frank Khan, the director of Knight Frank Thailand’s residential department, “but the recession has brought additional pressures: a flight to quality, for one, with increasing numbers of foreign buyers chasing finite supplies of high end stock.”

A late entrant to the tourist game, Koh Chang’s polka dot chain of 52 islands, which boasts a larger combined land mass than that of Phuket and Koh Samui put together, represents a lucrative development opportunity. “Authorities are only too aware of the region’s potential and have pre-empted a ‘free-for-all’ by imposing strict building regulations and construction quotas,” explains Stefan Picot of overseas investment consultancy GDI Overseas. “70 per cent of Koh Chang is already set aside as a national park.”

Domestic transport links are improving too. Flights from Bangkok to nearby Trat regional airport are being supplemented by a fast ferry service from the mainland with plans to extend road infrastructure to neighbouring Cambodia. “The end goal is a coastal link between the triple gems of Koh Chang, Koh Kong in neighbouring Cambodia and Phu Quoc Island in Vietnam, which will fan-out tourism revenue to the wider region,” says Thapanee Kiatphaibool of the Thailand Tourism Board.

To date, the vast majority of foreign buyers have chosen to put down roots on Koh Chang (main island) where capital growth has been averaging 20 per cent per annum since 2005. Boutique-style resort projects line the scenic northwest coast: Tranquility Bay near Bang Bao fisherman’s village is among the swankiest, with fully-furnished, three-bed pool villas with guest quarters selling for £935,000.

Considerably less developed, and with current land prices around the £100,000 mark for prime beachfront lots, neighbouring island Koh Mak is home to a fledgling community of expat retirees, many of whom have settled here since title deeds for land on the island were upgraded in 2009. “The vast majority of the land plots now have Chanote titles, which makes ownership more secure,” says Kate Sawangwit of Exotiq Property. “Three or four bed sea view villas finished to western standards can be found for £250,000.”

Further south on Koh Kood, land prices (one-tenth of those on Phuket) are following a similar upward trajectory, the archipelago’s second largest island. Instantly recognisable by its bounty of coconut and rubber tree plantations, most visitors reach the island by hopper flight from Bangkok or catch the fast ferry from Trat; a “stepped journey” Sawangwit feels will “weed out the time wasters from the genuine buyers.”

Billed as the “benchmark” for future residential offerings on the island’s northwest fringes, is the newly-launched resort of Soneva Kiri, owned and operated by spa development specialists Six Senses. Spread across 150 acres of indigenous rainforest and pristine beachfront (including an exclusive private island adjacent to the resort), this £65 million project is home to just 27 beachfront, hill and cliff private residences; individual homes are constructed from sustainable materials including eucalyptus logs, native bamboo, and plantation-sourced pine.

Four- to six-bedroom residences range in price from £2 million to an eye-watering £5.3 million. Annual management fees of 2 per cent (of the property purchase price) cover maintenance services, with a villa rental Programme offering a guaranteed minimum yield of 2 per cent based on villa size and personal use. Properties, confirms resort spokesperson Henry Gray, command on average £1,500 a night.

So who will be buying? “High-net worth individuals,” confirms the director of Six Senses Residences, Robert Green. “Those looking for spacious homes in a small, well-managed luxury development. A high percentage will be baby-boomers – most want homes in managed estates because they’re busy individuals. Allocation of villas to date has drawn a broad international clientele – UK, America, India and the Middle East, which makes for a cosmopolitan community.”

But while the rarity value of a ‘slice of paradise’ carries sway, the investor “tipping point”, adds Green, is more likely to be the perceived wider security that the Thai market offers: “Thailand is no stranger to challenging climates, but its economy remains relatively steadfast, with a government pro-business and pro the country moving forward. It’s also one of the few global holiday destinations with a truly international reach. With a drive for well executed and innovative real estate opportunities now underway – getting in on the ground floor bodes well for future returns.”

Buying in Thailand

Thailand has very strict property ownership laws. Foreign nationals can own property freehold but not land.

Most property purchases are carried out on a renewable leasehold basis with owners taking repeating leases in tranches of 30 years up to a quoted potential of 120 years. The leaseholder can build or make changes to a property on the land during the time of the lease and can leave it in their will to relatives.

Property tax does not apply to property being used for private residential purposes. Costs only apply on transfer of ownership. This normally equates to two-three per cent of the property market value and is shared between the buyer and seller.

The seller pays the real estate agent’s commission, which ranges from three per cent to five per cent of the sale price.

Buyers should always check the credibility of the developer and company managing the development and engage a competent legal firm to advise on the contract.

‘Tricks and Mortar: The Little Book of Property Wisdom’ by Laura Henderson is available now from all major booksellers and online retailers.

Source: http://www.telegraph.co.uk/property/expatproperty/8960522/Expat-property-time-for-a-Thai-buy.html

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