A guide to buying a property in Thailand

Important things expats should know before moving to Hua Hin…

There’s something definitely alluring about the idea of living an expatriate adventure. Living abroad does not only give you the flexibility on advancing your career, but it can also make it financially viable for a better class of living during times when money is extremely tight or your plans for the future are still uncertain.. Can you imagine spending your days relaxing beneath the palm trees on an exotic beach, enjoying a local community with all year-round hot tropical weather or wandering the streets of a cultural town such as Hua Hin?

Strategically located on the southern Thai province of Prachuap Khiri Khan, Hua Hin was once a peaceful fishing village. But since the royal Thai family built their summer palace in the 1920s, it slowly gained its unprecedented fame and attracted Bangkok’s elite, who subsequently established a neighborhood of vacation homes along its wide stretch of sandy beaches. Today, this jewel boasts a thriving expat community, a flourishing restaurant scene and world-class golf courses – perfect for a sun-kissed escape from the bustling city! To top it all off, one of the biggest appeals of the expatriate lifestyle in Hua Hin is, undeniably, its standard of living. As of writing, Thailand currently scores 0.319 on the international cost of living index, therefore savings will go a long way here too, as living here outlays roughly 1/3 of the amount compared to the USA. Sounds amazing right?

To say that Thailand’s real estate is fast becoming a favorite among buyers abroad is quite an understatement. In fact, an article published in The New York Times reported that the price indexes for condominiums, townhouses villas and land in Thailand have grown even more quickly over the years, frequently in the range of 5 percent to 12 percent a year. Spending your days in foreign shores can seem like novel and poetic, but buying a property overseas has its own set of rules and standards. You will need to consider a range of factors – from Thailand’s political stability to the logistics of managing your assets from afar. We highly urge expats to plan carefully and consider the following reminders before packing their passports and starting a new life in paradise.

Finding the Right Agent

It is absolutely vital to perform extensive research prior to buying a real estate property in Thailand to guarantee that your investment will be a sound one. As a foreigner, the best way to do this is by reaching out to a reputable real estate broker who can help hunt for your dream home in Hua Hin. Almost everything you need to know about the location and property will be presented to you by the broker, thus, a real estate agent can be an impressive resource for insights into neighborhood-specific information and trends. He or she can show you plenty of properties which can speed up the searching process and suit your needs, taste, and budget – all at the same time. They will be your finest supplier for intelligence on how long a home has been on the market, if it’s been listed more than once, how it rivals to nearby properties and can also provide insights from previous inspections. Moreover, they can be instrumental in helping you understand all of the added costs of owning a home, such as insurance, government taxes and maintenance. Above all else, find a broker who has a great track record in closing transactions and one who values professionalism graciously. From the moment you decide to buy a property, you’re essentially agreeing to participate in a “buying process” that involves meeting lawyers, property developers, and private sellers. So a good agent who’s informed, experienced and have great connections in the industry can make your property search much more comfortable.

Can Foreigners Invest in Thailand properties?

The simple answer is yes, but the first thing every foreign home buyer should know is that under the Thai law, foreigners are not permitted to own land in their own name. They can however own the right to freehold ownership of any property or other buildings erected on the land. Foreign land ownership restrictions in the country refer solely on the land and not the structure or condominium registered under the Condominium Act, while land ownership is regulated by the Land Code Act. Therefore, the land and the structure on the land can be owned independently by separate individuals.

Foreign nationals may own:

  • A unit in a registered Condominium.
  • A building distinct from its land.
  • A registered leasehold of up to 30 years for all types of titled land or buildings.

Foreign nationals may not own:

  • Freehold land.
  • More than 49% of the shares in a Thai company that owns freehold land.

A common practice for foreign investors is to purchase the property together with a lease for the land that usually runs for a period of 30 years with two opportunities for renewal of 30 years each. The deal is often inclusive of a purchase option for the land that could be implemented in the event that the laws of foreign ownership changed or the property is sold to a Thai national or a legal entity. The freehold of the land can also be purchased by a foreigner through their business, provided that the Thai shareholder(s) of the business owns a combined share of 51%, allowing foreign owners absolute control over both the land and the property. Land ownership, however, is registered to the company in this case and not the individual. Recent laws also allow the Thai spouse of a foreigner to purchase land in his or her own name but is restrained by the requirement that the purchase legally belongs solely to the spouse, with no foreign claim to it.

Furthermore, the most popular means of foreign property ownership, due to its ease of maintenance, is investing in a condominium. However, investors should also take note that under the Condominium Act, foreigners can only own up to 49% of the total salable area of a condominium building.

Preparing For Viewings

No matter how advanced technology will be, a real estate investment must always be seen and experienced at the end of the day. If you’ve already prepared a shortlist of favorable developments which you’re eyeing for, scheduling an ocular can absolutely narrow down the search. This is imperative since you will be spending a large sum of money for the investment. If you are looking for a property to call home, it might be a nice idea to purchase one in an expat-populated area such as Hua Hin. Why? Well, there are several reasons why this area has been considered expat-friendly, and has been admired by a considerable number of foreign national residents over the past decade. These reasons include the accessibility of their location, secured communities and villages, family-friendly establishments and institutions, and proximity to transportation hubs. Similarly, this generally applies if you are eyeing a fully finished and ready-for-occupancy condominiums like condominium name, where a first-hand experience is certainly a must to see not just the condo unit itself but also the surrounding community and the amenities being offered by the building’s management.

Title Deeds Explained

As a foreigner buying land, one must have a deep understanding on the various existing land title deeds that are offered by the local Thailand government. So before diving in to any investment, make sure to acquire legal advice from a real-estate lawyer who can take care of your transactions’ paper works. This ensures that you are securing all precautionary measures and protecting your entitlement to legally apply for or obtain approval to build a property on such lands.

Now, what are the main types of land titles? Most buyers consider land that comes with a Chanote, Nor Sor 3 or Nor Sor 3 Gor. These are comparable to a land title deed for all purposes that can be sold, rented, applied as mortgage collateral and are the only titles over which a registered right of ownership or lease can exist. However, the boundaries are less accurately surveyed compared to land with a Chanote. There are a number of other land titles, though these do not afford the owner to exercise full rights to the land under the Thai law.

Chanote (Nor Sor Gor 4 Jor)

Officially called Nor Sor 4, the Chanote is the most protected type of deed because it grants the owner full rights over the land, to deal with or to take advantage of ruling out others from its possession. It acts as a certificate of legal leasing of the land and is issued by the Hua Hin Provincial Land Office using GPS to precisely define the land’s boundaries and can be used as evidence confirming their right to government authorities.

Nor Sor 3 Gor

A land that is pending for a full title deed is granted the document Nor Sor 3 Gor. The section of land is defined by small posts at its borders and is measured by the Land Department; therefore, it also has its exact boundaries. Moreover, this type of land can be divided into smaller plots, may be sold, transferred, or mortgaged in the same manner as a Chanote as long as it is ready to be a full-title deed. In order to upgrade the title to a Chanote, the owner must file a petition to the Land Department to file a request to change it to a full title deed (Chanote), and the Land Department may decide to grant the request if there is no opposition made against the petition.

Nor Sor 3

On the other hand, The Nor Sor 3 differentiates from the Nor Sor 3 Gor because this title is issued without never yet being measured by the Land Department; hence it is regarded as a floating map with no exact boundaries. The certificate allows the legal construction of a property on the land, but only allows a usage certification by the government given to the proprietor. It is not an official possessory title, but it does ensure that the person holding the title can benefit from the land or use the title deed as a legal document. Problems can occur with defining the actual area referred to on the title deed, and any legal developments must be publicized in the public domain for 30 days. The Nor Sor 3 title may later be adjusted to a Nor Sor 3 Gor then subsequently petitioned to a Chanote in the future.

Condominium Title

A condominium title acknowledges a section of a building or buildings with multiple owners, a fractional interest in the land, other common assets (such as a swimming pool) and common parts of the building (such as the stairwell or lobby). The title will state the floor area of the rented space, the ground area of the common land and the percentage interest, in which that apartment has in the common property. This percentage also determines the voting influence in the condominium company or owners association.

Building Transfers

Buildings apart from condominiums do not have any form of titled document, but their sale or long lease can be registered at the District Land Office. Proof of ownership must be established either from proof of construction or a document showing sale and purchase. This is different from the House License document, which is simply a registration of the persons occupying the house. Transferring of a building requires the posting of 30 days public notice, to check if anyone wishes to dispute the property’s ownership. Foreigners may therefore own a building or structure that is distinct from its land and register such transfer of ownership into their names at the Local District Office.

Other Fees

Apart from spending money to pay for the property itself, there are also other fees and taxes that you need to keep in mind and be put into the budget, such as Transfer Fee, Stamp Duty, Withholding Tax, and Sinking Fund. Taking these into deliberation will let you know if your budget is still on track before signing the Contract of Sale.

  1. Transfer fee
    Generally, the transfer fee is split between the purchaser and seller and is often used as part of the negotiation process of the sale. The fee is two percent of the assessed value of the property determined by the Treasury Department and amassed through the data taken from the Land Department.
  2. Stamp duty or specific business tax
    The seller incurs a stamp duty at 0.5 percent. For owners who have held the property for less than five years, a specific business tax at 3.3 percent is incurred as a way to deter Thailand’s speculative investors in the property market.
  3. Withholding tax
    This is a progressive tax paid by the seller of the property.
  4. Sinking fund
    This is an advanced payment for all brand new condominiums paid by the first owner of the property. This budget is periodically set aside for the gradual repayment of a debts or used as a fund to refurbish the building.
  5. Common area fee.
    Normally, condominiums have a set of rules and regulations that must be followed in order to maintain a clean, orderly, and peaceful community. It is better to know these rules beforehand to see if you are comfortable conforming to all of them, or if you need to find another property should there be any rule that you do not agree with. The common area fee is calculated depending on the size of the property, and usually paid by the owner on a yearly basis. This fee is allocated by the condominium’s management for the daily upkeep of the building and its facilities.
  6. Utility meters.
    If you decide to purchase a condominium, keep in mind that there are monthly fees that you need to settle. Commonly known as utility meters, the computation of which is based on the size of your unit. Upon the successful transfer of ownership of a property, the buyer is responsible for paying the registration of the brand new property’s electricity meter and the transfer of ownership of the electricity meter for resale purposes.