First of all, thanks to all the well-wishers (especially Dusty) after my accident… your concern is much appreciated, and I’m feeling a lot better.

Today I want to talk about real estate in Thailand, and particularly here in Pattaya.  I’ve spent the last few days scouting property, and talking to agents, developers, and buyers.  Overall, some aspects of the market are reasonably attractive in the long-term, but I need to give you a bit of background first.

In general, I dislike countries that place restrictions on foreign ownership… buying property in Panama, for example, is great. Foreign ownership is allowed and protected to the same extent as a local Panamanian’s. Plus, buying property can often lead to residency.

Thailand is completely different.  Foreign ownership is limited by law, and this is a big negative to me. For people that are interested in moving here, though, the private sector has found a few ways around these restrictions.

First, a foreigner can establish a Thai company and buy property through that company. S/he would be the largest individual shareholder, but have to give up at least 51% of the company in order for the transaction to be legitimate. Usually a team of attorneys would be the remaining shareholders.

In this case, a buyer would clearly need to have a high degree of trust in the attorneys who are the legitimate controlling shareholders of the company and property.

Second, a foreigner can buy a property for a domestic company or individual, then lease it back from them.  The lease term is capped at 30-years, then renewable for another 30-years. This is known as the “2×30” scheme.

For example, you pay $100,000 for a property, and then deed the property to a local Thai.  You would then ‘rent’ the property for a nominal fee for 30-years, renewable for another 30-years.  At the end of 60-years, unless they change the law, you/your heirs will lose access to the property.

In this case, you need to have an iron-clad rental agreement that ensures you cannot be evicted from your own property over the two 30-year periods, plus provisions for your estate.

Frankly, I find both of these options to be rather risky and unappealing.  There is an attractive loophole for condominium projects, though, which stipulates that up to 40% (or 49% in some cases) of the project can be owned directly by foreigners.

For this reason, you frequently see condo listings advertise “Foreign Owned,” which means that buying the property will have no effect on the building’s foreign ownership quota.

Mid-range condo prices in Pattaya average between $900 and $1,500 per square meter, while high-end condo projects can cost upwards of $2,500 per square meter.

At the moment, though, there is excess inventory on the market.  Developers started too many projects in the last 24-months, and the volume of buyers has decreased dramatically from the peak.

It’s the same story around the world, and Thailand’s foreign ownership restrictions make things even worse. 

To boost sales, developers have started offering financing in this traditionally ‘cash-only’ market. Financing incentives consist of a 10% to 20% down payment, followed by fixed payments for 5 to 10-years.

Other developers have come up with other gimmicks, like giving away free Toyota SUV to buyers, or even a Thai wife.  As you can imagine, these are generally signs of a real estate market that is wallowing near the bottom. 

My assessment is that developer financing will probably kick start an increase in sales.  Given the erosion of wealth that has occurred around the world, many people simply do not have $100,000 for a condominium in Thailand… many more, however, have $20,000 for a down payment and $600/month to pay the note.

This includes North American and European retirees, as well as another key market in Pattaya– Russians.

Pattaya is crawling with Russians, and their influence is omnipresent– there are signs and billboards everywhere written in Russian Cyrillic, and Thai musicians have even learned Russian songs that they play on the streets and in the local bars.

Many real estate agencies cater specifically to Russian customers, and at a fraction of the price of Dubrovnik, Pattaya is an attractive location for them.

One final note about property in Thailand– unlike many other countries, a large purchase in Thailand does not guarantee residency. Many people who have lived here for years still have to do a periodic ‘visa run’ to neighboring Laos or Cambodia to reset their visas for another 30 to 90 days.

You should strongly consider this if you are thinking about moving to Thailand; there’s no place in the world quite like it, but you really have to want to be here to go through the hassle and bureaucracy of the visa.

For the right person, Thailand is paradise. You can test it out on the cheap– a nice, clean property rental is about $500/month.

For other people, there may be much better locations where property purchase and residency go hand-in-hand, like Malaysia’s “My Second Home” program. More on that in a future letter.

About the author

James Hickman (aka Simon Black) is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.

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