Thailand real estate presents opportunities for international entrepreneurs and property investors. While government regulations help to avoid mortgage related issues of other countries, the financial market turmoil and increasing economic uncertainty will impact Thailand real estate. The following will help you determine whether Thailand real estate is the optimum investment strategy to fulfill your objectives:

The Economist Intelligence Unit (EIU) predicts the economy will contract sharply in 2009, as the global economic slowdown will have a negative impact on exports. Ongoing concerns about political stability will also continue to prevent a major improvement in consumer and investor sentiment in the early part of the forecast period. However, as the global economy picks up, GDP growth in Thailand will accelerate to an average annual rate of 3.4% in 2011-13.

Inflation is another economic indicator which could impact on Thailand real estate. According to Bangkok Bank data, the 2008 inflation rate of 2.2% is down 2.9 percentage points from the 2007 figure of 5.1%. The Fiscal Policy Office predicts that 2009 inflation will drop to 1%.

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Despite the market being stagnant during 2007 where overall property prices fell by 0.8% some analysts are predicting Thailand real estate will undergo an investment surge. CB Richard Ellis points out that political turmoil over the last 3 years has made investors cautious and resulted in Bangkok not seeing the degree of development other Asian capitals have experienced, making it now more appealing to outside investors.

Thailand real estate is not reliant on availability of debt finance like other western markets. Thai banks follow strict lending approval guidelines where maximum mortgages are not the norm. Banks have focused on domestic business with property loans rarely exceeding 70% of the banks valuation of a property. Foreign purchases require evidence that the funds have been brought into the country to finance the purchase price so mortgages are not required.

In March 2008, the Thai government implemented reductions in mortgage fees, transfer fees and certain business taxes to maintain and improve developer confidence and boost house purchases. The initiatives were originally for 1 year but amid fears of a slowdown in the market, the government is considering extending the expiry date to maintain transaction levels in Thailand real estate.

Tourism plays a key role in the development of Thailand real estate; however, due to the current economic slowdown, the kingdom predicts slower growth for 2009. According to eTurboNews reports, the government forecast a tourism revenue shortfall of 190 billion baht (5.35 billion dollars) this year, with 3.2 million fewer visitors to Thailand as a result of the unrest.

Restrictions apply, but foreign ownership of Thailand real estate is allowed whether the purpose be for residential real estate, commercial real estate, or as a property investment. The easiest way for foreigners to purchase Thailand real estate is via condominiums where the only restriction is that the total foreign ownership within a condominium block cannot exceed 49% and the funds used to buy the property must be remitted from outside of Thailand and recorded by a Thai bank.

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Ownership of Thailand real estate requires payment of taxes. There are specific taxes for buying Thailand property or selling Thailand property and the buyer and seller can negotiate on who pays these taxes. The taxes involved include income/withholding tax, stamp duty, transfer fee, specific business tax, land tax and structures usage tax. Asia Property Consultants advise international investors on the taxation requirements associated with Thailand real estate.

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The current political uncertainties will not help attract investment into Thailand real estate. Growth in Thailand real estate market will depend on continued strength of the tourism industry, along with government initiatives to encourage investment.

For more information on Thailand real estate, please contact us at our Singapore office at (+65) 67350120 or email us at info@healyconsultants.com