The property market in Thailand is failing to attract the same proportion of foreign buyers as other Asian countries thanks in part to a 20 year old law in the country. Overseas buyers account for just one fifth of transactions in Bangkokââ¬â¢s business district ââ¬â low by regional standards.
Whilst the fall in the number of foreigners buying property in Thailand can partly be blamed on the weakness of the American and British economies, a lack of mortgage finance is also hampering foreign buyers. Even buyers with a sizeable deposit are unable to get the mortgage they need, partly because of a 1991 law.
Condominium Act hampering foreigners looking to buy Thailand property
The 1991 Condominium Act states that foreigners can buy up to 49 per cent of a condominium development, but that the funds must be transferred from overseas. In order to buy, the Thai Land Department requires non-resident buyers to provide a Foreign Exchange Transaction Form that certifies the transfer of funds from overseas in a foreign currency for the purchase of the property. For ownership to be transferred this form is necessary.
The problem with the requirement for this form to be produced is that the transfer must be in a foreign currency. This makes it impossible for foreigners to obtain mortgages from local banks, as funds are released in local currency (Thai baht) and so the document cannot be issued.
Nick Marr Director at overseas property portal Homesgofast.com” Thailand is serving a double blow, the law coupled with recent political troubles is hindering the overseas interest in Thailand. To attract inward investment laws need to be more in favour for international investors, we have seen a marked increase in interest for Malaysian real estate in part owing to the difficulties with the Thai housing market “
The law also applies to expatriates working in Thailand, as even though they are able to obtain a mortgage in Thailand, they still have to provide 50 per cent of the purchase price from funds overseas.
This effectively leaves cash purchasers as the only foreigners able to buy property in Thailand. It also means that the country finds it hard to compete with other major Asian property markets such as Malaysia ,Singapore and Hong Kong where mortgages are widely available for overseas buyers.
HSBC the largest foreign bank in Asia released figures week showing that Singapore, Indonesia and Malaysia had pretax profit of US$524 million, US$219 million and U$401 million, respectively in 2010. Indictaing strong business in the Asian markets.
