Housing market.. Look out below !!!

[LivinLOS]

Dangerous comments..

Monday January 29, 2007
Foreigners warned on land
Krirk-krai: Resorts not in Thai hands
source: Bkk Post

Foreign investors holding property through shell companies using Thai nominees have been warned to restructure their holdings or face prosecution.

"Foreigners using shell companies to buy housing across the country are violating two laws. One, the Land Act that forbids foreigners from holding land and two, the Foreign Business Act by using nominee structures. I recommend that they restructure," Commerce Minister Krirk-krai Jirapaet told foreign journalists at a dinner talk on Friday.

Under Thai law, he pointed out, foreigners can only own land if they have businesses promoted by the Board of Investment, under the Industrial Estate Act or with written permission from the Interior Ministry.

"Look around you - all the land in Samui, Phuket and Koh Chang is in the hands of foreigners.

They cannot take the land away but there's a sense of nationalism and therefore they should restructure," a combative Mr Krirk-krai said in response to questions from foreigners.

The resort islands of Phuket and Samui have been the focus of foreign investors who have snapped up million-dollar villas as second or retirement homes, but the imminent changes to the Foreign Business Act have begun to keep investors, developers and buyers at bay.

It is expected that among those to be hurt the most by the new rules will be companies selling villas to foreign buyers, as any foreigner will need to set up a company with at least a 51% Thai shareholding. To comply with the amendments, companies will need to change from freehold to leasehold contracts.

Market experts believe the villa-for-sale market in resort destinations will suffer as a result.

Mr Krirk-krai also said that the government would likely look at ways to plug the loopholes under which companies use Non Voting Depository Receipts (NVDRs) to circumvent FBA-mandated restrictions on foreign ownership.

"I will make sure that over the next three or four months we will plug this loophole," he said.

NVDRs are issued by Thai NVDR, a subsidiary of the Stock Exchange of Thailand, to foreign investors who have bought shares in listed companies that are already up to their foreign-ownership limits.

NVDR holders are entitled to full economic rights, including dividends and rights issues, but are not allowed to vote, except on motions involving delisting. Voting rights are automatically restored if the NVDRs are sold back to Thais.

Mr Krirk-krai said the military-installed government was in a rush to resolve this issue because abuse of the laws was a key reason for the fall of the previous government.

"It's not that we are backtracking from globalisation and not welcoming foreign investors, but what we want is good quality investors, not just any investors," he said.

"If the investors cannot observe one or two laws that are similar to those in other civilised countries, then we should not care about them."

[ATMwalking]

Originally Posted by LivinLOS

Dangerous comments..

Started to write something picking this apart. Not worth the effort as I will never understand the line of thinking.

As we were discussing before, I would not want to be on the development side.

Alot of people holding a house could be SOL if they are not in a legit project. If you have a custom house on your own plot, this could be tough to sort out. I think their idea of restructuring is give your house to a Thai down the street and then lease it back.

The government needs to setup an agency that will act as the leaseholder and then also extend the term of lease. Give people a way to sort out the mess, feel secure, and comply with the law. Not just pull the carpet out.

I think you are right, this could really screw with the secondary/resale market.

[Simbo]

Malaysia- welcome to our country, buy a house here and no visa problems. Then we get the above! Other countries promote inward investment, over here its the nasty Falangs stealing from us. Strange interpretation of inward investment and all the knock on factors it brings. Malaysia or Cambodia here we come?

[ATMwalking]

Originally Posted by Simbo

Malaysia- welcome to our country, buy a house here and no visa problems. Then we get the above! Other countries promote inward investment, over here its the nasty Falangs stealing from us. Strange interpretation of inward investment and all the knock on factors it brings. Malaysia or Cambodia here we come?

There is more talk of that amongst my expat friends. BTW, it isn't buy a house. It is buy TWO houses. Plus you can bring in a luxury car tax free. 10 year visa. sweet deal.

More and more I am ok without freehold ownership. Fighting the xenophobic mood isn't worth while. But there should be a better and cleaner leasing system. You get to the same place, and leave them happy that we won't put up big wall around phuket blocking thais from coming in.

[K2]

Originally Posted by LivinLOS

Dangerous comments..

Foreign investors holding property through shell companies using Thai nominees have been warned to restructure their holdings or face prosecution.

"Foreigners using shell companies to buy housing across the country are violating two laws. One, the Land Act that forbids foreigners from holding land and two, the Foreign Business Act by using nominee structures. I recommend that they restructure," Commerce Minister Krirk-krai Jirapaet told foreign journalists at a dinner talk on Friday.It is expected that among those to be hurt the most by the new rules will be companies selling villas to foreign buyers, as any foreigner will need to set up a company with at least a 51% Thai shareholding. To comply with the amendments, companies will need to change from freehold to leasehold contracts.

Market experts believe the villa-for-sale market in resort destinations will suffer as a result.

Mr Krirk-krai also said that the government would likely look at ways to plug the loopholes under which companies use Non Voting Depository Receipts (NVDRs) to circumvent FBA-mandated restrictions on foreign ownership.

"I will make sure that over the next three or four months we will plug this loophole," he said.

Mr Krirk-krai said the military-installed government was in a rush to resolve this issue because abuse of the laws was a key reason for the fall of the previous government.

"It's not that we are backtracking from globalisation and not welcoming foreign investors, but what we want is good quality investors, not just any investors .......!!!!!!!!!," he said.

"If the investors cannot observe one or two laws that are similar to those in other civilised countries, then we should not care about them."

Worrying stuff indeed LiL - did not think they would go this far - will see if get wider ministeral backing and sure there will be lobby (building industry) to fight this level of change - but certainly should be watched for further developments.

[Nicke]

Well. End of the property boom then. Just feel very sorry for those who already spent/invested millions of bath in this country.

[webner]

I will never buy any property in this country as long the situation stays at this.

[midnightsun1]

I would never invest a penny in Thailand unless you are willing to turn your investment over to the Thais at any given time when they see fit to take it.

Many other places to invest in the world where you are welcome and have protection on your investment just as if you were a citizen of that country.

A good example is Tesco/Lotus shut them down while building new ones in progess. Just think what they can do you anytime they feel like it.

[midnightsun1]

Ebay Announcement..

Immediately for sale/up for bid is the Suvarnabhumi Airport. Four months old. Like new condition. Unlimited possibilities for the new owner. New addtitional toilets installed. Enough retail space you can open 6 Walmarts. Easy access to all the wiring. Roof leaks but will fix before final sale. Aircraft will land in U-Tao. Shuttles available for shopping. Possible access to downtown by skytrain. Tuk tuks always available for your use.

Once foreigner has made all the necessary repairs and passes all inspections. Land will revert back to the Thais.


Foreign Nationals only need to bid. All procededs will benefit Exiled PM Thaksin for his safe return to Thailand

[Simbo]

Everything else so far proposed has been turned around after a week or so when they take heads out of the sand. This is costing Thailand billions of Baht ( Johhnie Walker Classic, 70/30 money thing, alchol advertising to name a few) Seems like some just want to implode the economy

[Simbo]

'what we want is good quality investors, not just any investors .......!!!!!!!!!," he said. Does this mean the quality of the bung!!

[Crunch]

Just me or do the Thais make the BNP look like the WI when it comes to foreigners.

[LivinLOS]

Originally Posted by ATMwalking

Alot of people holding a house could be SOL if they are not in a legit project. If you have a custom house on your own plot, this could be tough to sort out. I think their idea of restructuring is give your house to a Thai down the street and then lease it back.

How much of the total property market would you think the condos make up ?? 2% ?? 5% ??

Even if this doesnt come to pass.. The fact that this is being openly said creates the additional risk..

I like Kev didnt really think they would be going this far.. Remember these owners simply cannot find a buyer as non Thais cant find a new corporate structure to do this and I dont see many Thais buying up those multi million USD villas.

[K2]

The heat is on with this one .... a Hash friend of mine was looking at selling his house in Nai Harn for 10 mil (4 Bed, pool, 0.4 rai) - just offered it to me for 8 mil - I have to stay where I am for my kids school, but thats a good deal in normal circumstances, and the price cut was without even me asking.

Spotted this AM advert on BBC World for Shangra-La resort villas - big budget - desparate to sell - thats the trouble with property - very illiquid. Unless have a Thai wife or REALLY trust your TG then would avoid buying property until this is resolved.

[LivinLOS]

The house in Nai Harn isnt owned by a guy whose first name starts M is it ?? Only the price and description is exactly fitting.

I know of large seaview pool villa.. On the market at 65.. the 50 then 45.. Heard he would take 38 ish which makes it appealing (has land that could be developed further) but still no takers.. Hes rented it now for 150k per month and semi given up the sale I think.

[ATMwalking]

In fairness the owners effected by this were playing in a grey area. Using a company and thai proxies was an end run around landownership restrictions. It was never explicitly legal, just tolerated. Buying this way was playing with fire and now they got burnt a little.

The government does need to give more guidance on how to "observe one or two laws" and help everyone become legit.

People who have bought a freehold condo or have a land office registered lease are not effected. The law explicitly allows for this. The government are looking to expand the % of freehold condos in areas like phuket. Rumors of longer leases in the near future. Odds are in the next 90 years laws will change and you can convert the lease to freehold.

There is still plenty of opportunity to invest and benefit if you stay within the law. The housing market isn't going away. Risk of buying hasn't increased. There could be some good bargains right now in legit developments. "When there's blood on the streets buy property"

That said, I do feel this is a really poor direction for the government to be heading.

Personally, the continued unrest in the south concerns me a lot more.

[ATMwalking]

Originally Posted by LivinLOS

How much of the total property market would you think the condos make up ?? 2% ?? 5% ??

Even if this doesnt come to pass.. The fact that this is being openly said creates the additional risk..

I like Kev didnt really think they would be going this far.. Remember these owners simply cannot find a buyer as non Thais cant find a new corporate structure to do this and I dont see many Thais buying up those multi million USD villas.

Clearly these guys need to stop the xenophobic rant. I don't think it is scoring any points with the home crowd, so what's the point. Clean up their own trash, then start to talk tough.

An increasing amount is condos. Especially in Bang Tao/Surin and then down around Kata/Chalong/Rawai areas.

Personally I knew they were going in this direction for the past 8-10 months. I am only surprised it took this long to get to this point. It was pretty clear when the land office started to tighten things up with companies registering land.

My thinking is you don't need to find a buyer to clean this up. You need to assign the company wholly into a thai name. then lease it back for 30+30+30 years.

[LivinLOS]

But there is not 30+30+30.. sure people will sell you that but if they dont want to renew you cant force them only 30 is enforcable in law.

When you say make a wholly Thai owned company.. I understand they want to see the assets of the Thai directors to show that Thai genuinely did put the money up and its not a farang front. And realistically do you think thats going to wash on multi million USD properties ?? I know someone who sold his Surin pad for 120 mil baht, thank kind of purchase needs to have some real level of ownership.

Dealing with 'investments' in Thailand always reminds me of that saying.. You stop worrying so much about the return on your capital and start worrying about the return OF your capital..

[Rex7777]

So if all the people that own property "illegally" have to sell it, where will they buyers come from? Fire sale prices to Thais?

Rex

[LivinLOS]

Exactly.. Its not a liquid market and iof there is enforced selling and no purchasers what happens ??

[ATMwalking]

Originally Posted by LivinLOS

But there is not 30+30+30.. sure people will sell you that but if they dont want to renew you cant force them only 30 is enforcable in law.

When you say make a wholly Thai owned company.. I understand they want to see the assets of the Thai directors to show that Thai genuinely did put the money up and its not a farang front. And realistically do you think thats going to wash on multi million USD properties ?? I know someone who sold his Surin pad for 120 mil baht, thank kind of purchase needs to have some real level of ownership.

Dealing with 'investments' in Thailand always reminds me of that saying.. You stop worrying so much about the return on your capital and start worrying about the return OF your capital..

My understanding the renew factor depends on if you are leasing from a company or an individual. You are more bullet proof on the lease and extensions when leasing from a company.

They are only checking the thai's background on compay formation when there is a foreign sharholder or director. if it is 100% thai, then it should sale through as the foreigner has no direct control. There is no indirect control as they are closing the proxy control method. So moving it to a thai name does not mean they need to have the capital.

Sure we all would prefer to directly hold a title, but really is there any example of properly structured leased land from a company not being upheld and recognized?

[ATMwalking]

Originally Posted by Rex7777

So if all the people that own property "illegally" have to sell it, where will they buyers come from? Fire sale prices to Thais?

Rex

They don't have to. I think the "panic button" is being hit too soon.

The government said they need to restructure the companies and comply with the law. That means getting it to the point where the title is basically held through a 30+30+30 year lease. This is the way it should have always been done to be legal.

Then if in the next 90 years foreign freehold is allowed, you convert the lease to a freehold title in your name.

I guess it would be much smarter for me to fan the flames of panic. Then go looking for some fire sales. So yes, the world is ending. You need to sell today. next the thai government will invalidate tor tor sams that were issued for illegal companies Taht means you will have to pay a lot of tax to return your capital and have a hell of a time getting it out. SELL NOW. SELL TODAY really cheap. I may be able to help....

[LivinLOS]

The 30 year thing is to my understanding irrespective of private or company.. However there less upside to a large company not renewing a lease and breaking the lease extensions as its bad PR and possibly opens a civil suit in breaking contract..

The private person has the ability to not extend your lease as the public perception isnt a problem.

As to background checks, thats the current interpretation.. Doesnt mean that next year thats how they will be doing it.. I think if farangs start loading many villas onto 100% Thai companys doing nothing more then owning a multi million dilla villa then thet will be closed next.

The worst implication really is any home already created cant be sold to a farang now.. Farang buyers are scarce.. So can you really see Thais buying these properties in the amount that they may have to come onto the market ?? At the values that people expect ??

[ATMwalking]

Originally Posted by LivinLOS

The 30 year thing is to my understanding irrespective of private or company.. However there less upside to a large company not renewing a lease and breaking the lease extensions as its bad PR and possibly opens a civil suit in breaking contract..

The private person has the ability to not extend your lease as the public perception isnt a problem.

As to background checks, thats the current interpretation.. Doesnt mean that next year thats how they will be doing it.. I think if farangs start loading many villas onto 100% Thai companys doing nothing more then owning a multi million dilla villa then thet will be closed next.

The worst implication really is any home already created cant be sold to a farang now.. Farang buyers are scarce.. So can you really see Thais buying these properties in the amount that they may have to come onto the market ?? At the values that people expect ??

There is a huge differnce between private and company lease. A company is obligated to honour all terms of the lease, even it is sold or goes bankrupt. On the personal level, heirs to a piece of land are not obligated in the same way. However the original person leasing the land is.

I'll come clean with my story.

I was tired of renting a place and loosing money on a place that didn't fully suit my tastes. Tired of seeing property values increase by 20-50% every year and not getting a peice of the action.

so I decided to buy. At the same time it is a wacky part of the world and you shouldn't bring in more than you are willing to loose.

So I bough a very modest place in a legal and licensed truly thai owned house project. The thai owner is part of the old rich phuket families and a super great guy. He and his lovely wife lived abroad and builds to western standards for an affordable price.

So knowing the base was 100% legit, I am very comfortable taking out a long-term lease from the company. Also because the price is reasonable and all is legit, I know there are a lot of buyers if I want to sell. I could sell today, yes today, and make a tidy profit.

There is still alot of interest in this project. It is 100% sold, no one has backed out, no one is selling, and lots of people coming to look everyday. they are already 25% presold on the next project and it isn't slowing down. i think it will actually pick up. Good thing I have a warm relationship with them as I may reserve some property and then flip it when the real expense rolls in.

For people that came and dropped 120 million on a grey market deal, that was pretty stupid. I hope they did it knowing they may loose it one day.

So if you are going to buy, buy in a legit project. Keep it modest. Get good legal advice. know the owner/developer.

[nelsonone]

seems to me that all of the talk above still relies heavily on an arrangement that may be unenforceable via law/the contract.........even if all parties are acting in good faith there is no guarantee that the govt, a death, sale or just change of heart from the Thai " holding partner" puts your investment at risk....????

That is why I was looking at freehold condos..........any chance that these too could come down in price.....or do you think that falang investors could try to reposition themselves into this market and force these prices upwards???

[ATMwalking]

Originally Posted by nelsonone

even if all parties are acting in good faith there is no guarantee that the govt, a death, sale or just change of heart from the Thai " holding partner" puts your investment at risk....????

If you believe that it is that lawless here, then you should put any money over here for a lease or freehold condo. Both are registered with and enforced by the government.

I personally think freehold condos will be in more demand. Some of the newer developments are more townhouse/beachhouse like. Much nicer than a concrete box with a window.

[marc26]

Originally Posted by ATMwalking

If you believe that it is that lawless here, then you should put any money over here for a lease or freehold condo. Both are registered with and enforced by the government.

I personally think freehold condos will be in more demand. Some of the newer developments are more townhouse/beachhouse like. Much nicer than a concrete box with a window.

are freehold condo's where there is 51% thai owned
and what consitutes a condo
i would love to buy a condo like the one that someone started a thread with in Karon

[LivinLOS]

Condo depends on being given condo status at construction and having 51% of the project owned by Thais..

Though in recent years the 'condo' markets have got so expensive they cannot find the Thai 51% to purchase so they were selling freehold condos and condos owned by companies (now not possible) or leased or even used for purely rental yields by the developer.

[ATMwalking]

Originally Posted by LivinLOS

Though in recent years the 'condo' markets have got so expensive

Yep, some of the prices makes me scratch my head a little. Cheapest I have seen recently is 4m baht for a very small 1 bedroom not sea view. There is a nice new seaside condo project in Rawai. On the beach units are running north of 30 million baht. Don't forget service fees. Partly what makes a leased house more attractive to me.

I know one person that recently made out like a bandit on flipping a freehold condo in the bang tao area. The market is there.

[marc26]

Originally Posted by ATMwalking

Yep, some of the prices makes me scratch my head a little. Cheapest I have seen recently is 4m baht for a very small 1 bedroom not sea view. There is a nice new seaside condo project in Rawai. On the beach units are running north of 30 million baht. Don't forget service fees. Partly what makes a leased house more attractive to me.

I know one person that recently made out like a bandit on flipping a freehold condo in the bang tao area. The market is there.

i would go to about 10mil but only if it was rock solid and would have alot of what im looking for
and this is all specualtive but a thought in my head

[ATMwalking]

Originally Posted by marc26

i would go to about 10mil but only if it was rock solid and would have alot of what im looking for
and this is all specualtive but a thought in my head

That is good as the market is speculative

You are into some nice sea view for that price.

[marc26]

Originally Posted by ATMwalking

That is good as the market is speculative

You are into some nice sea view for that price.

and it wouldnt have to be in patong
be happy in rawai, chalong

the way i figure it
i will be going to thailand at the very least for holidays for a long time
and if i take time off between jobs like i did before
the amount i would pay for hotels in that time might as well be in a condo

[K2]

BKK Post reporting that Ford may pull $1 billion in investmant plans here ...

Ford Motor Co said today in Washington that it is considering whether to scrap a planned $1 billion programme in new and upgraded factories in Thailand over the recent curbs on currency and foreign investment.

Ford will decide where to invest the earmarked $1 billion by the end of June. China and India are possible alternative destinations.

Bangkok Post Breaking News

Japan External Trage Org. has now rated Thailand bottom in the ASEAN for the past 3 months.

Historical FIDF Quoted Yields

Notice the swap curve really shift today - my trade of the year BUY JPY/THB!

[ATMwalking]

Do you think housing is more tied to foreign investment or tourism? What's the bigger driver?

[LivinLOS]

1bn USD.. 35b baht.. Thats over half of thier Fx reserves that you listed the other day..

Tied to tourism and quality of life issues more than big business.. But big business gives a windsock to how open or closed thier market and mindset is..