Investing in Mid-Luxury to Luxury Condominiums in Bangkok: A Lucrative Option Amidst Singapore’s Latest Property Cooling Measures?

In recent years, Singapore has implemented stricter property cooling measures on purchasing of second and more properties, prompting many Singaporeans to explore overseas investment opportunities. One such enticing option is Bangkok’s mid-luxury to luxury condominium market. This blog delves into why I’m one of the growing number of Singaporeans who have considered overseas properties, particularly mid-luxury to luxury condominiums in Bangkok, as a viable investment alternative and whether my decision made was the right choice.

As a savvy investor seeking lucrative opportunities in the real estate market, Bangkok’s mid-luxury to luxury condominium segment presents an attractive prospect. In 2018, I purchased a freehold mid-luxury condominium in CBD Rama 9, located in the heart of Bangkok, which is a vibrant and rapidly developing central business district that has garnered significant attention from investors in recent years.

Top 5 Reasons Why I decided to Invest in CBD Rama 9, Bangkok:

1. Prime Location and Thriving Business District: CBD Rama 9’s strategic location in Bangkok positions it as a prime investment opportunity. As a rapidly developing business district, it offers a vibrant ecosystem of commercial activities, making it an ideal destination for entrepreneurs and businesses. The district’s proximity to major corporate offices, shopping malls, and entertainment centers ensures a steady demand for both residential and commercial properties. Interestingly, several national and international companies have relocated or elected to establish business operations in the area like Unilever and AIA Capital. One high-profile example of this trend is The Stock Exchange of Thailand which has relocated its operations to 93 Ratchadaphisek Road.
2. Capital Appreciation and Rental Growth Potential: CBD Rama 9 is undergoing rapid development, with numerous infrastructure projects and commercial developments transforming the area into a bustling urban center, where some big projects like GLAND to be fully completed around 2026. As the district continues to grow, property values are expected to appreciate over time, providing investors with potential capital gains. The combination of increasing demand, limited supply, and ongoing development projects in the vicinity makes CBD Rama 9 a promising investment destination.
3. Lifestyle and Amenities: Investing in an overseas property in CBD Rama 9 allows Singaporeans to experience the best of both worlds. The district offers a vibrant lifestyle with a wide range of amenities, including luxury shopping malls, fine dining restaurants, entertainment venues, and cultural attractions. The area’s modern infrastructure, green spaces, and recreational facilities provide residents with a high-quality living experience, further enhancing the appeal for both investors and potential tenants. The neighborhood is connected to the MRT Blue line and is served by MRT Phra Ram 9 and Thailand Cultural Station (it will also be part of the new Orange Line). Road users can also connect to major arteries such as Phetchaburi Rd., Asoke-Din Daeng, Vibhavadi Rangsit and the Sirat Expressway.
4. Accessibility and Proximity to Singapore: One of the key advantages of investing in Bangkok is its close proximity to Singapore. With a short flight time of just around two hours, Singaporean investors can conveniently travel between the two cities, making property management and monitoring more accessible. This proximity also allows for easy visits and seamless connectivity, enabling investors to stay actively involved in their overseas investment. Alternatively, with Bangkok being one of the top travel destinations for Singaporeans, the property can also be treated as a holiday home.
5. Reputable Developer and Property Agency: When investing in an overseas property, particularly in CBD Rama 9, Bangkok, it is crucial to consider the reputation and track record of the developer and property agency involved. By selecting a reputable developer and property agency, I had peace of mind knowing that my property investment is in safe hands. It minimizes potential risks and enhances the overall investment experience, ensuring a smooth and hopefully, a profitable journey in the Bangkok property market.

Rental Yield

Despite the global impact of the Covid-19 pandemic from 2020 to 2022, which caused significant disruptions across various sectors, including real estate, the construction of my property continued as scheduled and was successfully completed. Throughout the process, my agent played a crucial role in facilitating the furnishings of the unit and efficiently securing tenants within a short period. Their assistance and expertise ensured a smooth transition and swift rental process, allowing me to start earning rental income promptly. My current Gross Rental Yield for 2022 is 4.45%, which also happens to the same as the average rental yield in Bangkok (based on Q3, 2022 data) with a yield range between 1.89% to 8.00%.

Capital Appreciation

Property transactions have experienced a significant decline, with a sharp drop observed in the total value of land and building transactions nationwide during the first three quarters of 2022. According to data from the Bank of Thailand (BoT), the recorded value decreased by approximately 35% year-on-year to THB 560.65 billion (equivalent to US$15.96 billion). This decline was evident across all regions, indicating a widespread impact. However, the recent resurgence in tourism has instilled optimism for improved demand, particularly among foreign buyers, in the upcoming months.

By property type, in Bangkok and vicinities:

• Condominium prices fell by 2% (-8% in real terms) in Q3 2022 from a year earlier, in stark contrast to the y-o-y rise of 11.4% seen in Q3 2021.
• Townhouse prices rose by 4.3% (but declined 2% in real terms) during the year to Q3 2022, following the previous year’s 3.2% y-o-y increase.

As of October 1, 2022, the Thai government has lifted all Covid-related restrictions and extended the length of stay for tourists from countries eligible for visa exemption from 30 days to 45 days. Similarly, tourists eligible for a visa on arrival (VOA) now have an extended stay of 30 days, up from the previous 15 days. These measures are expected to stimulate demand and contribute to the recovery of the property market in Bangkok and beyond.

I recently had a meeting with my Huttons Bangkok agent to gain a deeper understanding of the current property market situation. Similar to my above findings, there is currently an excess supply of residential units in the market. However, an interesting development is the growing interest from Chinese investors, now that China has opened up. This influx of queries from Chinese investors has the potential to boost demand in the market. In addtion, Bangkok is expanding continuously. By 2025, it’s expected that the mass transportation system will run all throughout Bangkok, and land prices are expected to increase after that. For now, I will closely monitor the situation, considering long-term investment prospects and even the possibility as an overseas retirement option. By staying informed and assessing the market trends, I can make informed decisions regarding my investment strategy in the Bangkok property market.

Thailand–related Tax implications

In Thailand, there are specific tax implications for selling a property within 5 years of its acquisition. This is known as the “Specific Business Tax” (SBT). The SBT applies to the sale of immovable properties, including land and buildings, within a short period of time. Here are the key points regarding the tax implications:

1. Specific Business Tax (SBT): If you sell a property within 5 years of its acquisition, you will be subject to the SBT. The tax rate is fixed at 3.3% of the appraised value or the actual selling price, whichever is higher.
2. Exemptions and Reductions: There are certain exemptions and reductions available for the SBT. For example, if the property is inherited or received as a gift, the SBT may not apply. Additionally, if the property is used as the primary residence for at least one year before the sale, the SBT rate may be reduced or exempted, depending on the circumstances.
3. Withholding Tax: Apart from the SBT, there is also a withholding tax requirement when selling a property in Thailand. The buyer is responsible for withholding a percentage of the sale price and remitting it to the tax authorities on behalf of the seller. If the seller is a company, withholding tax is fixed at 1% over the registered sale value or appraised value (whichever is higher) and if the seller is an individual, withholding tax is calculated at a progressive rate based on the appraised value of the property.
4. Transfer Fee: The Thai Government imposes a transfer fee of 2% of whatever the sale figure is while purchasing or selling a property. The fee is to be shared amongst the seller and the buyer, dividing it by 1% each. Both parties have the right to negotiate, depending on the terms agreed upon. Moreover, if the property is in the owner’s possession for five years or more, a stamp duty of 0.5% is added on and imposed on the sale.

Understanding the tax implications and seeking professional advice can help you make informed decisions when selling a Thai property within 5 years of acquisition, ensuring compliance with the applicable tax laws and regulations.

What are repatriation procedures when selling the Thai property?

When selling a condominium in Thailand as a foreigner, there are certain repatriation issues to be aware of. Repatriation refers to the transfer of funds from Thailand back to the foreign investor’s home country. Here are the key points to consider:

1. When Initially Funding your Property Purchase: It is recommended that all payments made to the Developer or the Seller be transferred in any foreign currency except Thai Baht from an overseas bank account (not opened in Thailand) and must indicate the Purpose of Transfer, Buyer’s Name, Project Name and Unit Number.
2. Repatriation Limitations: The Bank of Thailand imposes regulations on repatriating funds from the sale of a property by a foreigner. The repatriation is subject to certain limitations and requires compliance with the applicable rules and documentation.
3. Foreign Currency Transactions: Repatriation is typically done in foreign currency. To repatriate funds, the foreign seller must convert the Thai Baht proceeds from the sale into their preferred currency through an authorized financial institution in Thailand.
4. Documentations and Proof: The foreign seller must provide necessary documentation to support the repatriation, such as the Sale and Purchase Agreement, Title Deed (Chanote), tax receipts, and other relevant documents. These documents serve as evidence for the legitimate sale and transfer of funds.
5. Approval from Authorities: Depending on the amount being repatriated, the approval from the Bank of Thailand may be required. It is advisable to consult with a qualified professional or seek guidance from the relevant authorities to ensure compliance with the repatriation regulations.
6. Taxes and Fees: It is important to note that taxes and fees may be applicable to the repatriated funds. These can include withholding tax, transfer fees, and other related charges. Understanding the tax implications and obligations is crucial to avoid any unexpected financial burdens.

To ensure a smooth repatriation process, it is also advisable to work with reputable professionals, such as lawyers or accountants, who have expertise in handling property transactions for foreigners in Thailand. They can provide guidance on the necessary steps, documentation, and compliance requirements to facilitate the repatriation of funds in accordance with the regulations in place.

In conclusion, purchasing and selling property in Thailand as a foreigner involves various considerations and processes. When buying a property, foreign investors can benefit from attractive investment opportunities, particularly in popular locations such as Bangkok’s CBD Rama 9. Factors such as prime location, rental yield potential, capital appreciation, lifestyle amenities, and proximity to Singapore make Bangkok an appealing choice for overseas property investment. It is essential to engage reputable developers and property agencies to ensure quality construction, timely completion, professional property management, and support for resale or exit strategies.

However, when selling a property in Thailand as a foreigner, repatriation issues come into play. Repatriating funds back to the investor’s home country requires adherence to regulations set by the Bank of Thailand. Documentation, foreign currency transactions, and potential approval from authorities must be considered. Seeking guidance from professionals with expertise in property transactions for foreigners is crucial to navigate the repatriation process, comply with regulations, and fulfill tax obligations.

Throughout the entire buying and selling journey, it is important for foreign investors to conduct thorough research, consult with professionals, and stay informed about the latest regulations and market trends. By doing so, investors can make well-informed decisions, maximize their returns, and ensure a smooth and successful experience when investing in and selling property in Thailand as a foreigner.

Further Online Readings for you:

Rental Yields in Thailand in 2022, Q3 | GlobalPropertyGuide

Investment Analysis of Thai Real Estate Market (globalpropertyguide.com)

Property Tax in Thailand | ThaiEmbassy.com

Buying a Condo in Thailand | ThaiEmbassy.com

Disclaimer: The following is a general disclaimer regarding property purchases and should not be considered as legal or financial advice. It is recommended to consult with qualified professionals before making any property purchase decisions.

1. No Legal or Financial Advice: The information provided in this disclaimer is for general informational purposes only and should not be construed as legal, financial, or investment advice. It is not intended to substitute professional advice tailored to your specific circumstances. Any reliance on the information provided is at your own risk.
2. Accuracy of Information: While efforts have been made to ensure the accuracy and timeliness of the information presented, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the property purchase information. Any reliance on such information is strictly at your own discretion.
3. Local Laws and Regulations: Property purchase laws, regulations, and practices vary by country, region, and municipality. It is essential to familiarize yourself with the specific laws and regulations governing property purchases in the target location. Seek advice from qualified professionals, such as real estate lawyers or agents, who have expertise in the local property market.
4. Financial Considerations: Property purchases involve significant financial commitments. It is crucial to conduct proper due diligence, including financial assessments, before making any purchase decisions. Consider factors such as affordability, mortgage options, taxes, fees, and potential future costs associated with property ownership.
5. Contractual Obligations: Property purchases typically involve signing legally binding contracts. It is essential to carefully review and understand the terms and conditions of any contracts, including sale agreements, financing agreements, and property management agreements. Seek legal advice to ensure your rights and interests are protected.
6. Market Risks: Property markets can be subject to fluctuations, economic conditions, and other factors beyond your control. Past performance is not indicative of future results. It is important to consider market risks and conduct thorough research on the property market, including historical trends, local demand and supply dynamics, and potential risks or uncertainties.
7. Professional Guidance: It is strongly recommended to seek guidance from qualified professionals, such as real estate agents, lawyers, financial advisors, and tax consultants, who can provide personalized advice based on your individual circumstances and objectives. They can assist with navigating legal, financial, and contractual aspects of the property purchase process.

In summary, property purchases require careful consideration, research, and professional guidance. This disclaimer emphasizes the importance of seeking qualified advice and conducting thorough due diligence before making any property purchase decisions. We disclaim any liability for any loss or damage arising from reliance on the information provided. Always consult with professionals for personalized advice based on your specific needs and circumstances.