First of all may I wish you all a very prosperous and Happy New Year. I have no comment on the result of the General Election as yet until we can see how the Coalition negotiations turn out and what proposals that come out of that.
You will see that in February we are supporting the Matt Hampson Trust. (see http://matthampsonkohsamui.blogspot.com/). For those of us who have been involved in Rugby at various levels over the years and continue to support it even as spectators, this is a very worthwhile charity and any assistance or help will be much appreciated. More specific details in next months Newsletter. So far we have attracted intriguing sponsorship including signed boxing gloves from Steve Collins, Enzo Macrinelli and Joe Calzaghe, Leicester Tigers shirts signed by their international players and our local champion Mr Lawrence Fay of Sabai Properties who has offered to have his head shaved on the 23rd February live in Coco Blues if we can get Baht 40,000 in sponsorship. I do not see that as a major problem - please email me for sponsorship foms!
More and more investors are coming to Koh Samui for the purpose of investing in the hotel scene. We have already seen announcements by Conrad, Park Hyatt, Mandarin Oriental, Hard Rock Hotel, Dusit D2, Alila Hansar, W, X2 and more recently a joint venture between Lehman Brothers and the Malaysian YTL Hotels and Properties of a site in Choengmon which they claim will be managed by a “renowned name”. We recently were instrumental in bringing to the island a famous name in hotels which is known internationally but which we cannot yet disclose. We have also received an enquiry from a major hotel group who wish to establish themselves here in Koh Samui as well as another foreign investor with a significant budget with the same idea. These are all 5-star hotels, a commodity in which the island has been severely lacking, but it is indicative of the way Koh Samui is moving up market and the faith major investors and international hotel operators have in the future of Koh Samui as a tourist destination.
There are very few large hotels on Koh Samui, and of the 264 hotels in our survey there are only two which can boast over 200 rooms and only 13 which have over 100 rooms. None of the new hotels planned exceed 200 rooms, and half have under 100, but a common feature to many is the combination of hotel rooms and villas for sale, not a new concept by any means but one which is becoming more prevalent as investors work to recoup their capital outlay quickly whilst still providing the required accommodation for the hotel management as the villas for the most part remain in the rental pool. It has been a common philosophy that for a hotel management company to provide the necessary Return on Investment (ROI) to the owner, a very minimum of 130 keys is essential and that still probably holds true for hotels in the 4-star category. What we are seeing here is the required ROI being achieved by higher occupancy and higher Average Daily Rates (ADR). This is achieved by good marketing, and of course the international chains have established worldwide marketing arms, but above all by providing exceptional service. The travelling public is becoming more discerning and demanding but is prepared to pay for quality. The United Nations World Tourist Organisation (UNWTO) report that tourism world wide is on the increase with 5.6% more people travelling in the first eight months of 2007 than same period in 2006 and that this growth is likely to continue for the rest of 2007. Regionally Asia Pacific is expected to grow by +10% whilst a slow down in the Americas, the Middle East and slightly in Europe. The Average Daily Rate for the new hotels planned for Samui is predicted at ca. $650/ night or Baht 22,000.
The good news to support this increase in tourists is the approval by the Environmental Authorities to allow additional capacity at Koh Samui Airport which should allow flights by Thai Airways to start and provide some competition although I will not be holding my breath to see significantly cheaper air fares. See the article below.
Once again I need to highlight the Thai Baht onshore/offshore rate issue. I am still seeing companies offering to buy and transfer Thai Baht at better rates than can be achieved at high street banks. For instance one company was quoting the Pound at Baht 65.6 against Baht 64.8 at the bank. The rate onshore here in Thailand at the same time was Baht 68.08 which would gain you Baht 124,000 on a £50,000 transfer. It was the same against the US Dollar – Baht 31.8 against Baht 31.4 when the rate onshore was Baht 33.49. A difference of Baht 84,500. They will even offer to transfer the funds without charge – well with transfer costs of less than Baht 1,000 I am not surprised. So you can see where they are making their money and none of them will tell you that you will not get the Foreign Exchange Transaction Certificate this way. ALWAYS send funds in your home currency, never in Thai Baht. In my experience you will always get a better rate here onshore and you will get the FETC. Also see the article later in this Newsletter re the future of the offshore/onshore rate divide.
For those of you who know him, Crispin Patton-Smith has at last been cleared of all charges and released from prison – see the story below. That he had to spend the last eighteen months in custody due to the unsubstantiated ramblings of a madman is a travesty and we all wish Crispin well on his return to civilisation.
The full Newsletter can be obtained by emailing me hbonning@kosamuiproperties.com
Monday 31 December 2007
Tuesday 4 December 2007
Koh Samui - Has the rain stopped? We think so!
It is November. It is the rainy season. It is wet. ‘Nuff said!
That is how I opened last months Newsletter and I have included some of the articles from the Newspapers about “what happened next!” (If you want a copy of the full Newsletter email me at hbonning@kosamuiproperties.com ) Well we did get a lot of rain for a couple of days and the problem was that the storm, instead of moving on, sat on top of us for those two days. Consequently the amount of rain that fell was so much and consistent that even with the new drainage that was installed after the previous floods a couple of years ago, it was falling faster than it could drain away. It is true that in some places there was some severe flooding, especially around the Laem Din Market, by the Chaweng Lake and along certain sections of the Beach Road, but once the rain stopped the water did actually drain away pretty quickly. In some areas the floods were worse than two years ago especially around the Reggae Street end of Chaweng Lake and the north end of the Beach Road but the big difference was that once it stopped raining the water went away very quickly. Now that did not make the situation any better for the people who had been affected as the damage had been done, but at least they were able to get back to business once the water had subsided. Clearly a lot more needs to be done to make the situation better when we get this level of flooding and hopefully the move towards Samui getting City Status can provide the additional funds to do this. In this respect a consultation document was issued in September (but only just reached my desk) explaining what the authorities were trying to do and asking for the views of the local population. There was no date by when submission had to be made but we will be making further enquiries to see how this progresses. In the meantime it has been warm and sunny and many locals believe the rainy season was short and sharp and is now over. Michael Fish – eat your heart out!
There are three kinds of lies: lies, damned lies, and statistics
This well-known saying is part of a phrase attributed to Benjamin Disraeli and popularized in the U.S. by Mark Twain. Doing research into an article I am writing I accessed the Tourist Authority of Thailand web site statistics page for Koh Samui. Whilst it is mostly in Thai, certain sections are in English and of particular interest to me were the figures representing the hotel occupancy rates for 2004 to 2006. Each year is on a separate page so in order to make a meaningful comparison I consolidated the figures into a single spreadsheet. It was only then that it became obvious there was a huge error. The figures quoted for the second half of 2005 in every category were exactly the same as the figures quoted for the second half of 2006. Statistically impossible – or am I being glib? The reality I suspect is someone cut and pasted the figures, no one updated them and no one checked them. I also looked at the figures quoted for hotel rooms in Koh Samui and tried to reconcile their figures with my own. Let us just say we differ significantly. So far they have not responded to my emails asking if we can resolve this. I am quite prepared to accept it if I have made a mistake but I somehow doubt I have missed several thousand hotel rooms. The problem therefore is having found two quite significant discrepancies in two separate tables, how accurate are the remainder, and if they are not accurate, how do they help in planning for the future? I have a strange feeling I will be running up a face saving issue here and rather than resolve the problem, it will just be ignored.
The General Election is due to take place on 23rd December and it is anyone’s guess as to how it will turn out. There is the usual bickering between the various factions with allegations and insults flying around. Par for the course I guess. Nevertheless it must be good for the country to return to civilian rule where legitimate actions and legislation can set the country back on course and not fall behind the rest of Asia where foreign business is being made more welcome every day. I am still surprised, although having lived here for so long I should not be, at the number of people who want to whisper in your ear that they know someone in Bangkok who has the inside track on how this is all going to turn out and the Ministries have already been allocated. The funny thing is of course, no one has the same story! All we can do is wait and see. Then perhaps we will discover who really did have “informed sources”!
That is how I opened last months Newsletter and I have included some of the articles from the Newspapers about “what happened next!” (If you want a copy of the full Newsletter email me at hbonning@kosamuiproperties.com ) Well we did get a lot of rain for a couple of days and the problem was that the storm, instead of moving on, sat on top of us for those two days. Consequently the amount of rain that fell was so much and consistent that even with the new drainage that was installed after the previous floods a couple of years ago, it was falling faster than it could drain away. It is true that in some places there was some severe flooding, especially around the Laem Din Market, by the Chaweng Lake and along certain sections of the Beach Road, but once the rain stopped the water did actually drain away pretty quickly. In some areas the floods were worse than two years ago especially around the Reggae Street end of Chaweng Lake and the north end of the Beach Road but the big difference was that once it stopped raining the water went away very quickly. Now that did not make the situation any better for the people who had been affected as the damage had been done, but at least they were able to get back to business once the water had subsided. Clearly a lot more needs to be done to make the situation better when we get this level of flooding and hopefully the move towards Samui getting City Status can provide the additional funds to do this. In this respect a consultation document was issued in September (but only just reached my desk) explaining what the authorities were trying to do and asking for the views of the local population. There was no date by when submission had to be made but we will be making further enquiries to see how this progresses. In the meantime it has been warm and sunny and many locals believe the rainy season was short and sharp and is now over. Michael Fish – eat your heart out!
There are three kinds of lies: lies, damned lies, and statistics
This well-known saying is part of a phrase attributed to Benjamin Disraeli and popularized in the U.S. by Mark Twain. Doing research into an article I am writing I accessed the Tourist Authority of Thailand web site statistics page for Koh Samui. Whilst it is mostly in Thai, certain sections are in English and of particular interest to me were the figures representing the hotel occupancy rates for 2004 to 2006. Each year is on a separate page so in order to make a meaningful comparison I consolidated the figures into a single spreadsheet. It was only then that it became obvious there was a huge error. The figures quoted for the second half of 2005 in every category were exactly the same as the figures quoted for the second half of 2006. Statistically impossible – or am I being glib? The reality I suspect is someone cut and pasted the figures, no one updated them and no one checked them. I also looked at the figures quoted for hotel rooms in Koh Samui and tried to reconcile their figures with my own. Let us just say we differ significantly. So far they have not responded to my emails asking if we can resolve this. I am quite prepared to accept it if I have made a mistake but I somehow doubt I have missed several thousand hotel rooms. The problem therefore is having found two quite significant discrepancies in two separate tables, how accurate are the remainder, and if they are not accurate, how do they help in planning for the future? I have a strange feeling I will be running up a face saving issue here and rather than resolve the problem, it will just be ignored.
The General Election is due to take place on 23rd December and it is anyone’s guess as to how it will turn out. There is the usual bickering between the various factions with allegations and insults flying around. Par for the course I guess. Nevertheless it must be good for the country to return to civilian rule where legitimate actions and legislation can set the country back on course and not fall behind the rest of Asia where foreign business is being made more welcome every day. I am still surprised, although having lived here for so long I should not be, at the number of people who want to whisper in your ear that they know someone in Bangkok who has the inside track on how this is all going to turn out and the Ministries have already been allocated. The funny thing is of course, no one has the same story! All we can do is wait and see. Then perhaps we will discover who really did have “informed sources”!
Saturday 3 November 2007
Who does an agent act for? Thoughts from Koh Samui.
It is November. It is the rainy season. It is wet. ‘Nuff said!
Donald Trump wrote a book entitled “The Art of the Deal”. As one of the most successful real estate developers in the world, he has had his ups and downs and proved the old adage that the more you owe the more you can borrow. When he was down on his last legs he owed various banks hundreds of millions of dollars. He arranged a meeting and said quite simply, you make me bankrupt and you will lose all the money you leant me or you can lend me more and I will get out of this mess – take your choice. They really had none, they gave him the money he needed and he climbed back to the top with some outrageously difficult but ultimately profitable schemes.
The main thrust of his book though was know your adversary, information is king, know the strengths and weaknesses of the other side and be prepared to walk away from a deal that is not right. “The Art of the Deal” was written from the perspective of the Principle, the decision maker, the man who controlled the money and who decided where and what was invested. An agent or broker still has to know how to make a deal but he is in a different position to the Principal in that he is the third party in a transaction and it is the job of the agent to bring two or more parties together to a conclusion acceptable to each side.
An Agent is “a person or business authorized to act on another's behalf”. The extent of that authorization is determined by agreement between the parties. As a Real Estate Agent we are authorised to offer properties for sale or to let on behalf of a Client. It is the Client who will pay our fee and it is the Client to whom we have the principal responsibility to negotiate the best deal on their behalf. This in no way diminishes our responsibility to the other party to provide accurate and honest information and not to provide misleading information. The extent of the authority an agent has can vary. Offering a property for sale is a basic and common relationship and usually evidenced by a simple contract or letter of appointment. At the other end, and I have been in this situation, bidding for a Client at an Auction requires far more.
A Sale at auction becomes legally binding on the fall of the Auctioneers Gavel. So if you have the winning bid, you need as an agent both a full Power of Attorney to sign on behalf of the Client and funds to pay the required deposit. Without this the agent would be legally bound to complete the sale himself. There is also an art to bidding at Auction for a Client. You will have specific instructions to bid up to a certain amount. You therefore must concentrate on the how the bidding is progressing and in what amounts. It is crucial that your last bid (if it gets that far) is the highest bid your Client has authorised, therefore you need to get into the bidding at a level that allows that last bid to be yours. For example, if the bids are increasing in £1,000 steps and your highest bid is say £50,000, then you need to be in the bidding no later than £48,000, preferably earlier but on the even numbers so when £49,000 is bid you can get your highest bid, £50,000, in next. Your Client would be very unhappy if you bid £49,000 and £50,000 bought it!
I was asked recently by a friend, who has been living part time on the island but who is now selling his house, to comment on an approach he had received from a “broker’ in respect of the sale of his house. The “broker” has a client who was interested in my friends house but the introduction to the house had been through two other people, one of whom he would have to share his commission with, the other would have to be taken care of by the seller, my friend. He did not disclose the name of the potential buyer, nor pass on any offer. His only concern was how much commission was the seller going to pay him and if it was not enough he would be unable to recommend the deal to his buyer. This is probably among the best cases of un-professionalism I have come across in over 35 years of working in international real estate. He forgot the first principle of this business – the Client comes first.
As an agent it is not our decision whether or not any offer is acceptable. Even if an offer is made that is derisory we have a duty to make that offer known to the Seller. We cannot know the personal circumstances of that person and however bad the offer is, it may just suit the seller to accept it at that time. Indeed a few years ago that precise situation happened to me. An offer was made on a property that was way below the asking price and below the real value. As a matter of course I informed my Client and to my surprise he told me to accept the offer and close the deal. His reasons were personal but the offer, as bad as it was, came at the right time for him and he has never regretted his decision. As an agent we still negotiate deals, but unlike “The Donald” we can only do so within the parameters set by our Clients, but must never forget that these parameters can change.
Donald Trump wrote a book entitled “The Art of the Deal”. As one of the most successful real estate developers in the world, he has had his ups and downs and proved the old adage that the more you owe the more you can borrow. When he was down on his last legs he owed various banks hundreds of millions of dollars. He arranged a meeting and said quite simply, you make me bankrupt and you will lose all the money you leant me or you can lend me more and I will get out of this mess – take your choice. They really had none, they gave him the money he needed and he climbed back to the top with some outrageously difficult but ultimately profitable schemes.
The main thrust of his book though was know your adversary, information is king, know the strengths and weaknesses of the other side and be prepared to walk away from a deal that is not right. “The Art of the Deal” was written from the perspective of the Principle, the decision maker, the man who controlled the money and who decided where and what was invested. An agent or broker still has to know how to make a deal but he is in a different position to the Principal in that he is the third party in a transaction and it is the job of the agent to bring two or more parties together to a conclusion acceptable to each side.
An Agent is “a person or business authorized to act on another's behalf”. The extent of that authorization is determined by agreement between the parties. As a Real Estate Agent we are authorised to offer properties for sale or to let on behalf of a Client. It is the Client who will pay our fee and it is the Client to whom we have the principal responsibility to negotiate the best deal on their behalf. This in no way diminishes our responsibility to the other party to provide accurate and honest information and not to provide misleading information. The extent of the authority an agent has can vary. Offering a property for sale is a basic and common relationship and usually evidenced by a simple contract or letter of appointment. At the other end, and I have been in this situation, bidding for a Client at an Auction requires far more.
A Sale at auction becomes legally binding on the fall of the Auctioneers Gavel. So if you have the winning bid, you need as an agent both a full Power of Attorney to sign on behalf of the Client and funds to pay the required deposit. Without this the agent would be legally bound to complete the sale himself. There is also an art to bidding at Auction for a Client. You will have specific instructions to bid up to a certain amount. You therefore must concentrate on the how the bidding is progressing and in what amounts. It is crucial that your last bid (if it gets that far) is the highest bid your Client has authorised, therefore you need to get into the bidding at a level that allows that last bid to be yours. For example, if the bids are increasing in £1,000 steps and your highest bid is say £50,000, then you need to be in the bidding no later than £48,000, preferably earlier but on the even numbers so when £49,000 is bid you can get your highest bid, £50,000, in next. Your Client would be very unhappy if you bid £49,000 and £50,000 bought it!
I was asked recently by a friend, who has been living part time on the island but who is now selling his house, to comment on an approach he had received from a “broker’ in respect of the sale of his house. The “broker” has a client who was interested in my friends house but the introduction to the house had been through two other people, one of whom he would have to share his commission with, the other would have to be taken care of by the seller, my friend. He did not disclose the name of the potential buyer, nor pass on any offer. His only concern was how much commission was the seller going to pay him and if it was not enough he would be unable to recommend the deal to his buyer. This is probably among the best cases of un-professionalism I have come across in over 35 years of working in international real estate. He forgot the first principle of this business – the Client comes first.
As an agent it is not our decision whether or not any offer is acceptable. Even if an offer is made that is derisory we have a duty to make that offer known to the Seller. We cannot know the personal circumstances of that person and however bad the offer is, it may just suit the seller to accept it at that time. Indeed a few years ago that precise situation happened to me. An offer was made on a property that was way below the asking price and below the real value. As a matter of course I informed my Client and to my surprise he told me to accept the offer and close the deal. His reasons were personal but the offer, as bad as it was, came at the right time for him and he has never regretted his decision. As an agent we still negotiate deals, but unlike “The Donald” we can only do so within the parameters set by our Clients, but must never forget that these parameters can change.
Monday 1 October 2007
News from Koh Samui for October
Statistics issued by the Association of Thai Travel Agents indicate a sharp drop in foreign tourist arrivals through Bangkok’s Suvarnabhumi Airport for the first eight months of this year. This may not be indicative of tourist arrivals overall as the figures do not include international arrivals into Koh Samui, Phuket, Chiang Mai and Krabi. What is interesting about the figures is that the main fall in numbers is from Asian countries such as China, Japan and Korea, the suggestion being that tourists from these countries are saving for the Olympic Games in China in 2008 which is an interesting concept to consider in relation to what will happen to tourism in Thailand next year. Major sporting events around the world are now so popular and well attended that they do appear to have an effect on the tourism of other destinations – sometimes positively. If I think back to the Rugby World Cup in 2003 which was held in Australia, there was no doubt that Samui and probably Thailand benefited as people travelled through and stopped over on their way there and back. Some even stayed here for the whole tournament as the television timing was friendlier than in Europe and it was considerably cheaper than going on to Australia. The Soccer World Cup in 2006 had the opposite effect with many people taking their vacations in Germany, although there was one group who found the cost of tickets so expensive that for the same price they flew out to Koh Samui for four weeks and still watched all the games in various bars around the island! So will the Beijing Olympics be good for Thailand or not? The implication from the statistics is that it will not, at least as far as other Asian tourists are concerned. However, the statistics also showed that there was an increase in tourists from Europe, in particular France, the UK and Russia. People are still travelling despite the hassle of modern airline security procedures and perceived political problems here, so will we see the same phenomena as we saw in 2003 as people travel to and from China, or will the Games and China itself be too attractive for them to take side trips? We must wait and see.
This year has seen a number of high quality hotels open, or announce their intention to open, on Koh Samui. This includes The Four Seasons which opened earlier this year on the north west peninsular, Banyan Tree due to open in 2008, Conrad in the south west, W in the north, Club Med in an as yet undisclosed location, although thought to be on one of the small islands off the south west coast, Park Hyatt in Tong Krut Bay due to open in late 2009 and word on the grape vine is that there are two more world class operators also about to announce their intentions. We are also working closely with a major hotel group in the acquisition of a property here and expect an announcement to be made early in the New Year. Koh Samui is without doubt becoming a major destination island and the hotel brands coming here are all the top of the range within their groups. Koh Samui is definitely going up-market and the constant moan is that the island has lost its charm. Well I would suggest that this may be true for the ageing backpacker who first came here 20 years ago, but for anyone coming here for the first time it still has a great deal to offer. Has the infrastructure kept up with development – well obviously not but it is slowly and gradually improving and it is the pressure of development that has made this happen. If all the houses and hotels that have been built over the last few years had not been built, there would have been no need to increase the electricity supply, address the water issue and, whether you like it or not, attract the likes of Lotus Tesco, Makro, Big C and Home Pro. When I first came here six years ago power cuts were frequent even before development started, many places relied solely on shallow wells with water of dubious quality. Shopping was a hit and miss affair with limited choice and poor quality. Since then a second electrical supply cable has been laid from the mainland a desalination plant built and a water ring main installed round the island. Obviously this has been of benefit to the tourist industry and business generally but it has also improved the living standards of the local Samui population, something that probably would not have happened without the pressure of development. Complaints are heard that Tesco, Makro and Big C are harming small supermarkets. The same supermarkets I shopped at six years ago are still here and where do they buy their stock? Lotus, Makro and Big C and at wholesale prices. So there have been many positives to the development that has taken place, but probably the biggest negative has been the effect on the roads with so many concrete lorries and construction vehicles continually on the move. The main roads are the responsibility of the Surat Thani Highways Department and anyone taking the ferry to Don Sak must wonder how they manage to build such a quality road from the ferry port into Surat Thani but cannot do the same on Samui. No one at any level of government has been able to answer that yet. Is Samui overdeveloped? Possibly in the short term in relation to current demand, but once the political situation has clarified itself after the General Election in December I believe that there is a large pent up demand waiting to come here. Is Samui over developed as an island per se? Take a boat trip round the island and look inland. I did this a few weeks ago and was quite surprised at the vast areas of totally development free land there – a great deal of course high in the hills under the control of the Forestry Department and therefore safe from development. Almost all the development that has taken place and is planned, with the exception of the Choengmon peninsular, is within one to two kilometers of the sea. There are indeed some eyesores that have appeared and I am sure that some judicial use of colour and/or landscaping would lessen their visual impact. The Local Authority has taken some steps in this direction by only allowing earth tone colours for roof tiles. The real estate market has taken a breather but it has not collapsed as some people thought it would. Sales are still happening if at a slower pace, but we have not seen any significant drop in values. Samui is definitely emerging as a high value resort destination and for those with spare cash, the Thailand Elite Card, details of which I can send you if you contact me by email, offers freedom from the hassle of border runs and visa renewals. Certainly not for everyone due to the cost, but for those with a high net worth who play golf and use spas and who are seeking an easy life – well worth considering.
A quick reminder if you are planning a trip to Samui in November – Loh Kratong falls on the 24th November this year. If you have never seen this before it is well worth planning your visit around this Festival where hundreds if not thousands of candle lit Kratongs are set afloat in the sea, on lakes and rivers. More details on that in a future Newsletter.
This year has seen a number of high quality hotels open, or announce their intention to open, on Koh Samui. This includes The Four Seasons which opened earlier this year on the north west peninsular, Banyan Tree due to open in 2008, Conrad in the south west, W in the north, Club Med in an as yet undisclosed location, although thought to be on one of the small islands off the south west coast, Park Hyatt in Tong Krut Bay due to open in late 2009 and word on the grape vine is that there are two more world class operators also about to announce their intentions. We are also working closely with a major hotel group in the acquisition of a property here and expect an announcement to be made early in the New Year. Koh Samui is without doubt becoming a major destination island and the hotel brands coming here are all the top of the range within their groups. Koh Samui is definitely going up-market and the constant moan is that the island has lost its charm. Well I would suggest that this may be true for the ageing backpacker who first came here 20 years ago, but for anyone coming here for the first time it still has a great deal to offer. Has the infrastructure kept up with development – well obviously not but it is slowly and gradually improving and it is the pressure of development that has made this happen. If all the houses and hotels that have been built over the last few years had not been built, there would have been no need to increase the electricity supply, address the water issue and, whether you like it or not, attract the likes of Lotus Tesco, Makro, Big C and Home Pro. When I first came here six years ago power cuts were frequent even before development started, many places relied solely on shallow wells with water of dubious quality. Shopping was a hit and miss affair with limited choice and poor quality. Since then a second electrical supply cable has been laid from the mainland a desalination plant built and a water ring main installed round the island. Obviously this has been of benefit to the tourist industry and business generally but it has also improved the living standards of the local Samui population, something that probably would not have happened without the pressure of development. Complaints are heard that Tesco, Makro and Big C are harming small supermarkets. The same supermarkets I shopped at six years ago are still here and where do they buy their stock? Lotus, Makro and Big C and at wholesale prices. So there have been many positives to the development that has taken place, but probably the biggest negative has been the effect on the roads with so many concrete lorries and construction vehicles continually on the move. The main roads are the responsibility of the Surat Thani Highways Department and anyone taking the ferry to Don Sak must wonder how they manage to build such a quality road from the ferry port into Surat Thani but cannot do the same on Samui. No one at any level of government has been able to answer that yet. Is Samui overdeveloped? Possibly in the short term in relation to current demand, but once the political situation has clarified itself after the General Election in December I believe that there is a large pent up demand waiting to come here. Is Samui over developed as an island per se? Take a boat trip round the island and look inland. I did this a few weeks ago and was quite surprised at the vast areas of totally development free land there – a great deal of course high in the hills under the control of the Forestry Department and therefore safe from development. Almost all the development that has taken place and is planned, with the exception of the Choengmon peninsular, is within one to two kilometers of the sea. There are indeed some eyesores that have appeared and I am sure that some judicial use of colour and/or landscaping would lessen their visual impact. The Local Authority has taken some steps in this direction by only allowing earth tone colours for roof tiles. The real estate market has taken a breather but it has not collapsed as some people thought it would. Sales are still happening if at a slower pace, but we have not seen any significant drop in values. Samui is definitely emerging as a high value resort destination and for those with spare cash, the Thailand Elite Card, details of which I can send you if you contact me by email, offers freedom from the hassle of border runs and visa renewals. Certainly not for everyone due to the cost, but for those with a high net worth who play golf and use spas and who are seeking an easy life – well worth considering.
A quick reminder if you are planning a trip to Samui in November – Loh Kratong falls on the 24th November this year. If you have never seen this before it is well worth planning your visit around this Festival where hundreds if not thousands of candle lit Kratongs are set afloat in the sea, on lakes and rivers. More details on that in a future Newsletter.
Friday 7 September 2007
It's September in Koh Samui!
The new Constitution was approved at the Referendum on 19th August and the General Election has been announced for December 23rd subject to formal confirmation. It is anticipated and indeed hoped that a new democratic government will have a more realistic and pragmatic approach to the issues that have been creating lack of confidence in foreign investors over the last twelve months. There are many people with whom we are in communication all over the world and, with a few exceptions, most are deferring investment decisions until early next year. The indications are, that with a sensible resolution to foreign investment, Thailand, and Samui in particular, will not only recover but continue to flourish.
I received a phone call the other day from a rather nice sounding young lady in the UK. She worked for “the largest non-bank” foreign exchange company in England and would like to introduce me to the wonderful deals she could offer my clients on currency exchange. Not only did they get such wonderful exchange rates but there were no transfer charges. Well this was really interesting so I let her carry on with her sales pitch which was probably unfair because I knew how much of a sticky wicket she was on, but she did not. Eventually I had to ask her if she was aware that the Thai Baht traded at different rates onshore and offshore. No she did not but she was sure they could get a better rate in England. I asked her if she was aware that there was currently a 5 Baht difference in the two rates and that made a difference of £1,275 on One Million Baht? I asked her if she was aware that by transferring funds into Thailand in Thai Baht meant that you could not get a Foreign Exchange Transaction Certificate and what were the consequences of that? Of course she had no answer to this and said she had to check back with the trading desk and would get back to me. Of course she did not. The problem is that I am seeing more of these companies trying to persuade people to use their services on the promise of better exchange rates and free transfers. The reality is that in all my time here in Thailand I have always obtained better rates onshore even when the difference was marginal rather than the large gap we have now. As shown above it will cost you £1,275 more to buy one million Baht offshore than on shore. But it does not end there. The Foreign Exchange Transaction Certificate will be needed if and when you want to transfer funds out of Thailand without incurring any tax liability. It is the evidence you need to say ‘I brought this money in, and I can take it out!” Without the FETC the Revenue Department will assume you earned the money here and it is therefore taxable. FETC’s are only issued on amounts in excess of $US20,000 and consequently sending funds out of Thailand in amounts less than $US20,000 is generally not a problem but the original “Inward Transfer Advice” from your bank showing when funds arrived and how much should be sufficient to avoid any Revenue Department demands.
Big C Supermarket opened on 6th September as welcome competition to Lotus Tesco. I recall when Lotus Tesco first opened here it was really quite exciting as suddenly we had access to a much wider range of product than had previously been available in the local supermarkets. Sometimes we forget what it was like before they came, going from one supermarket to another to find what you were looking for. Of course the novelty wore off and the shortcomings of Lotus Tesco became apparent – supply chain problems, uninterested staff etc. Will Big C be any better? Let us at least hope some competition makes both companies a little sharper. Big C is located just south of Bandon Hospital on the Ring Road.
One good thing about Lotus Tesco was that it incorporated a Cinema and, whilst we do not get every major film release, those we do get we get at the same time as they open internationally which is not bad for a small island in the south of Thailand. Last month we had both “Rush Hour 3” and “The Bourne Ultimatum”. The theatres are modern and comfortable and for the romantics the back row has the “Honeymoon” seats, two large seats joined together. The row in front, Row A, is my preference as they have given extra leg room to the next row which allows you to stretch out in comfort. At Baht 140 a seat, good value. Coke and Popcorn Baht 80 a cheap couple of hours of good entertainment.
A quick reminder if you are planning a trip to Samui in November – Loh Kratong falls on the 24th November this year. If you have never seen this before it is well worth planning your visit around this Festival where hundreds if not thousands of candle lit Kratongs are set afloat in the sea, on lakes and rivers. More details on that in a future Newsletter.
For other Festivals around Thailand visit the Tourist Authority of Thailand website.
I received a phone call the other day from a rather nice sounding young lady in the UK. She worked for “the largest non-bank” foreign exchange company in England and would like to introduce me to the wonderful deals she could offer my clients on currency exchange. Not only did they get such wonderful exchange rates but there were no transfer charges. Well this was really interesting so I let her carry on with her sales pitch which was probably unfair because I knew how much of a sticky wicket she was on, but she did not. Eventually I had to ask her if she was aware that the Thai Baht traded at different rates onshore and offshore. No she did not but she was sure they could get a better rate in England. I asked her if she was aware that there was currently a 5 Baht difference in the two rates and that made a difference of £1,275 on One Million Baht? I asked her if she was aware that by transferring funds into Thailand in Thai Baht meant that you could not get a Foreign Exchange Transaction Certificate and what were the consequences of that? Of course she had no answer to this and said she had to check back with the trading desk and would get back to me. Of course she did not. The problem is that I am seeing more of these companies trying to persuade people to use their services on the promise of better exchange rates and free transfers. The reality is that in all my time here in Thailand I have always obtained better rates onshore even when the difference was marginal rather than the large gap we have now. As shown above it will cost you £1,275 more to buy one million Baht offshore than on shore. But it does not end there. The Foreign Exchange Transaction Certificate will be needed if and when you want to transfer funds out of Thailand without incurring any tax liability. It is the evidence you need to say ‘I brought this money in, and I can take it out!” Without the FETC the Revenue Department will assume you earned the money here and it is therefore taxable. FETC’s are only issued on amounts in excess of $US20,000 and consequently sending funds out of Thailand in amounts less than $US20,000 is generally not a problem but the original “Inward Transfer Advice” from your bank showing when funds arrived and how much should be sufficient to avoid any Revenue Department demands.
Big C Supermarket opened on 6th September as welcome competition to Lotus Tesco. I recall when Lotus Tesco first opened here it was really quite exciting as suddenly we had access to a much wider range of product than had previously been available in the local supermarkets. Sometimes we forget what it was like before they came, going from one supermarket to another to find what you were looking for. Of course the novelty wore off and the shortcomings of Lotus Tesco became apparent – supply chain problems, uninterested staff etc. Will Big C be any better? Let us at least hope some competition makes both companies a little sharper. Big C is located just south of Bandon Hospital on the Ring Road.
One good thing about Lotus Tesco was that it incorporated a Cinema and, whilst we do not get every major film release, those we do get we get at the same time as they open internationally which is not bad for a small island in the south of Thailand. Last month we had both “Rush Hour 3” and “The Bourne Ultimatum”. The theatres are modern and comfortable and for the romantics the back row has the “Honeymoon” seats, two large seats joined together. The row in front, Row A, is my preference as they have given extra leg room to the next row which allows you to stretch out in comfort. At Baht 140 a seat, good value. Coke and Popcorn Baht 80 a cheap couple of hours of good entertainment.
A quick reminder if you are planning a trip to Samui in November – Loh Kratong falls on the 24th November this year. If you have never seen this before it is well worth planning your visit around this Festival where hundreds if not thousands of candle lit Kratongs are set afloat in the sea, on lakes and rivers. More details on that in a future Newsletter.
For other Festivals around Thailand visit the Tourist Authority of Thailand website.
Thursday 2 August 2007
Koh Samui round up August 2007
I know we Brits tend to talk too much about the weather but the first half of July was really very pleasant in respect of temperatures and we did not get too much rain. Some evenings were extremely pleasant – for us Europeans anyway. My wife did not agree and found it cold so I told her to do the ironing and that would warm her up. Apparently my food is likely to be as cold as the weather for a while.
I am pleased to say that after the last two months I am more positive about the future of the real estate market here in Samui than I have been for some time. Since the beginning of June we have seen more activity and concluded more deals than for a long time. Another phenomena has been the increase in visitors to our web site which has trebled since August last year and doubled since March of this year. This indicates that interest in Koh Samui is coming back and that people are starting to look again and in consequence of that we are now receiving more serious enquiries, mostly by email from people anticipating visiting the island over the next few months.
There has been much discussion over the last couple of years about the prospect of Koh Samui receiving City Status and the present Mayor is pushing very hard for this. Whilst it is true that Koh Samui now has the requisite 50,000 registered population, it does not quite meet the second requirement of density which is 3,000 per square kilometer. Koh Samui is roughly 525 square kilometers so only has a density of 95/sq km. Now this being Thailand you can guarantee there will be a way round this and one suggestion I have heard is that Koh Samui, Koh Phangan and Koh Tao could be made a Special Economic Zone, as Bangkok and Pattaya, which would have much the same effect. Nothing is likely to happen before the Election but watch this space!
The Buddhist Holy Day of Asarnha Bucha fell this year on Sunday 29th July. Asarnha Bucha Day is the day considered to be the birth of Buddhism, as the Buddha departed the location where he obtained his enlightenment two months earlier and then, coming to a forest area in the city of Pharansi, where he showed favour to five ascetics who became his followers. So this is a very Holy day in the Buddhist religion which is why bars are shut for that day and the day following the start of Buddhist Lent (Asarnha Bucha Day) is another important Buddhist Holy day called Khao Pansaa where the Monks traditionally retreat to the Temple at which they were ordained for three months during the rainy season. I mention this after the event because the longer you live in Thailand and the longer you have a Thai wife the more you learn about Thai culture and the ceremonies. Now let us say my dear wife has reached “a certain age” and as a consequence our joint ages are near enough to 100 so that we had to enact a special ceremony involving eels. Now before you let your imagination run away with you this all occurred in public in broad daylight. First we had to buy ten live eels each from Laem Din market after which we proceeded to the Chaweng Lake, fired up the joss sticks, said a few prayers and set the eels free in the lake. Apparently this is to bring us good luck and good fortune for the coming year. After the year we have just been through I think I will go back and set some more free today!!
Talking of bars closing last Sunday, I called one bar owner and asked where she was. She said she was in the bar. I asked if they were open then. Her reply “Just a little bit!” Such is Thailand!
A quick reminder if you are planning a trip to Samui in November – Loh Kratong falls on the 24th November this year. If you have never seen this before it is well worth planning your visit around this Festival where hundreds if not thousands of candle lit Kratongs are set afloat in the sea, on lakes and rivers. More details on that in a future Newsletter.
________________________________________
Do you have a question?
Do you have a question you would like answering on real estate in Koh Samui? Please feel free to email me directly and I will give you the benefit of my experience over the last 35 years in the international real estate business and six years in Koh Samui. I can answer you privately or, if the question is of general interest, I can publish the reply in this Newsletter – without naming you of course!
E Mail me at hbonning@kosamuiproperties.com
I am pleased to say that after the last two months I am more positive about the future of the real estate market here in Samui than I have been for some time. Since the beginning of June we have seen more activity and concluded more deals than for a long time. Another phenomena has been the increase in visitors to our web site which has trebled since August last year and doubled since March of this year. This indicates that interest in Koh Samui is coming back and that people are starting to look again and in consequence of that we are now receiving more serious enquiries, mostly by email from people anticipating visiting the island over the next few months.
There has been much discussion over the last couple of years about the prospect of Koh Samui receiving City Status and the present Mayor is pushing very hard for this. Whilst it is true that Koh Samui now has the requisite 50,000 registered population, it does not quite meet the second requirement of density which is 3,000 per square kilometer. Koh Samui is roughly 525 square kilometers so only has a density of 95/sq km. Now this being Thailand you can guarantee there will be a way round this and one suggestion I have heard is that Koh Samui, Koh Phangan and Koh Tao could be made a Special Economic Zone, as Bangkok and Pattaya, which would have much the same effect. Nothing is likely to happen before the Election but watch this space!
The Buddhist Holy Day of Asarnha Bucha fell this year on Sunday 29th July. Asarnha Bucha Day is the day considered to be the birth of Buddhism, as the Buddha departed the location where he obtained his enlightenment two months earlier and then, coming to a forest area in the city of Pharansi, where he showed favour to five ascetics who became his followers. So this is a very Holy day in the Buddhist religion which is why bars are shut for that day and the day following the start of Buddhist Lent (Asarnha Bucha Day) is another important Buddhist Holy day called Khao Pansaa where the Monks traditionally retreat to the Temple at which they were ordained for three months during the rainy season. I mention this after the event because the longer you live in Thailand and the longer you have a Thai wife the more you learn about Thai culture and the ceremonies. Now let us say my dear wife has reached “a certain age” and as a consequence our joint ages are near enough to 100 so that we had to enact a special ceremony involving eels. Now before you let your imagination run away with you this all occurred in public in broad daylight. First we had to buy ten live eels each from Laem Din market after which we proceeded to the Chaweng Lake, fired up the joss sticks, said a few prayers and set the eels free in the lake. Apparently this is to bring us good luck and good fortune for the coming year. After the year we have just been through I think I will go back and set some more free today!!
Talking of bars closing last Sunday, I called one bar owner and asked where she was. She said she was in the bar. I asked if they were open then. Her reply “Just a little bit!” Such is Thailand!
A quick reminder if you are planning a trip to Samui in November – Loh Kratong falls on the 24th November this year. If you have never seen this before it is well worth planning your visit around this Festival where hundreds if not thousands of candle lit Kratongs are set afloat in the sea, on lakes and rivers. More details on that in a future Newsletter.
________________________________________
Do you have a question?
Do you have a question you would like answering on real estate in Koh Samui? Please feel free to email me directly and I will give you the benefit of my experience over the last 35 years in the international real estate business and six years in Koh Samui. I can answer you privately or, if the question is of general interest, I can publish the reply in this Newsletter – without naming you of course!
E Mail me at hbonning@kosamuiproperties.com
Tuesday 3 July 2007
News Round up from Koh Samui June 2007
The news has been fairly disjointed this month with nothing substantial worth commenting on. Mainly a lot of political in fighting following the dissolution of the Thai Rak Thai Party and the on going campaign against Mr T. who may or may not come back to Thailand to defend himself and whose safety the government say is guaranteed but the military say is not! In the UK we call this the silly season where the newspapers concentrate on the bizarre and odd stories that sell papers. I am not sure it quite works like that in Thailand and you get the feeling that the heavy hand of censorship is at work playing down the growing unrest at the present government. Certainly the rumours that we hear, and they are only rumours, are that the present economic limbo that Thailand finds itself in is at last being understood by those in power even if they do not know how to deal with it. However, those that do know what needs to be done and know how to do it are preparing themselves for power after the elections in December although it is now being reported that they might bring the Elections forward to November. We also “hear” that the lack of confidence and uncertainty surrounding the interpretation of the Foreign Business Act is very high on the agenda. Thailand still has a way to go to get back to normal but the indications are that this will happen, it may be a few months yet, but for those willing and able to hang on the future should be pretty bright.
For all the bad news that has been generated over recent months with regard to the economy and the FBA, we have seen an upturn in activity and June was probably our busiest month this year. There is no doubt that there are a lot of people out there who see this as a good time to buy real estate – and there are deals to be had with out a doubt – provided you get the legal niceties right. If the Newspaper reports are correct we appear to have a red carpet full of celebrities queuing up to buy property on Koh Samui. Sven-Goran Eriksson has bought and so has the world's No-1 female tennis player, Justine Henin. Now David Beckham has joined the list of possible purchasers with Wayne Rooney’s name being mentioned as well although we have it on very good authority that this is just one of those rumours that circulate here now and again. The list of five-star hotels wanting to be represented here is growing with Club Med also joining the list along with another internationally known brand we cannot name for confidentiality reasons that we are representing.
We are often asked about medical facilities on Koh Samui and in particular Dentists. From my experience in Thailand, Dental treatment here is not only cheap in comparison to Europe, Australia and the USA, but is also very good. Prices will vary between Clinics but as a guide a simple filling can cost as little as Baht 1,000, a Root Canal Baht 4,000 and Crowns between Baht 7,500 and Baht 15,000. Over the last five years numerous Dental Clinics have appeared and of course the Hospitals have their own. The only thing I would suggest is that you need some idea of what you want doing as there is a tendency for some Clinics to try and sell Cosmetic Dentistry on top of routine maintenance.
For all the bad news that has been generated over recent months with regard to the economy and the FBA, we have seen an upturn in activity and June was probably our busiest month this year. There is no doubt that there are a lot of people out there who see this as a good time to buy real estate – and there are deals to be had with out a doubt – provided you get the legal niceties right. If the Newspaper reports are correct we appear to have a red carpet full of celebrities queuing up to buy property on Koh Samui. Sven-Goran Eriksson has bought and so has the world's No-1 female tennis player, Justine Henin. Now David Beckham has joined the list of possible purchasers with Wayne Rooney’s name being mentioned as well although we have it on very good authority that this is just one of those rumours that circulate here now and again. The list of five-star hotels wanting to be represented here is growing with Club Med also joining the list along with another internationally known brand we cannot name for confidentiality reasons that we are representing.
We are often asked about medical facilities on Koh Samui and in particular Dentists. From my experience in Thailand, Dental treatment here is not only cheap in comparison to Europe, Australia and the USA, but is also very good. Prices will vary between Clinics but as a guide a simple filling can cost as little as Baht 1,000, a Root Canal Baht 4,000 and Crowns between Baht 7,500 and Baht 15,000. Over the last five years numerous Dental Clinics have appeared and of course the Hospitals have their own. The only thing I would suggest is that you need some idea of what you want doing as there is a tendency for some Clinics to try and sell Cosmetic Dentistry on top of routine maintenance.
News Round up from Koh Samui June 2007
The news has been fairly disjointed this month with nothing substantial worth commenting on. Mainly a lot of political in fighting following the dissolution of the Thai Rak Thai Party and the on going campaign against Mr T. who may or may not come back to Thailand to defend himself and whose safety the government say is guaranteed but the military say is not! In the UK we call this the silly season where the newspapers concentrate on the bizarre and odd stories that sell papers. I am not sure it quite works like that in Thailand and you get the feeling that the heavy hand of censorship is at work playing down the growing unrest at the present government. Certainly the rumours that we hear, and they are only rumours, are that the present economic limbo that Thailand finds itself in is at last being understood by those in power even if they do not know how to deal with it. However, those that do know what needs to be done and know how to do it are preparing themselves for power after the elections in December although it is now being reported that they might bring the Elections forward to November. We also “hear” that the lack of confidence and uncertainty surrounding the interpretation of the Foreign Business Act is very high on the agenda. Thailand still has a way to go to get back to normal but the indications are that this will happen, it may be a few months yet, but for those willing and able to hang on the future should be pretty bright.
For all the bad news that has been generated over recent months with regard to the economy and the FBA, we have seen an upturn in activity and June was probably our busiest month this year. There is no doubt that there are a lot of people out there who see this as a good time to buy real estate – and there are deals to be had with out a doubt – provided you get the legal niceties right. If the Newspaper reports are correct we appear to have a red carpet full of celebrities queuing up to buy property on Koh Samui. Sven-Goran Eriksson has bought and so has the world's No-1 female tennis player, Justine Henin. Now David Beckham has joined the list of possible purchasers with Wayne Rooney’s name being mentioned as well although we have it on very good authority that this is just one of those rumours that circulate here now and again. The list of five-star hotels wanting to be represented here is growing with Club Med also joining the list along with another internationally known brand we cannot name for confidentiality reasons that we are representing.
We are often asked about medical facilities on Koh Samui and in particular Dentists. From my experience in Thailand, Dental treatment here is not only cheap in comparison to Europe, Australia and the USA, but is also very good. Prices will vary between Clinics but as a guide a simple filling can cost as little as Baht 1,000, a Root Canal Baht 4,000 and Crowns between Baht 7,500 and Baht 15,000. Over the last five years numerous Dental Clinics have appeared and of course the Hospitals have their own. The only thing I would suggest is that you need some idea of what you want doing as there is a tendency for some Clinics to try and sell Cosmetic Dentistry on top of routine maintenance.
For all the bad news that has been generated over recent months with regard to the economy and the FBA, we have seen an upturn in activity and June was probably our busiest month this year. There is no doubt that there are a lot of people out there who see this as a good time to buy real estate – and there are deals to be had with out a doubt – provided you get the legal niceties right. If the Newspaper reports are correct we appear to have a red carpet full of celebrities queuing up to buy property on Koh Samui. Sven-Goran Eriksson has bought and so has the world's No-1 female tennis player, Justine Henin. Now David Beckham has joined the list of possible purchasers with Wayne Rooney’s name being mentioned as well although we have it on very good authority that this is just one of those rumours that circulate here now and again. The list of five-star hotels wanting to be represented here is growing with Club Med also joining the list along with another internationally known brand we cannot name for confidentiality reasons that we are representing.
We are often asked about medical facilities on Koh Samui and in particular Dentists. From my experience in Thailand, Dental treatment here is not only cheap in comparison to Europe, Australia and the USA, but is also very good. Prices will vary between Clinics but as a guide a simple filling can cost as little as Baht 1,000, a Root Canal Baht 4,000 and Crowns between Baht 7,500 and Baht 15,000. Over the last five years numerous Dental Clinics have appeared and of course the Hospitals have their own. The only thing I would suggest is that you need some idea of what you want doing as there is a tendency for some Clinics to try and sell Cosmetic Dentistry on top of routine maintenance.
Wednesday 30 May 2007
Property News from Koh Samui in May
The most important news item and event this month has been the ruling of the Constitutional Court on the future of the Democratic Party and the Thai Rak Thai Party. There were fears of mass demonstrations and riots in Bangkok but despite the ruling exonerating the Democratic Party and banning Thai Rak Thai and nineteen officials for five years, the matter seems to have passed off peacefully, at least so far. Reports suggest that most people think the ruling is correct and indeed all the Thais I spoke to last night (both of them) thought this was good for the country. It seems far more likely that the elections scheduled for December will now go ahead as planned which has to be a good thing for everyone.
The South West Monsoon has arrived and inevitably we are getting a few rain showers coming through, some heavier than others but actually very welcome and as this is low season, just the right time. This is where Koh Samui beats Phuket during the summer months as they get the full force straight off the Andaman Sea and we just get the remnants which keeps things green and lush, fills the sub-aqua but is not so constant that you cannot get a sun tan!
I have been criticised by one or two local readers of my monthly Newsletter for including an article last month which included some misleading and incorrect statements. The criticism was possibly correct in as much as I did not add a comment disagreeing with the content but simply plagiarised it from The Nation. To set the record straight – there is no 150 metre rule on Samui and no one can name more than one of these foreign investors who have pulled out. The view of the market on Samui was also distorted and whilst no one can deny that things have slowed down, we are still receiving regular enquiries for both land and property on the island. My impression is that many people want to buy in Thailand and in Koh Samui in particular, but are unsure how to do this safely and legally. I expressed part of the solution in last months Newsletter and, whilst there are no public statements to support this, the grapevine suggest that the powers that be have at last realised that their proposals are not practicable.
The leasehold structure is certainly becoming more acceptable and Lynx Developments have been very successful in selling their townhouses in Choengmon on this basis. We have also in this last week concluded both a house sale and a land sale on long leases so it is not all doom and gloom as some people would like to think. In fact many people seem to be thinking that now is the right time to get into the market and some of the enquiries we are getting are for quite substantial areas of land or properties. In fact (and I am touching a lot of wood as I type this!) this last week has been as busy in the office as I have known it for a long time.
The concern of most people, as we have stated before, is what happens at the end of the initial 30 year lease period if the original landowner is no longer around for whatever reason? With a management company owning the freehold this is not really a big issue and is becoming an increasingly popular way to go. It is always when the freehold of the land is held in the name of an individual that the potential problem arises. As far as we are aware – and we have made enquiries – no renewal options against heirs of original owners after 30 years have been tested through the Courts – mainly because no leases are that old and it may be a good few years before they are. The positive side is that even under present law, provided the structure is owned separately, the landowner cannot simply take the property back without compensation, so there is good reason for them to grant a new lease.
Another issue was highlighted this month from two different people. One has his pension paid to him from the UK every month and he found that his last payment received in Thailand was Baht 7,500 (£110) less than usual. The bank were their usual unhelpful selves and blamed the difference on the routing through various different banks and charges at each stage. That is absolute rubbish! We have funds coming into our Clients Account on a regular basis and this does not happen. What actually happened was that the UK bank converted to Thai Baht before transferring the funds which even in the past was the wrong thing to do, but now we have an onshore and an offshore exchange rate and there is a 5 Baht spread. The Baht against the UK Pound offshore is about 63 whilst onshore it is 68. It is vital when transferring funds to Thailand to give clear instructions to your bank to transfer in your home currency and have the conversion made to Thai Baht here in Thailand. Even before the present disparity in exchange rates emerged this year, we always obtained a better rate on exchange in Thailand than overseas. The other main point is that for amounts over $20,000 you can get a Foreign Exchange Transfer Certificate issued by the receiving bank which you need to take the money back out of Thailand at a later date without problems. If you send the funds in Thai Baht you cannot get this certificate. The second case was a Client who was considering buying Baht offshore in respect of a considerable purchase here in Koh Samui. If he had done so the difference in the offshore/onshore rate would have cost him £31,000 and he would not have received the Foreign Exchange Transfer Certificate. Always buy Thai Baht in Thailand – not overseas.
In this months Newsletter you will read a couple of reports of buildings and cars damaged by fire. This came a little to close to home this month when we experienced an electrical fire in the cabling at the rear of our office. Luckily this was spotted quickly and extinguished before any serious damage was done to the building although it took a full day to restore power and we were off line until the next day so we apologise if there was a time when we were not responding as quickly as usual to your emails. However, it does make you realise how important insurance is, not just to have it but to ensure you have the right cover, correct insured amounts and pay the premiums on time. For those of you who know our building, the upper parts of which are timber, very dry timber, you can imagine how quickly the fire could have spread. The Koh Samui Chaweng Fire Station is on the Laem Din Road near to the Beach Road and so only a short drive away, but ten minutes might have been too long. Fire extinguishers are essential – we have two but only needed to use one. Dry powder makes a mess (ask our Maid!) but was very effective on this fire. The emergency number for the Fire Station is 199.
________________________________________
Do you have a question? Would you like to receive my Monthly Newsletter?
Do you have a question you would like answering on real estate in Koh Samui? Please feel free to email me directly and I will give you the benefit of my experience over the last 35 years in the international real estate business and six years in Koh Samui. I can answer you privately or, if the question is of general interest, I can publish the reply in this Newsletter – without naming you of course!
E Mail me at hbonning@kosamuiproperties.com
The South West Monsoon has arrived and inevitably we are getting a few rain showers coming through, some heavier than others but actually very welcome and as this is low season, just the right time. This is where Koh Samui beats Phuket during the summer months as they get the full force straight off the Andaman Sea and we just get the remnants which keeps things green and lush, fills the sub-aqua but is not so constant that you cannot get a sun tan!
I have been criticised by one or two local readers of my monthly Newsletter for including an article last month which included some misleading and incorrect statements. The criticism was possibly correct in as much as I did not add a comment disagreeing with the content but simply plagiarised it from The Nation. To set the record straight – there is no 150 metre rule on Samui and no one can name more than one of these foreign investors who have pulled out. The view of the market on Samui was also distorted and whilst no one can deny that things have slowed down, we are still receiving regular enquiries for both land and property on the island. My impression is that many people want to buy in Thailand and in Koh Samui in particular, but are unsure how to do this safely and legally. I expressed part of the solution in last months Newsletter and, whilst there are no public statements to support this, the grapevine suggest that the powers that be have at last realised that their proposals are not practicable.
The leasehold structure is certainly becoming more acceptable and Lynx Developments have been very successful in selling their townhouses in Choengmon on this basis. We have also in this last week concluded both a house sale and a land sale on long leases so it is not all doom and gloom as some people would like to think. In fact many people seem to be thinking that now is the right time to get into the market and some of the enquiries we are getting are for quite substantial areas of land or properties. In fact (and I am touching a lot of wood as I type this!) this last week has been as busy in the office as I have known it for a long time.
The concern of most people, as we have stated before, is what happens at the end of the initial 30 year lease period if the original landowner is no longer around for whatever reason? With a management company owning the freehold this is not really a big issue and is becoming an increasingly popular way to go. It is always when the freehold of the land is held in the name of an individual that the potential problem arises. As far as we are aware – and we have made enquiries – no renewal options against heirs of original owners after 30 years have been tested through the Courts – mainly because no leases are that old and it may be a good few years before they are. The positive side is that even under present law, provided the structure is owned separately, the landowner cannot simply take the property back without compensation, so there is good reason for them to grant a new lease.
Another issue was highlighted this month from two different people. One has his pension paid to him from the UK every month and he found that his last payment received in Thailand was Baht 7,500 (£110) less than usual. The bank were their usual unhelpful selves and blamed the difference on the routing through various different banks and charges at each stage. That is absolute rubbish! We have funds coming into our Clients Account on a regular basis and this does not happen. What actually happened was that the UK bank converted to Thai Baht before transferring the funds which even in the past was the wrong thing to do, but now we have an onshore and an offshore exchange rate and there is a 5 Baht spread. The Baht against the UK Pound offshore is about 63 whilst onshore it is 68. It is vital when transferring funds to Thailand to give clear instructions to your bank to transfer in your home currency and have the conversion made to Thai Baht here in Thailand. Even before the present disparity in exchange rates emerged this year, we always obtained a better rate on exchange in Thailand than overseas. The other main point is that for amounts over $20,000 you can get a Foreign Exchange Transfer Certificate issued by the receiving bank which you need to take the money back out of Thailand at a later date without problems. If you send the funds in Thai Baht you cannot get this certificate. The second case was a Client who was considering buying Baht offshore in respect of a considerable purchase here in Koh Samui. If he had done so the difference in the offshore/onshore rate would have cost him £31,000 and he would not have received the Foreign Exchange Transfer Certificate. Always buy Thai Baht in Thailand – not overseas.
In this months Newsletter you will read a couple of reports of buildings and cars damaged by fire. This came a little to close to home this month when we experienced an electrical fire in the cabling at the rear of our office. Luckily this was spotted quickly and extinguished before any serious damage was done to the building although it took a full day to restore power and we were off line until the next day so we apologise if there was a time when we were not responding as quickly as usual to your emails. However, it does make you realise how important insurance is, not just to have it but to ensure you have the right cover, correct insured amounts and pay the premiums on time. For those of you who know our building, the upper parts of which are timber, very dry timber, you can imagine how quickly the fire could have spread. The Koh Samui Chaweng Fire Station is on the Laem Din Road near to the Beach Road and so only a short drive away, but ten minutes might have been too long. Fire extinguishers are essential – we have two but only needed to use one. Dry powder makes a mess (ask our Maid!) but was very effective on this fire. The emergency number for the Fire Station is 199.
________________________________________
Do you have a question? Would you like to receive my Monthly Newsletter?
Do you have a question you would like answering on real estate in Koh Samui? Please feel free to email me directly and I will give you the benefit of my experience over the last 35 years in the international real estate business and six years in Koh Samui. I can answer you privately or, if the question is of general interest, I can publish the reply in this Newsletter – without naming you of course!
E Mail me at hbonning@kosamuiproperties.com
Wednesday 25 April 2007
Property in Koh Samui after Songkran
Songkran came and went and, as usual, was over in one day so by Saturday morning it was safe to go out without fear of getting wet. On the other hand elsewhere in Thailand Songkran goes on for days. My wife comes from Kalasin and she was home for the holiday and they were still celebrating a week later!
There is still a general air of uncertainty re the political situation which is not helpful, but on the other hand what I am beginning to see is a more positive attitude among many business people for the future. Whilst we should not be complacent, there seems to be a feeling that the lengthy deliberation and discussions about the Foreign Business Act will go on and on, possibly until the elections in December, when a more pragmatic government will instill some sense into the situation. We must wait and see of course and this may be the optimistic view but we are still receiving enquiries from interested purchasers.
There are inevitably some people who are panicking which I believe is totally the wrong attitude although on the whole most people are sitting back to see what happens. Remember that the concept of foreigners acquiring an interest in land through a Thai registered company with local Thai shareholders (nominee or not) has been a standard practice recommended by lawyers throughout Thailand for years and accepted by government after government. I find it somewhat disingenuous of all the lawyers today making statements to the effect that “we told you so!” - well in my six years in Thailand I cannot point to one lawyer who, until last year when this all came to a head, said the Thai company was not the way to go. Be that as it may, where could it go from here and why should we not panic?
We can only look at the Law as it stands and even assuming they apply the existing Law I see major problems of enforcement. Let us assume that on Koh Samui alone there are 1,000 such land owning companies controlled by foreigners. First of all they have to investigate all those companies and having established that there is foreign control, they must then apply to the Court for an order under the Land Code requiring the company to divest themselves of that interest with a 180 day deadline after which the Court can order a forced sale of the land. Now I would imagine that any vaguely competent lawyer could manage to defer these hearings for weeks if not months. Multiply that by 1,000 and you can see how quickly the Court system would be brought to a halt.
Let us be clear though. There is still nothing wrong with a Thai company with foreign shareholders owning land. What is at question currently is control of that company whether by majority shareholding or voting rights. Obviously it is not possible for foreigners to own more than 49% of the shares but it was, in the past, possible to control the company by way of preference voting rights and it is this issue which is currently being debated more than any other. However, even with equal voting rights it should still be possible to retain significant if not quite total control of the actions of the company by carefully worded Articles of Association. For instance, all decisions have to have agreement of 70% of the shareholders and… well I am not going to give all the secrets away!
But of course you still have to have legitimate Thai shareholders. Let us say for example that you are buying a Baht 20 million house. Technically you are going to have to find Thai shareholders to contribute 51% or Baht 10,200,000. That is clearly unrealistic. But remember that it is perfectly legal for you to own the structure on the land in your own right. So, let us say that the value of the land is Baht 2,000,000 so now you only need to find Thai shareholders for Baht 1,020,000. Five of them at Baht 200,000 each. Where do they get the Baht 200,000 from – well they can borrow it – where from I will leave you to work out! So now you take a 30 year lease from the company of the land and you own the structure in your own name. Options are built in to renew the lease in 30 years, to extend the lease should longer leases be allowed and to purchase the land should the law change in the future. You have to be careful how these various factors are put together as there are some tax implication to be aware of, but which can be legitimately minimised.
So what happens after 30 years? You serve notice on the company (of which you are still a shareholder) to renew the lease of the land for a further 30 years. Such renewal I would surmise is unlikely to be refused. The renewal is duly registered at the Land Office and in fact as you actually control the situation this could repeat ad infinitum. Obviously this is a simplistic description of what I am describing and there are a number of consequential issues that need addressing and safe guards to be built in and I am not going to cover them all in this Newsletter. **
We have to deal with what is in front of us and, whilst we can speculate on how the Law will be changed (or not) and how it will then be applied, I believe it is still possible to safely buy property here in Thailand and that the future for Koh Samui is very bright. There are some bargains around at the moment for those with the foresight to take advantage of them.
**If you would like to subscribe to my monthly Newsletter, please send me and email to hbonning@kosamuiproperties.com
There is still a general air of uncertainty re the political situation which is not helpful, but on the other hand what I am beginning to see is a more positive attitude among many business people for the future. Whilst we should not be complacent, there seems to be a feeling that the lengthy deliberation and discussions about the Foreign Business Act will go on and on, possibly until the elections in December, when a more pragmatic government will instill some sense into the situation. We must wait and see of course and this may be the optimistic view but we are still receiving enquiries from interested purchasers.
There are inevitably some people who are panicking which I believe is totally the wrong attitude although on the whole most people are sitting back to see what happens. Remember that the concept of foreigners acquiring an interest in land through a Thai registered company with local Thai shareholders (nominee or not) has been a standard practice recommended by lawyers throughout Thailand for years and accepted by government after government. I find it somewhat disingenuous of all the lawyers today making statements to the effect that “we told you so!” - well in my six years in Thailand I cannot point to one lawyer who, until last year when this all came to a head, said the Thai company was not the way to go. Be that as it may, where could it go from here and why should we not panic?
We can only look at the Law as it stands and even assuming they apply the existing Law I see major problems of enforcement. Let us assume that on Koh Samui alone there are 1,000 such land owning companies controlled by foreigners. First of all they have to investigate all those companies and having established that there is foreign control, they must then apply to the Court for an order under the Land Code requiring the company to divest themselves of that interest with a 180 day deadline after which the Court can order a forced sale of the land. Now I would imagine that any vaguely competent lawyer could manage to defer these hearings for weeks if not months. Multiply that by 1,000 and you can see how quickly the Court system would be brought to a halt.
Let us be clear though. There is still nothing wrong with a Thai company with foreign shareholders owning land. What is at question currently is control of that company whether by majority shareholding or voting rights. Obviously it is not possible for foreigners to own more than 49% of the shares but it was, in the past, possible to control the company by way of preference voting rights and it is this issue which is currently being debated more than any other. However, even with equal voting rights it should still be possible to retain significant if not quite total control of the actions of the company by carefully worded Articles of Association. For instance, all decisions have to have agreement of 70% of the shareholders and… well I am not going to give all the secrets away!
But of course you still have to have legitimate Thai shareholders. Let us say for example that you are buying a Baht 20 million house. Technically you are going to have to find Thai shareholders to contribute 51% or Baht 10,200,000. That is clearly unrealistic. But remember that it is perfectly legal for you to own the structure on the land in your own right. So, let us say that the value of the land is Baht 2,000,000 so now you only need to find Thai shareholders for Baht 1,020,000. Five of them at Baht 200,000 each. Where do they get the Baht 200,000 from – well they can borrow it – where from I will leave you to work out! So now you take a 30 year lease from the company of the land and you own the structure in your own name. Options are built in to renew the lease in 30 years, to extend the lease should longer leases be allowed and to purchase the land should the law change in the future. You have to be careful how these various factors are put together as there are some tax implication to be aware of, but which can be legitimately minimised.
So what happens after 30 years? You serve notice on the company (of which you are still a shareholder) to renew the lease of the land for a further 30 years. Such renewal I would surmise is unlikely to be refused. The renewal is duly registered at the Land Office and in fact as you actually control the situation this could repeat ad infinitum. Obviously this is a simplistic description of what I am describing and there are a number of consequential issues that need addressing and safe guards to be built in and I am not going to cover them all in this Newsletter. **
We have to deal with what is in front of us and, whilst we can speculate on how the Law will be changed (or not) and how it will then be applied, I believe it is still possible to safely buy property here in Thailand and that the future for Koh Samui is very bright. There are some bargains around at the moment for those with the foresight to take advantage of them.
**If you would like to subscribe to my monthly Newsletter, please send me and email to hbonning@kosamuiproperties.com
Monday 2 April 2007
April and Songkran on Koh Samui
Songkran is upon us again and will be celebrated in Samui between 13th and 15th April. For a detailed guide to, and explanation about Songkran, the Tourist Authority of Thailand have a very good wed site at http://www.tatnews.org/events/events/2007/april/3169.asp
In other parts of Thailand Songkran seems to last for days. At least here in Koh Samui it starts on the afternoon of the 12th when the kids will stand at the side of the road and throw and squirt water at passing cars and bikes. There is then one full day of mahem with processions through Chaweng and it is pretty well all over by midday on the 14th. However, for those few days make sure your telephone, wallet and cigarettes are wrapped in a plastic bag because you can be a target at any time. Be very careful if you are riding a bike as you will be a prime target and safety and consideration tend to go out of the window at this time. Watch out also for the pick-up trucks full of people with a large container in the back. These will get you too. Great fun for the kids but I think having done this too often before, I will be relaxing at home!
Mind you, water pistols may not be needed as after a fairly dry few weeks we have started to get showery weather again at the tail end of the NE Monsoon season. Nothing too drastic but useful to keep the water levels up although we really need a lot more. If you want to check the weather at any time go to http://www2.tmd.go.th/radar/chumphon.php and you will get a radar picture showing rain clouds. The Chumphon radar currently gives the best picture as the Surat Thani radar site is not working. We are just approaching the usual hottest months of the year and would expect the NE Monsoon to gradually give way to the SW Monsoon over this period.
British Summer Time (Day Light Saving Time) started on the 25th March so here in Koh Samui we are now only 6 hours ahead of the UK. This continues until Sunday 28th October. Day Light Saving started in the USA on 11th March and will finish on 4th November. Why do the Americans get a longer summer than the Brits?
Koh Samui has long been a stop off point for Formula One teams and the latest British success story Lee Hamilton is no exception as he made his way from Melbourne to the Kuala Lumpa Grand Prix by way of Bangkok and Koh Samui.
There is still debate over the future of the Foreign Business Act and how it will be drafted and applied with one or two more sensible words of wisdom floating about. However it is still too early to make any definitive comment until we know what the final version is. Two dates in December, 16th or 23rd, have been suggested for the General Election – but will that actually solve anything? Who knows!
In other parts of Thailand Songkran seems to last for days. At least here in Koh Samui it starts on the afternoon of the 12th when the kids will stand at the side of the road and throw and squirt water at passing cars and bikes. There is then one full day of mahem with processions through Chaweng and it is pretty well all over by midday on the 14th. However, for those few days make sure your telephone, wallet and cigarettes are wrapped in a plastic bag because you can be a target at any time. Be very careful if you are riding a bike as you will be a prime target and safety and consideration tend to go out of the window at this time. Watch out also for the pick-up trucks full of people with a large container in the back. These will get you too. Great fun for the kids but I think having done this too often before, I will be relaxing at home!
Mind you, water pistols may not be needed as after a fairly dry few weeks we have started to get showery weather again at the tail end of the NE Monsoon season. Nothing too drastic but useful to keep the water levels up although we really need a lot more. If you want to check the weather at any time go to http://www2.tmd.go.th/radar/chumphon.php and you will get a radar picture showing rain clouds. The Chumphon radar currently gives the best picture as the Surat Thani radar site is not working. We are just approaching the usual hottest months of the year and would expect the NE Monsoon to gradually give way to the SW Monsoon over this period.
British Summer Time (Day Light Saving Time) started on the 25th March so here in Koh Samui we are now only 6 hours ahead of the UK. This continues until Sunday 28th October. Day Light Saving started in the USA on 11th March and will finish on 4th November. Why do the Americans get a longer summer than the Brits?
Koh Samui has long been a stop off point for Formula One teams and the latest British success story Lee Hamilton is no exception as he made his way from Melbourne to the Kuala Lumpa Grand Prix by way of Bangkok and Koh Samui.
There is still debate over the future of the Foreign Business Act and how it will be drafted and applied with one or two more sensible words of wisdom floating about. However it is still too early to make any definitive comment until we know what the final version is. Two dates in December, 16th or 23rd, have been suggested for the General Election – but will that actually solve anything? Who knows!
Tuesday 27 February 2007
Thai Airways suspend maiden flights to Samui
Comments on a report in The Samui Express 23 Feb 2007
Originally planned to commence operation on 1st March with two flights a day, Thai Airways have, according to Koh Samui Tourist Promotion Association, decided that the landing costs imposed by Bangkok Airways are too high and have scrapped those plans.
(We have to wonder why at this late stage they have changed their opinion as we are not aware that the landing charges have changed since they first announced the intention of flying here. The usual criticism is that Bangkok Airways airfares are excessive. Koh Samui is not shown as an available destination on the Thai Airways website so it is not possible to compare what they would have charged. We did check a return flight from Surat Thani to Bangkok and the total price was Baht 7,390. An equivalent fare with Bangkok Airways was Baht 8,030 so the additional Baht 640 saves a bus, ferry and bus trip to Surat. The Bangkok Airways promotional fare is only Baht 5,265. A flight from Bangkok to Phuket return was Baht 8,160 and to Krabi was Baht 7,830 so it seems that Bangkok Airways are once again being made the whipping boy for Koh Samui’s problems in not attracting tourists over the recent high season when the bad publicity last year and hotel prices probably had as much to do with that as did the much cheaper general packages to the Andaman Resort areas working hard to regain custom after the tsunami. So once again we are seeing calls for a second airport but there seems to be no evidence that this would produce cheaper fares and unless the hotels are prepared to compete on price with the Andaman coast then the tourists will still not come. There are an ever increasing number of high quality hotels coming to Koh Samui. Four Seasons has just opened, Evason has been here for a while and both Conrad and W have announced plans to be here soon. Others we hear are also planning new five star operations on the island. It is unlikely that guests to these hotels are going to worry too much about a difference of Baht 1,000 on an airfare. So what does Samui want? High end tourists only in which case the existing airport can probably cope or a second airport to attract mass tourism with no guarantee that on its own it will succeed? Can two airports operate at the same time on the island? The original plan for the second airport was parallel to the road from Hua Thanon to Nathon but there now appear to be issues with flight paths and wind shears off the surrounding hills. Also with the present interim government, do they have the will at this time to approve such a project? The land acquisition process itself could take years as compulsory purchase orders will need to go through the Courts and then the funds will have to be available to buy the land and build the airport by which time we will no doubt have a different government to that now in power or in power after the next election – so who knows where it could go and if Suvarnabhuni Airport in Bangkok can be used as an example we probably have another 45 years to wait anyway! )
Friday 16 February 2007
To lease or not to Lease on Koh Samui!
The fall out from the bitter dispute between the military backed interim government and the ousted ex-Prime Minister Taksin Shinawat has been the attack on the nominee structure of foreign controlled Thai companies which for years have been the accepted way for foreigners doing business in Thailand to control their investment. The statement that they are merely clarifying the law rather than amending it is a purely face saving one to avoid admitting that they are changing the law retrospectively. They are doing this by amending the Foreign Business Act but as yet no one knows just what the final version will be and if there will be changes to the Class 1, 2 & 3 lists of prohibited and permitted businesses in which foreigners can have an interest. Consequently there is a great deal of uncertainty in business and in the property sector in particular as the nominee structured Thai company was the usual and accepted way for foreigners to acquire an interest in land in Thailand.
What is certain however is that a foreigner can lease land and this lease can be registered at the Land Office for a period not exceeding 30 years. There is a provision within the Land Code for a further extension of 30 years after the initial lease has expired. Section 540 of the Civil & Commercial Code states:
“The duration of a hire of immovable property cannot exceed thirty years. If it is made for a longer period, such period shall be reduced to thirty years. The aforesaid period may be renewed, but it must not exceed thirty years from the time of renewal.”
So let us look at the pros and cons of leasing land in Thailand as the law stands today.
Firstly and most importantly the interest in the land under a lease is completely legal and enforceable in the Courts.
Secondly, it is possible and again perfectly legal for the lease to be renewed for a further thirty years – and by implication that could go on indefinitely, but subject to the comments below.
The downside to leases are the following.
1) A lease is a depreciating asset. Whereas a freehold will increase in value in line with property values generally, a lease will decrease in value with the reducing remaining term.
2) The renewal of the lease after 30 years is based on a contractual option with the original Lessor. It may not be enforceable against his heirs and successors if he has disposed of his interest or died, although a recent Supreme Court ruling seemed to indicate that it might be provided the option has actually been exercised prior to the Lessor’s death.
3) The lease must be carefully drafted and so registered at the Land Office stating that the lease holds good not only to the Lessee but to his heirs and successors, preferably named, because if he dies the lease, if not, dies with him and is terminated.
These reservations apply principally to leases with individuals. Many developers now are offering 30 year registered leases with both options to buy should the law change to allow that and to extend the lease at the end of the term. These are relatively safe in that the Lessor being a company cannot “die” and the Articles of Association require the company to renew leases when the fall due.
So for the time being the only totally legal way for a foreigner to acquire and interest in land in Thailand is by way of a lease. Will that change? The most likely change being muted currently is to extend the period for which a lease can be registered and both 60 and 90 years have been bandied about. We must wait and see.
What is certain however is that a foreigner can lease land and this lease can be registered at the Land Office for a period not exceeding 30 years. There is a provision within the Land Code for a further extension of 30 years after the initial lease has expired. Section 540 of the Civil & Commercial Code states:
“The duration of a hire of immovable property cannot exceed thirty years. If it is made for a longer period, such period shall be reduced to thirty years. The aforesaid period may be renewed, but it must not exceed thirty years from the time of renewal.”
So let us look at the pros and cons of leasing land in Thailand as the law stands today.
Firstly and most importantly the interest in the land under a lease is completely legal and enforceable in the Courts.
Secondly, it is possible and again perfectly legal for the lease to be renewed for a further thirty years – and by implication that could go on indefinitely, but subject to the comments below.
The downside to leases are the following.
1) A lease is a depreciating asset. Whereas a freehold will increase in value in line with property values generally, a lease will decrease in value with the reducing remaining term.
2) The renewal of the lease after 30 years is based on a contractual option with the original Lessor. It may not be enforceable against his heirs and successors if he has disposed of his interest or died, although a recent Supreme Court ruling seemed to indicate that it might be provided the option has actually been exercised prior to the Lessor’s death.
3) The lease must be carefully drafted and so registered at the Land Office stating that the lease holds good not only to the Lessee but to his heirs and successors, preferably named, because if he dies the lease, if not, dies with him and is terminated.
These reservations apply principally to leases with individuals. Many developers now are offering 30 year registered leases with both options to buy should the law change to allow that and to extend the lease at the end of the term. These are relatively safe in that the Lessor being a company cannot “die” and the Articles of Association require the company to renew leases when the fall due.
So for the time being the only totally legal way for a foreigner to acquire and interest in land in Thailand is by way of a lease. Will that change? The most likely change being muted currently is to extend the period for which a lease can be registered and both 60 and 90 years have been bandied about. We must wait and see.
Wednesday 24 January 2007
Koh Samui and Thailand - What now?
From a Real Estate point of view we have seen increasing interest since Christmas with more enquiries of a serious nature and sales being agreed. I am a little surprised that many lawyers seem to be still promoting the acquisition of real estate through the Thai company route and it does appear to be correct that the Land Office are continuing to register land of less than 1 Rai to companies with foreign shareholders. I can only assume that they are looking at the new FBA which it is stated will give companies two years to rectify any irregularities in the belief that a newly elected government will correct the present unsatisfactory situation. The nominee structure with its combination or Ordinary and Preference Shares was for many years the accepted way for foreigners to own land and it was a typical Thai pragmatic compromise which allowed this despite the strict conflict with Thai Law. The present government, interim as it may be, have made it very clear that businesses in Thailand must be majority Thai owned and the Thai shareholders must have majority voting rights. Foreigners may not own or control businesses in Thailand. I think it is widely accepted that this whole situation was brought about as a consequence of the deal between the ousted Prime Minister Taksin Shinawatra and the Singapore government for the sale of his family business Shin Corp. Apart from the tax free nature of the sale which created a lot of bad feeling the issue it brought to the fore was the control of a major Thai company (and a sensitive one being in telecommunications) by a foreign entity. Further investigations into his business affairs and those of his family really opened a huge bag of worms which extended to land deals and which the opposition seized upon with glee and culminated in the Coup last September.
Where does this leave us with regard to real estate? The first thing is not to panic. Nothing stays the same for long here and much fear of what might happen is built on ill founded rumour. We have had meetings with certain people recently and even within the present system there are fairly highly connected people who recognise the dilemma and who are trying to come up with a solution. For the time being my own recommendation is that land should be acquired on a Registered Lease for 30 years with two well drafted options, firstly to acquire the land should the law change and secondly to extend the lease for a further 30 years. The house on the land can be owned separately in your own name. There is also talk about extending the period for which a lease can be registered and some rumours state 90 years and some 60 years. As usual we must wait for the facts and assume nothing. I consider it highly unlikely that Thailand will relax its policy on foreign ownership of land but I do think they will come up with a solution that makes investment here acceptable again.
Where does this leave us with regard to real estate? The first thing is not to panic. Nothing stays the same for long here and much fear of what might happen is built on ill founded rumour. We have had meetings with certain people recently and even within the present system there are fairly highly connected people who recognise the dilemma and who are trying to come up with a solution. For the time being my own recommendation is that land should be acquired on a Registered Lease for 30 years with two well drafted options, firstly to acquire the land should the law change and secondly to extend the lease for a further 30 years. The house on the land can be owned separately in your own name. There is also talk about extending the period for which a lease can be registered and some rumours state 90 years and some 60 years. As usual we must wait for the facts and assume nothing. I consider it highly unlikely that Thailand will relax its policy on foreign ownership of land but I do think they will come up with a solution that makes investment here acceptable again.
Monday 8 January 2007
Quad Bikes on Koh Samui
Last November Top Gear’s Jeremy Clarkson ventured to Botswana and experienced Quad Bikes.
Here is a quote:
“Now, the quad bike has had a fair degree of bad press in recent years. First of all, we had Rik Mayall damn nearly killing himself when his turned over and then, more recently, poor old Ozzy Osbourne breaking what's left of his body in two when his pulled a wheelie, throwing him off the back.
If you want to kill your children, there's no quicker way that I can see than buying them one of those 50cc jobbies you sometimes see at garden centres. My son went on one the other day and in less than two minutes, he and it were in the swimming pool.”
The full article can be found here
http://www.topgear.com/content/features/stories/2006/11/stories/02/1.html
What on earth are they doing now on the roads of Koh Samui? Over recent weeks more and more of these machines have been seen zooming round the island with the riders for some reason believing that they are safer than the two wheeled death traps popular with locals and tourists alike. Koh Samui has a high enough accident rate without adding the false sense of security that these vehicles appear to give people. Not only that, but I have yet to see one with a licence plate, nor have I seen a tax disc and I suspect therefore no insurance.
During the Second World War, that work horse of the US Army the Jeep had a great reputation for its ability off-road, but the opposite on-road where it killed many GI’s due to its inability to turn corners at speed. These Quad Bikes seem to have similar characteristics and I wonder how long it will be before we see them adding to the island’s statistics.
Here is a quote:
“Now, the quad bike has had a fair degree of bad press in recent years. First of all, we had Rik Mayall damn nearly killing himself when his turned over and then, more recently, poor old Ozzy Osbourne breaking what's left of his body in two when his pulled a wheelie, throwing him off the back.
If you want to kill your children, there's no quicker way that I can see than buying them one of those 50cc jobbies you sometimes see at garden centres. My son went on one the other day and in less than two minutes, he and it were in the swimming pool.”
The full article can be found here
http://www.topgear.com/content/features/stories/2006/11/stories/02/1.html
What on earth are they doing now on the roads of Koh Samui? Over recent weeks more and more of these machines have been seen zooming round the island with the riders for some reason believing that they are safer than the two wheeled death traps popular with locals and tourists alike. Koh Samui has a high enough accident rate without adding the false sense of security that these vehicles appear to give people. Not only that, but I have yet to see one with a licence plate, nor have I seen a tax disc and I suspect therefore no insurance.
During the Second World War, that work horse of the US Army the Jeep had a great reputation for its ability off-road, but the opposite on-road where it killed many GI’s due to its inability to turn corners at speed. These Quad Bikes seem to have similar characteristics and I wonder how long it will be before we see them adding to the island’s statistics.
Subscribe to:
Posts (Atom)
