VAT, Language and Trouble in Thailand!

Value Added Tax (VAT) has been a fact of life in many countries for years and is gradually being implemented in many more. Thailand requires registration for VAT on any business the turnover of which exceeds Baht 1.8 million per year. Therefore when you first open a business you do not need to register until you reach that magic figure. Of course during that period you cannot reclaim VAT charged by your suppliers either. The implication of that magic number was highlighted recently with a couple of properties on which I was advising. Both small with relatively small incomes but which projections showed would grow over the next few months and exceed the registration limit.

I will give an example to illustrate the point. You have a Room Rate of Baht 1,000 per night. Your income one day reaches Baht 1.8 million. You are required to register for VAT. Your net rate suddenly becomes Baht 935. OK, so now you can set off suppliers VAT, but many are not registered themselves so the offset tends to be minimal. To maintain the status quo you have to increase your room rate to Baht 1,070 per night and in a climate where lack of tourism is putting pressure on room rates anyway, that may not be feasible. It not only affects your room rate but all your other income as well – food, drink and any other services you may charge for. Something of a dilemma but a bullet that has to be bitten at some point if you are intent on expanding your business.

It does not matter in which country you live but there is always amusement to be had when languages get mangled in translation. I was told a story recently of someone who received a phone call from his house maid that his cat had come home with its ears painted green. He instructed the maid to collar the cat – presumably to stop it straying. When he got home he found the cat had been painted with white gloss paint. The maid had not understood collar and thought he meant colour the cat. Let’s not get into the “use her common sense” argument. He now has the only bald cat with green ears on Samui. I had another amusing experience with someone very close to me. Driving in the car one night I had a CD playing with the Nat King Cole classic “Straighten up and Fly Right”. After a few minutes of listening to this she turned to me and asked “Why he sing about fried rice?” Work it out for yourself!

Last month the main topic of conversation was the unfortunate crash of the Bangkok Airways ATR at Samui Airport. One of the reports was from someone who had been listening to the Air Traffic Control transmissions at the time. If you want to know more about Samui Airport, the radio frequencies and look at the approach charts for pilots you can find all this on line here at this link. Or this one for detail from The Thai Flying Club.

The television documentary shown on Bravo in the UK and widely distributed on You Tube “Big Trouble in Thailand” has drawn mixed reactions, mainly critical from the Thai authorities. Having now watched four of the episodes the only one which in my opinion shows Thailand in a bad light is the incident with the jet-ski operator in Phuket. The rest show the tourists in a much worse light. I have never been to a Full Moon Party on Koh Phangan and have no wish to do so. I do know many people who have been there and it is clear that drugs are widely available. If the Police arrested everyone in possession of drugs there they would need a very large holding facility. Why then did the girl in the programme get pulled for a small amount of marijuana? She was lucky to get off as lightly as she did although it was obviously a very harrowing experience.

And property prices continue to fall! If you check our web site and look at the Hot Press Offers you will see a great number of properties with prices that have been reduced from between 15% and 50% with an average reduction of 37% during this last month. These reductions are now beginning to produce sales and, although still not many, there are a few more buyers around than there were a few weeks ago. NEW REDUCTIONS EVERY MONTH!

See in particular the following properties – CTRL + click to follow the link:

3 bedroom house in Bangrak with walled garden and pool. Originally Baht 15m. Now available at Baht 10.9 million.

2 bedroom bungalow in Plai Laem with pool – originally Baht 11 million. Now available at Baht 8.8m.

If you would like to receive the regular full monthly Newsletter from Ko Samui Properties, please send an email to hbonning@kosamuiproperties.com

Koh Samui Monthly Blog - Air Crash and Other News

The big topic on the island of course this month was the crash of the Bangkok Airways Krabi flight on 4th August at Samui Airport. We started getting phone calls to the office within a few minutes of this happening and as usual the information was confused and inaccurate. Being next door to Bangkok Samui Hospital we are used to the regular wail of ambulances sirens so that was not unusual in itself, just the frequency. As the facts became clearer – mainly through internet web boards – it was a tragedy that the pilot died but a miracle really that no one else did and that serious injuries were confined to so few people. One could be a little cynical and say that if you are going to crash, doing so next to the emergency services building is probably the best place to do it, but that takes nothing away from the excellent response of the ground services who quickly eliminated any risk of fire. Eye witness accounts state that the aircraft was on the ground some 300 metres down the runway when it suddenly veered to the left. A sudden gust of wind or brake failure – we must wait for the accident report to find out. A 5 minute video of the rescue operation can be seen here.

Many airlines suffer accidents and it is how they respond to that which is important. Bangkok Airways has an excellent safety record and despite regular criticism of their high prices to Koh Samui, the general opinion is that they offer an excellent service. Certainly in the aftermath of this accident they seem to have done all the right things in offering assistance to the passengers both injured and uninjured.

What also came out of this incident was the matter of copyright as demonstrated by the person who witnessed the accident from his house above the airport and within minutes posted a picture of the crashed aircraft on Thai Visa.com. See the article below re-printed below from Bangkok Bugle – with their permission I might add!

Rumours have surfaced again that Index are to open on Samui. My understanding is that if this is correct then it will be on the vacant land between Makro and Big C.

There are many tempting souvenirs in the tourist shops throughout Thailand but be warned many of the items offered are in fact illegal. Visit the TAT Web site to get detailed information on what NOT to buy. Click here! WHAT NOT TO BUY OR TAKE HOME WITH YOU

In the article reproduced below the Treasury Department are accused of setting land values on Koh Samui at too high a level. This relates to the table of values used by the Land Office and Tax Office to assess values for tax and transfer purposes. There have often been issues when registering the sale of land at the value stated at the Land Office which are always lower than the actual sale value. This is because the tables used were out of date and well below actual values. Technically you were supposed to register at the Table Value or the actual value whichever was the highest but that rarely happened. Registering at the table values meant lower tax and transfer costs. The re-valuation is an attempt to bring the set values into line with the market and whilst many people seem to be against this the values quoted are a great deal more realistic than those on the old tables of values. A comparison would be the old system of Rateable Values of houses in the UK where the RV was a stated number for a specific house and only re-assessed every ten years and taxes were charged at a standard multiplier.

And property prices continue to fall! If you check our web site and look at the Hot Press Offers you will see a great number of properties with prices that have been reduced from between 15% and 50% with an average reduction of 39% during this last month. These reductions are now beginning to produce sales and, although still not many, there are a few more buyers around than there were a few weeks ago. NEW REDUCTIONS EVERY MONTH!

See in particular the following properties – CTRL + click to follow the link:
4 bedroom house in Bangrak with walled garden and pool. Originally in excess of Baht 10m. Offers now considered.
4/5 bedroom house in Pang Ka with pool – originally in excess of Baht 20. Now available at Baht 13m.
And two more special properties featured at the end of this Newsletter.

If you wish to receive the full version of this Newsletter, please send me and email at hbonning@kosamuiproperties.com

Koh Samui Blog - golf, films and hotels

First of all congratulations to Robin and Sue at The Waterfront in Fisherman’s Village for achieving 56th place in the worldas reported by Trip Advisor Travellers Choice 2009 survey for Best Bargain hotels and 6th place in Asia! Also 9th place in Asia for Best Hidden Gems. Sala Samui Resort & Spa and Tongsai Bay made 9th and 10th respectively in the World in the Best for Romance category.

Samui is into High Season now and we must watch and see how the tourist arrivals stack up. Certainly some businesses are trying to encourage people to come to the island.

Bangkok Airways have their monthly Jazz Concerts at Park Avenue at the airport and now we have the 1st Annual Samui Film Festival – details of both are shown below.

Also this month we have the inaugural Queens Cup Golf competition at Santiburi Golf and Country Club from the 13th and the Press Release is included below.

An interesting comment from Centara Hotels reported below. It is a common assumption that in the bad times hotels must cut their rates to stay competitive and I have touched on this in previous Newsletters. Hotels certainly come out with attractive special offers on a limited basis so as to maintain their rack rates. If you read the article below Centara admit that the number of guest has fallen but they have maintained their rates and that their returns are still competitive. There have been studies within the hospitality industry, mainly aimed at city centre business hotels that confirm this, but it seems it applies just as much to resort hotels as well. It is very tempting to reduce rates in the bad times against the competitive set to increase occupancy but the study shows that this ultimately has a negative effect on the bottom line.

However you must also read between the lines. What are they not saying? Accor for instance have just announced a 9.3% drop on Revenue for the first quarter and 9% drop in sales for the second quarter. The consequences of that are reduced spending. The hotel group is cutting 2009 spending on renovating hotels by 170 million euros to 315 million, lowering support costs by 80 million this year and 45 million in 2010, and reducing operating costs by 120 million this year. Fewer guests mean fewer staff; renovation and improvements deferred which has a knock on effect to other industries. Everyone if tightening their belts and rightly so.

And property prices continue to fall! If you check our web site and look at the Hot Press Offers you will see a great number of properties with prices that have been reduced from between 15% and 50% with an average reduction of 34%. These reductions are now beginning to produce sales and, although still not many, there are a few more buyers around than there were a few weeks ago. NEW REDUCTIONS EVERY MONTH!

If you would like to receive the full monthly Newsletter, please email me at hbonning@kosamuiproperties.com or visit our web site at www.kosamuiproperties.com

Koh Samui Electricity Costs

In these troublesome economic days it is worth looking at how money can be saved in running your home. Apart from the “green – environmental” issues, which I do not dismiss but are not the theme of this article, it is what can be done to reduce monthly running costs? The main bill we get on a monthly basis is for electricity and often the one that produces the highest number of complaints, particularly on managed developments. Taking your electrical supply direct from the Provincial Electricity Authority (PEA) for single phase supply the basic charge depends on your contract. Because many properties are owned under company names the supply rate is that of a Small Business. As most people use more than 150 kWh per month there is in practice no difference to the Residential Rate. Usage as measured by the meter is then multiplied by the appropriate rate and to this is added a fuel cost factor – this varies from time to time based on the cost of production such as oil prices – and is currently 0.9255 Baht per unit. Add VAT @ 7% and that is the total bill. Fairly basic stuff.

For an average bill the gross unit rate will work out at between about 3.30 and 3.60 Baht per unit. Many developments and some individual houses have 3-Phase supply. This is calculated in pretty much the same way but the bill is more complicated because there are different readings for Peak Hours and Off Peak Hours supply yet for most properties the rate is the same unless an option for “Time of Use” metering has been taken, but once taken you cannot switch back to Normal Rate metering. The current basic rate for Normal Use is Baht 2.4649/unit. Added to this is a Service Charge of Baht 228 a fuel surcharge - 0.9255 Baht per unit and VAT. The final unit rate works out at about Baht 3.75.

Why then people ask do managed developments often charge higher unit prices? There are a couple of reasons for this. The main one is the loss on distribution. Power is transmitted to the main transformer on site and then distributed to the various properties. Between the transformer and the properties there will be a loss. The transformer may receive say 1000 kWh but the total measured in the property meters may only show 950 kWh. The difference is the distribution loss and needs to be apportioned between the properties. So, one property may show a meter reading of say 200 kWh which at Baht 3.30/kWh would cost 660 Baht but also has to share 200/1000 of 50 kWh or an additional 10 Baht increasing the unit charge to 3.35/kWh.
There are other charges which often come into the equation. Transformers need maintenance and these costs are frequently allocated as a cost on the electricity bill. Whether they are allocated as a proportion of properties supplied or apportioned according to usage is a matter for the management contract. The wires from the transformer may also need attention from time to time and these costs need to be apportioned as well. Transformers and wiring do have life spans and at some time will need replacing so it is not unusual to see a sinking fund built in to the costs to provide future capital for renewal.

Finally there is a cost for the management of these issues. Someone has to check the meters, calculate the bills and collect the money. This is usually provided for as a percentage of the total bill.

Different projects carry out these allocations in different ways. Some include the costs as described above whilst others separate out managements and sinking funds costs. It is therefore important to know how these costs are dealt with in the management or service contract that is signed on purchasing a property.

Reverting to how I started this article. Identifying the big energy users in your home and controlling them sensibly can make a big difference to your energy bills. There are obvious savings to be made by controlling the use of air conditioning both in the hours it is run and the temperature it is set at. Surprisingly a not so obvious high user of power is a pool pump which can easily use 1,500 kWh per year which alone can add Baht 500 a month to your bill. Reducing the cycle time for the pump to the minimum required to keep the water clean can save money. Refrigerators are the next biggest user of electricity so minimising the time the door is left open will help. Simple things such as leaving the television on standby will use about 5kWh per month. The table top water boilers seen everywhere are extremely inefficient in normal use as they continually boil water even when not required. Energy saving lights benefit in operating at a lower temperature so reducing cooling requirements but also produce the same amount of light using far less power – 20-30% less than standard light bulbs. The initial costs are greater but with lifetimes of 8 to 15 times standard incandescent light bulbs they have significant cost benefits. They are not however trouble free. They do not re-act well to being switched on and off in a short space of time and this can lead to a significantly shorter lifespan – as much as an 85% reduction. These bulbs also contain Mercury which can complicate their safe disposal.

Saving money or just being “Green” – it is up to you.

Another comment on Foreign Exchange. Buy Baht here. In the last month I have checked the exchange rates being offered by UK banks and the Post Office against rates quoted by the banks here. As an example on 12th June the Post Office was offering Baht 52.3653 for one Pound and Nat West would only have given you Baht 50.4410. Siam Commercial Bank would have given Baht 54.58875 for notes and Baht 55.57 for Telegraphic Transfers.

A visiting land Officer in Phuket made a rather controversial statement that Thai Spouses owning land on behalf of their foreign husbands was not allowed and in such cases the land title would be with drawn. This obviously caused alarm which was unnecessary as the statement was made in clear contravention of a Supreme Court Ruling in 1999 that provided the funds used to purchase the land were solely the property of the Thai spouse then such ownership was legal. This is why a joint declaration to that effect is required where land is being purchased by a Thai spouse. Further clarification has been made by the Land Office and is reproduced below confirming this.

And property prices continue to fall! If you check our web site and look at the Hot Press Offers you will see a great number of properties with prices that have been reduced from between 15% and 50% with an average reduction of 34%. These reductions are now beginning to produce sales and, although still not many, there are a few more buyers around than there were a few weeks ago. NEW REDUCTIONS EVERY MONTH!

If you would like to receive the full monthly Newsletter, or require advice on acquiring property in Thailand please send me an email at hbonning@kosamuiproperties.com

Koh Samui Hotel Deals and How Big is Your House?

Tourism is down and hotels are cutting their rates both in Koh Samui and Bangkok. However, you will notice that this is done in a subtle way by offering limited promotions rather than a general reduced rack rate. Hotel room rates are very customer and travel agent sensitive and whilst modest increases year on year are accepted by clientele, major changes need to be on the back of a renovation or some other good reason to justify them. Therefore to increase the value of your hotel it can take a few years to achieve a higher Average Daily Rate and hoteliers do not want to take a step back by dropping the rack rate. Hence, limited period promotions. Despite the numerous promotions around the “big boys” obviously see a future in Koh Samui as Park Hyatt and Conrad are still building and Banyan Tree have quietly made good progress with their development to the north of Lamai which is due to open later this year. Bhundhari Spa Resort and Villas has just opened with 124 more rooms and villas and of course has an “Opening Promotion”. Sala Samui in Cheongmon have a “Sala Fly Free” promotion where complimentary one-way flights are on offer for up to two guests wishing to experience both SALA Phuket and SALA Samui. Nevertheless, reports in The Nation and Samui Express – copied later in this Newsletter – indicate that many hotel owners are finding it difficult to continue in the present market and are trying to sell. Whilst there is undoubtedly some truth in the article it is another example of “parachute journalism” where a reporter takes a snapshot of a situation following a brief visit and produces an article which seems to suggest that the properties being offered have come to the market as a consequence of the current recession. The reality is that every one of the hotels mentioned (in Koh Samui) has been offered on the market for at least the last three years and mostly at prices that were unrealistic then, never mind today.

Usually the owner is well aware that the price being asked is unrealistic but takes the view that somewhere there is someone who may pay it and at that price he will sell, but if it does not sell – so what! And sometimes they are right which makes valuing hotels here so difficult. In one case a beach front hotel was on the market for Baht 50 million. It was available for months, if not years. It eventually sold. Minor renovation – mainly just a paint job – was carried out and the property was put back on the market at Baht 110 million and sold within six months. No logic to this at all. Baht 50 million was good value. Baht 110 million was way over the top. There is another prevalent view that as time has passed, the value must have gone up. In one case a hotel had been offered at Baht 150 million and remained unsold for at least three years – it needed extensive renovation and was not ideally located. Late last year the owner put the price up to Baht 210 million because “it must be worth more now!” In this case it remains unsold and is likely to remain so for the foreseeable future – unless of course “someone from somewhere” comes along and proves me wrong!

How big is your house? Well it can vary depending on who measured it and by which criteria. The RICS produce a Code of Measuring Practice the purpose of which is to achieve consistency between valuers for the purpose of accurate comparison and definition. The Code runs to 42 pages and includes definitions of Gross External Area, Gross Internal Area, Net Internal Area and has a specific section relating to Net Sales Area. Most areas I see published on web sites are poorly defined and if I have the opportunity to check them on site, they are often misleading and often simply wrong by whatever definition used. The Code is extensively used in the UK and it is clear from experience that few people on the real estate industry here in Thailand use it or are aware of it – but then why should they be! There are currently about 60 fully qualified Chartered Surveyors practicing in Thailand and what is encouraging is the large number of young Thai people in the real estate industry who are applying for membership. Hopefully as more qualify and enter the profession, standards and consistency will improve, and even if the Thai valuers produce their own version of the Code for Thailand, then consistency will be achieved for the benefit of everyone. In the meantime, I will continue to abide by the RICS Code of Measuring Practice.

And property prices continue to fall! If you check our web site and look at the Hot Press Offers you will see a great number of properties with prices that have been reduced from between 15% and 50% with an average reduction of 34%. These reductions are now beginning to produce sales and, although still not many, there are a few more buyers around than there were a few weeks ago.

If you wish to receive the full monthly newsletter, please email me at hbonning@kosamuiproperties.com .

Travel to Koh Samui or not? Are you a Savvy Traveller?

“We advise against all but essential travel to Bangkok. British nationals should also review travel plans to other parts of Thailand. British nationals already in Bangkok and other cities affected by the violence are advised to stay indoors and to monitor the media and this travel advice.”

So stated the first paragraph of the Foreign Office warning to travellers during April. The whole text can be seen here.
Having lived, worked and travelled in and out of the Gulf during the first Gulf War and having been here during the Military Coup three years ago, I have seen these warnings on numerous occasions. Quite rightly I suppose governments need to make such statements because there are many people who are not seasoned travellers, who are not street wise and need to have their hands held every time they step outside their own front door. Modern news broadcasting is so extensive, immediate and even pervasive, that anyone with a reasonable amount of intelligence should be able to make a reasoned judgement on whether or not to travel to a certain place. Obviously over the Easter/Songkran weekend, Bangkok and Pattaya were probably not the best places to be, which was a shame as whether you enjoy Songkran or not, it is usually a time for fun and frivolity. With Songkran coming immediately after a weekend, it became of course a very long weekend with Songkran lasting until Wednesday. So now you have five days when people are not expected to turn up for work and the ability to amass a large number of people for a demonstration was that much easier. So was it a good idea to plan the ASEAN summit at this time? It would appear not with the inevitable consequences. As I write this in the immediate aftermath the police water cannon seem to have been replaced by the plastic water guns which have become more traditional during this period and most people have reverted to more peaceful means of enjoying themselves and the crowds are dispersing leaving the political consequences to be decided.

Here in Samui Songkran passed off as usual, a little quieter than in previous years and, as opposed to other parts of Thailand, is over in one day. Apart from Bangkok and briefly in Pattaya, I was not aware of any reports of disturbances elsewhere in Thailand, and even in Bangkok the problems seemed confined to specific areas, which obviously as a foreigner it would be wise to stay away from. The airport was not affected this time although I suppose that would be the main concern of travellers as the ability to travel and the possibility of not being able to travel was uppermost in peoples mind rather than getting caught up in the demonstrations. Certainly most people I know who are regular visitors to Thailand take these events in their stride, but for people planning their annual vacation to Thailand for the first time perhaps, these confrontations will inevitably make them have second thoughts and seek more stable destinations. The consequences for the tourism industry are severe. Job losses in the hospitality sector have been estimated at 275,000 this year based on a predicted 35% fall in tourist arrivals. Hotel occupancy is down. Room rates are being cut drastically and there are some very good deals being offered across the board.

So for the faint hearted, the Foreign Office advice may be one to pay heed to, but for the more savvy traveller the present situation has created opportunities to explore Thailand far more economically than before. Bangkok does not even have to be on the agenda. Koh Samui is accessible internationally from Singapore, Kuala Lumpur and Hong Kong as are other regional airports. For the more adventurous who wish to avoid air travel there is the Eastern & Oriental Express from Singapore through Kuala Lumpur, Penang, Kanchanaburi for the River Kwai and on to Bangkok where you can connect to Chiang Mai or Vientiane.

And property prices are still falling! If you check our web site and look at the Hot Press Offers you will see a great number of properties with prices that have been reduced from between 15% and 50% with an average reduction of 34%. These reductions are now beginning to produce sales and, although still not many, there are a few more buyers around than there were a few weeks ago.

To receive the full monthly Newsletter please email me at hbonning@kosamuiproperties.com

Koh Samui, Songkran, Marina and Sports Stadium

The world economic situation continues to have its affect on real estate globally and unsurprisingly also here in Koh Samui. We continue to see price reductions of 25-30% many of which are due to the fall in the value of Sterling and owners can afford to reduce the Baht price correspondingly and still receive the same mount in Pounds they would have done a year ago. Nevertheless there are some owners who are prepared to go even further and have reduced their asking prices by up to 50% as you will see if you look at our Hot Press Offers here. Having said that the market is not totally dead as we have seen a couple of sales in the last month so there are buyers out there looking to take advantage of falling prices.

Songkran starts on 13^th April so keep those plastic bags handy if you are going out to keep your phone, wallet etc. dry. Samui has a pretty good tradition of keeping it to three days at most. In some parts of Thailand it lasts for seven days! The main day will be Monday 13^th April although anyone venturing out on the Sunday afternoon or evening may get the odd splash and it tends to fizzle out by midday on the Tuesday. The Government was considering banning the sale of alcohol during the Songkran Festival but common sense prevailed. The existing ban on alcohol sales before 11am and between 2pm and 5pm and after midnight is illogical enough in terms of restricting sales. The concentration over Songkran will be enforcement of the drink driving law so beware – there are likely to be more traffic checks wherever you are in Thailand.

I have reported in previous Newsletters on plans for a Marina adjacent to Big Buddha and BBC Café. The soil surveys have commenced and it is expected that the Marine Department will approve the Initial Environmental Examination Report for the Samui Marina by mid to end of March. The next stage is provincial committee approval. For more information on progress and pictures check this web site http://www.bigbuddhamarina.com/index.html courtesy of Mark at BBC Café.

This has nothing to do with Samui but is interesting and worth passing on. We are all aware of the regular nonsense Health and Safety Executive directives that appear in the Press from time to time. Well the UK H&SE have now decided enough is enough and created their own web site to address the many issues of which they are accused. It makes interesting reading and you can see it here. http://www.hse.gov.uk/myth/ .

It would appear that Koh Samui is to get a new Sports Stadium according to the following announcement – “ Welcome to the Home Page of the Samui Sports Stadium, opening soon on the island of Koh Samui, Thailand. The Samui Sports Stadium features 3 large floodlit football (Futsal) pitches and a Multi-Purpose Hard Court for Basketball, Netball, Volleyball++ , a swimming pool and BBQ Area, a children's play area, state of the art facilities and a fully licensed restaurant and bar.” More details can be found on this web page - http://www.samuisportsstadium.com/

If you would like to receive the full Monthly Newsletter, please e-mail me at hbonning@kosamuiproperties.com