Pattaya Property

Vice President of Pattaya condo project “The Beaches” arrested on fraud charges

Source: Pattaya Daily News

On the morning of 5th June 2009, police arrested a Thai-English national, Mr. George Carl Morgan (40), on fraud charges. He is accused of issuing fake documents to customers of “The Beaches” condominium project in Jomtien and embezzling deposit payments to the tune of 100 million baht.

The arrest was confirmed at 11:20 am by officers of the Crime Suppression Division under the leadership of the Deputy Commissioner, Police Colonel Supisal Pakdee Narunart, and Police Colonel Pornsak Surasit. The half-Thai, half-English suspect, who resides at 45, U-thong Nok, Susit District, Bangkok, was arrested at Arina Gerden Village, Soi Samakki, Pak-Glet, Nonthaburi with warrant no. 1094/2550 on charges of issuing fake documents. He had managed to evade arrest until now by moving from place to place.

Mr Liakat S. Dhanji [40], the Canadian director of the development company behind the project (Triple Eight Property Company Limited) has issued separate proceedings against Mr. Morgan who, since 14th January of this year, has been the vice-president and marketing manager of the condominium project, claimed to be the biggest of its kind in South-East Asia.

Police said that Mr. Morgan had presented himself as a respectable person and had used his privileged position in the company to offer customers half price deposit deals. The value of the paid deposits is believed to be about 100 million baht.

Most of the customers affected are from Sweden and Russia and police have announced that anyone who has deposited money with Mr. Morgan should check to see whether their payments have been registered in the company records. Should anyone discover that their reservation has not been registered, they should contact the police immediately.

The 800 room, 20,000 million baht project started in 2005 and is located at the Najomtien area of Jomtien Beach. Prices for apartments are between 5 and 20 million baht and construction is expected to be complete by 2012. The project has been popular among speculators, both Thais and foreigners.

George Morgan, Vice President of Pattaya condo project “The Beaches” arrested on fraud charges

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Plenty of bargains are there to be had in Thailand’s condo market

Bangkok Post May 17, 2009

Among other opportunities are properties held by cash-strapped foreigners looking to bail out on their investments.

Thailand’s lingering political problems have led to a significant slowdown of new and second-hand condominiums, but prices have not dipped substantially, says James Pitchon, executive director of CB Richard Ellis (CBRE).

The discounts offered by those eager to exit the market are between 10% and 15% below the market’s perceived average price - or what buyers think a building is worth versus what developers say it is. By contrast, condo prices in Singapore and Hong Kong are down 30%.

New launches are down, of course, given the poor economy, particularly in the luxury condominium sector, with the supply of completed freehold condominium in downtown Bangkok standing at about 55,000 units.

Mr Pitchon says the slowdown is healthy for the market given the present demand. However, he warns that 2009 is really a stress test for condos, because as many as 11,000 to 12,000 units that were begun two or three years ago are being completed within this year. “When it comes to transfer of title we’ll find out if the original buyers were speculators, end-users or investors.”

Interestingly, despite the Songkran unrest, CBRE concluded transactions within the luxury segment in which it specialises both during Songkran week and the week after.

The turmoil in fact turned into a catalyst for people who were thinking about getting their money back. Although there were buyers and sellers prior to the unrest, the gap between them was often too wide. Right now, if a unit owner is willing to offer a 10-15% discount he should be able to attract buyers.

“We have seen foreigners who bought off-plan wanting to resell and willing to discount to their purchase price or, in a limited number of cases, to below their purchase price,” says Mr Pitchon.

Thai buyers, he says, certainly see these discounts as an opportunity. “I think this will probably be a continuing trend - foreigners wanting to exit the market, particularly those who are speculating. They need the money - a lot of people’s investment portfolios are down.

“There is a view that that prices are not going to rise, so their choice is to get out,but to transfer title means paying the full remaining 70% of the purchase price. There is no financing for that for foreigners.”

However, CBRE is seeing a very different attitude among Thai buyers. Thais are currently receiving almost zero interest on bank accounts and there are very few alternative investments within the country. More importantly, most of the money in Thailand stays within Thailand, with very little capital flight.

“So the options are you can keep it in the bank, put it in the stock market or other financial instrument, or put it in property. And right now with deposit rates close to zero, even a yield of 3-5% is better than receiving nothing in the bank account.”

Also helping the property market is a real worry in the world that inflation might start to head up as the economy recovers. Although the effect of the global financial crisis is deflationary, there are those who believe that there is a danger that the amount of money being thrown into the financial system may result in inflation. This view is mostly held among older investors who remember the 1970s.

“To build new will cost more in an inflationary environment, and property is still seen as a hedge against inflation provided you are not buying into a bubble market,” says Mr Pitchon. “CB Richard Ellis does not believe that Thailand is in a bubble market,” he added.

A good example of a bubble market is London, where property prices in Kensington and Chelsea increased by 450% from 1995 to 2007-08, and since then have dropped by 10-15%.

However, in Bangkok in many cases projects that are 10 years old have not even seen a doubling of prices. While the prices of new buildings and units have increased, this usually reflects better quality, as many units now come fitted with floor covering, kitchens and air-conditioning and are not bare shells as in 1995-97.

But with so many new units nearing completion, some developers could come under pressure to discount prices of their unsold inventory when they complete their buildings.

“But each developer will make their own decision. Whether to try and hold, whether to reduce pricing, hold and rent it would depend on the developers and their relationship with the banks. There is pressure from developers’ inventories, but we don’t know what the outcome is going to be yet.”

Aside from this, Mr Pitchon pointed to speculators who baulk at completing transactions when they see that prices are not rising. Some foreign speculators have shown willingness to settle for getting some of the downpayment back, and the buyers clearly benefit because they would be able to purchase units just prior to completion at the prices of two to three years ago.

“This will not happen at every building,” cautions Mr Pitchon. “It will depend on the level of speculative buying or pressure on the developer to sell inventory.”

However, this pressure is still unlikely to lead to a significant drop of prices in better-quality building, as it would apply only to the few units that have to be resold or sold at discounts by a developer because of the circumstances he faces.

Plenty of bargains are there to be had in Thailand’s condo market

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Thai investors look to overseas property

Source: The Nation

An increasing number of Thai investors are taking an interest in property projects overseas, in the light of declining asset values and the prospect of a global economic recovery next year, international property agency Jones Lang LaSalle (Thailand)’s managing director said.

Thai investors have shown a strong interest in expanding their investments in commercial buildings in overseas markets including the UK, Japan, Hong Kong and Singapore, Suphin Mechuchep said.

“If they wait to buy at the bottom price in the second half of this year, they stand to lose a business opportunity because investors from other countries also sense a bargain. As a result, Thai investors are keen to buy or take over commercial assets overseas,” she said.

Investments made now could generate average returns of 7 to 10 per cent a year, she said, adding that their break-even period should also be shorter.

Suphin pointed out that Central Group invested in CentralWorld and @Office on Ratchaprasong Junction during the financial crisis of 1997. Central Group now sees an average return on investment from the project of 7.5 to 8 per cent a year.

Quality Houses took over the QH Lumpini office building in 1998, shortly after the crisis. Its return on investment averages 7 to 8 per cent. Returns on investments made during economic slumps tend to be bigger and come in quicker than investments made in normal periods, Suphin said.

Meanwhile, Tonson Property, a development and investment arm of the Rattanarak tycoon family, has set aside Bt500 million a year to invest in commercial properties such as hotels, resorts and office buildings in both the domestic and overseas markets.

The Rattanarak family holds a major stake in Bank of Ayudhya.

The company’s managing director, Kanis Saengchote, said now is a good time to invest in property and commercial buildings because asset values are between 30 and 50 per cent lower than in normal periods.

“We are negotiating with French, British and Middle Eastern investors to raise money through property or other funds. This will be combined with our capital to expand our investments,” he said.

TCC Land, the property arm of beverage tycoon Charoen Sirivadhanabhakdi, has set aside Bt4.5 billion to invest in commercial property overseas this year, with a focus on the retail and hospitality businesses, deputy CEO Soammaphat Traisorat said.

Early this year, the company took over a hotel in New Zealand worth nearly Bt1 billion.

“This is a good time to invest, as we can bargain for a discount of more than 30 per cent compared to last year,” he said.

TCC Land owns a number of hotels in Thailand and overseas.

Thai investors look to overseas property

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Thai contractors prepare for good times

Source: The Nation

Mega-projects expected to boost growth this year and next

Thailand’s leading construction contractors expect to gain an increased share of work from the government’s new Bt500-billion mega-projects, especially the new rapid-transit systems, and this will drive their revenue growth this year and in 2010.

Italian-Thai Development’s president Premchai Karnasuta said his company expected to pick up about 40 per cent of the work in constructing the new rail routes. Bidding will open this year for contracts worth nearly Bt100 billion - the first part of the total Bt500-billion cost of the mega-projects to be built over the next five years.

Italian-Thai is expecting new construction contracts worth Bt200 billion this year, and part of this will come from the mega-projects, especially the new rail routes, he said.

At present, the company has won the bidding and signed contracts for projects worth Bt50.7 billion. It has offered what it claims are the lowest bids for further projects worth Bt101.2 billion, and expects to sign contracts for these later this year. It is also involved in the bidding process for yet more projects worth Bt110.2 billion.

“We expect to win more than a half of the [projects valued at] Bt110.2 billion, which are currently in the application process,” Premchai said.

In the construction business, Italian-Thai Development ranks in front of other contracting companies listed on the Stock Exchange of Thailand. It expects to record a net profit this year, from the both private and the government projects, after suffering a net loss Bt2.65 billion in 2008, he said.

Ch Karnchang’s executive-board chairman and chief executive Plew Trivisvavet said his company had a backlog of signed construction contracts worth a combined Bt12 billion. It expects to win new contracts to help build the new rapid-transit rail routes that will increase the value of its projects on hand by nearly Bt10 billion this year, he said.

In addition, it has other contracts waiting to be signed. They include the first contract for construction of the Purple Line rapid-transit route, the construction of an underground pedestrian tunnel at a Bangkok intersection, a small power plant in Ayutthaya’s Bang Pa-in district and the Nam Bak Dam in Laos.

As well, Ch Karnchang is planning to bid for many other projects, including the Red, Blue and Green lines, as well as road-construction jobs in India and Vietnam.

The company believes the Purple Line contract will be the most profitable one, even though CKTC - a joint venture between Ch Karnchang and Tokyo Construction - had to lower its project price in the most recent round of negotiations with the Mass Rapid Transit Authority.

Plew said the worsening local economy would not affect Ch Karnchang because the government would implement many measures to shore up the economy and maintain employment. He expects the company’s revenue and net profit to surpass those of 2008, which was a difficult year because of volatile construction-material prices.

This year, prices seem stable, which makes for easier management.

Last year, Ch Karnchang and its subsidiaries posted consolidated revenue of Bt14.51 billion, down from Bt14.92 billion in 2007. But the group recorded a higher net profit of Bt544 million, up from Bt14 million in 2007.

With more government projects open for bidding this year, a number of securities brokers are recommending “buy” on the stocks of construction contractors, especially Sino-Thai Engineering and Construction, Ch Karnchang and Syntec Construction.

Siam City Research Institute has maintained a “neutral” recommendation for the entire contractor sector, saying delays in government spending on infrastructure projects, while limiting the amount of construction work done in the short term, will keep the sector’s earnings stable during the first half of 2009 and lead to a possibly significant rise in the second half.

The institute believes that Cabinet approval of four electric train routes - the Purple, Red, Light Green and Green lines - will assure the contractor sector of continuous revenue from this year until 2013.

The broker believes the number of construction projects will increase during the second half of this year, starting with the Purple and Red lines, worth Bt36.05 billion and Bt8.7 billion, respectively. It says a start on the infrastructure mega-projects should boost confidence among private investors.

Siam City Research Institute’s top pick in the contractor sector is Ch Karnchang, for which it has made a “buy” recommendation with a fair value of Bt4.50. It says the firm’s earnings are expected to improve this year on the strength of its backlog, which is worth as much as Bt12 billion.

There is also the strong possibility of new small-power-producer projects worth Bt18 billion, a planned tunnel beneath Charan Sanitwong Road, and the construction of the Purple Line. These will contribute to Ch Karnchang’s 2009 earnings, which are expected to grow by 4 per cent year on year to Bt13.87 billion, as well as strengthening its earnings over the next three to five years.

Asia Plus Securities’s head of research Therdsak Thaveeteeratham agreed that construction-material costs were no longer a concern for the sector, which absorbed high steel and oil costs last year. He also echoed Siam City Research’s view that the number of new construction projects would increase in the second half of this year.

The sector is likely to record combined net profits of Bt1.17 billion this year, marking a turnaround from last year’s loss of Bt1.44 billion, he said.

Therdsak’s top picks for the sector are Sino-Thai Engineering and Construction and Syntec Construction.

Sino-Thai is a major contractor with expertise in the construction of power plants, petrochemical plants and waste-management systems. Its financial situation is strong, with cash reserves at the end of last year totalling Bt974 million - higher than its short-term borrowing of Bt769 million. Thus, Sino-Thai’s debt-to-equity ratio is as low as 0.2 times, leaving the firm well prepared should any liquidity problems arise this year, Therdsak said.

Sino-Thai’s backlog is worth Bt12.09 billion. This year, it is expected to post an operating profit of Bt285 million and pay its first dividend to shareholders. Asia Plus gives it a fair value of Bt3.83 per share.

The broker said Syntec’s expertise was mainly in high-rise buildings, condominiums and hotels, which provided higher profitability than other types of construction projects.

Most of its customers are listed firms, which carry a lower risk of exposure to bad debts. The company’s financial status is strong, with cash reserves of Bt431 million.

This year, Syntec is expected to post an operating profit of Bt227 million, with revenue from its backlog last year totalling Bt6.2 billion. Asia Plus gives its stock a fair value of Bt0.57 per share.

Thai contractors prepare for good times

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Property Perfect bets on recovery by Q4

Source: Bangkok Post

Expressing confidence that government stimulus measures will bring a recovery in the property sector by the fourth quarter, Property Perfect Plc (PF) plans to launch eight projects worth at least 10 billion baht within the first half of this year.

The Perfect Masterpiece Rama IX, with 319 upscale single houses, will be launched officially on May 20.

“The lowest point of the political crisis has passed,” said chief executive Chainid N. Sirimanee.

“Signs of economic recovery in Asia have been clearer, starting from China to other countries. We believe consumer confidence will resume, following an economic and property market revival late this year.”

With the BTS extension across the Chao Phraya River from Sathon to Thon Buri area scheduled to start on Friday and and the Airport Rail Link on Aug 12, half of the company’s new developments stand to benefit because of their locations.

On May 20, the company will launch two projects in the Rama IX area near the Airport Rail Link: The Metro Rama IX with 472 townhouses worth 1.7 billion baht, and the 3.27-billion-baht Perfect Masterpiece Rama IX with 319 single houses.

In Thon Buri, PF will offer 321 townhouses in The Metro Sathorn worth 1.27 billion baht, and Metro Park Sathorn phase 3 with 2,200 condominium units worth 4.4 billion baht.

Another four projects will be single houses in the Ratchapreuk area, on Ramkhamhaeng Road and Sukhumvit 77. It will also launch 367-unit Metro Sky Ratchada condominium phase 1 worth 911 million baht on Ratchadaphisek Road near the MRT.

“Some of these projects were postponed from the first quarter and late last year due to poor market sentiment,” Mr Chainid said. “We will launch all of them in the second quarter for sale throughout the second half when we believe the Thai economy will recover.”

By the end of the year, PF expects to realise 7 billion baht from housing sales and 1 billion as extra income from selling plots of land to schools. They include 900 million baht from 400 rai to the University of the Thai Chamber of Commerce and 100 million baht from the sale of 50 rai to another university.

“Selling land plots to educational institutions does not generate much profit but it can add more value to our remaining plots close by,” he said. The company is considering apartments for rent and dormitories that would be sold to a property fund, as PF did single houses for rent in the Ekamai-Rarm Intra area.

The company is also in talks with some investors to develop an international kindergarten and primary schools in three locations - Ramkhamhaeng, Rattanathibet and Pak Kret. It expects to complete an educational master plan by the end of the year.

PF also has another master plan for community malls. It plans a joint venture with Singaporean partners. One potential plot covers 25 rai near the intersection of Sukhumvit and Bang Na-Trat roads, where it plans to develop a community mall and condominium worth billions of baht next year.

“Singaporean partners’ views on Thai politics have improved and they will be back to invest again by the end of the year if the political and economic situation clearly recovers,” said Mr Chainid.

The partners postponed a joint-venture plan from late last year due to uncertainties in Thailand.

PF shares closed on Thursday at 3.34 baht, up two satang, in trade worth 101.7 million baht.

Property Perfect bets on recovery by Q4

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Thailand’s first property, land and inheritance tax legislation?

Source: Bangkok Post

Apparently with the backing of Prime Minister Abhisit Vejjajiva, Finance Minister Korn Chatikavanij has embarked on what critics might call a foolhardy but noble endeavour: to introduce the country’s first property, land and inheritance tax legislation.

According to latest reports, the draft bill crafted by the Fiscal Policy Office has been completed and will soon be put before the cabinet for consideration.

In defending the legislation, Minister Korn reportedly said the government’s intention in introducing such a law was to create social justice and fairness. But he noted that the law - if it ever makes it through parliament - would not become effective this year or the next.

In essence, the law seeks to impose taxes on ownership of land and property whether it is for living, commercial, industrial or agricultural purposes. Ownership of unutilised land may face higher taxation than utilised land, as the law is intended to encourage owners to make use of the land in a productive manner rather than leave it idle.

The most important feature of the law is that the taxes will not go into the national coffers but to local governmental bodies such as municipal or tambon administration organisations, which will be tasked with tax assessment and collection.

In return, the taxes collected would be used for the development of the communities, for investment in public utilities and infrastructure which consequently would increase the value of the property and land already taxed.

There is no denying that such legislation has been long overdue in this country, where most of the land is owned by a very small number of landlords who include politicians, senior government officials, big business operators, influential figures and aristocrats, while the majority of the people are landless. Many rice farmers whose forefathers owned the land have sold their farmland to pay mounting debts and are today toiling on the same plots leased from their creditors.

The acute problem of landlessness among impoverished farmers has driven many of them to resort to encroachment of forest reserves in search of land to make a living, thus exacerbating environmental degradation. Worse still, the encroached land plots may be used for a few years of farming after which they end up in the hands of the landlords, with the farmers embarking on further encroachment for new farmland.

Minister Korn and his backers should be commended for their courage in attempting to introduce a law that is sure to face stiff resistance from the landlords, even within the government itself.

The minister certainly realises that several governments over the past several decades had tried to push for such a law and failed. Some of them backed off mid-way after confronting hostile resistance from powerful elements. It will be an uphill task for Mr Korn to solicit support for such legislation even among cabinet members, many of whom are known to be landlords themselves.

This anticipated resistance should not serve as a reason for backers of this controversial legislation to back off if they truly believe that the law is meant for the good of the people as a whole, the landlords included, and if the legislation has been drafted to bring about social justice and fairness.

At least Mr Korn and his supporters can rest assured that they have the moral support of the landless and of those who aspire to see this long overdue problem of social injustice finally and properly dealt with.

Thailand’s first property, land and inheritance tax legislation?

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Phuket development shifts to private islands

Kanana Katharangsiporn

Phuket’s property development boom is expanding to four small nearby islands with total project investments of around 20 billion baht, says Risinee Sarikaputra, head of research at property consultant Colliers International Thailand.

“It’s a trend toward private islands,” she said.

“World celebrities, Hollywood stars and people in the ultra high-end segment love privacy and prefer buying a resort on a private island where no one can interfere with them. That’s why many property developers move to small islands.”

She said the largest investment on Phuket’s neighbouring islands is from the huge Indian conglomerate Tata Group’s Taj Hotels Resorts and Palaces on Koh Lone, located on southeastern Phuket near Chalong Bay.

The Indian-based hotel firm is investing almost 10 billion baht to develop Taj Exotica Resort and Spa on 125 rai, comprising a 100-room hotel worth two billion baht to be operated late next year. It will also include 19 villas priced between 128-384 million baht a unit, which is the first time the Taj has ever sold villas.

The second largest is an investment of Prime Minister Samak’s nephew Dilokpol Sundaravej and a Canadian partner that is developing Jumeirah Private Island Phuket worth around six billion baht on Koh Raet northeast of Phuket.

Another investment is on Koh Maphrao where a British investor late last year started developing The Village worth two billion baht. Of the total 62 villas for sale at prices between 18-45 million baht, 17 units are remaining.

This year there will be a development of a hotel and villas worth around two billion baht on a 180-rai site on Koh Mai Thon, southeast of Phuket. The owner is a group of local Phuket investors that are asking for a Board of Investment approval to allow the investment of foreign investors.

Ms Risinee said this trend also emerged in small islands in the Gulf of Thailand, including Koh Kood near Koh Chang where Six Sense opened Soneva Kiri resort. On Koh Tao near Samui an overseas fund will start an investment. and new hotel developments have started on Koh Phangan.

In Phuket, there are at least 17 residential projects in the pipeline with a total of 969 units worth more than 20 billion baht which will be completed in the next few years.

Land prices on Phuket’s west coast with good sea views climbed by 30-40% year-on-year but there is no availability of such plots of land for future development.

Land prices per rai in the western area average 35 million baht while they are 17 million baht a rai in the eastern area. However, the selling price of residential units in the east is about 130,000 baht per square metre while those in the west are 100,000 baht per sq m.

The trend of residential projects in Phuket is for projects integrated with hotels and managed by the same group that manages the hotel and the letting of property.

She added that Phuket tourism would soon vie with the Malaysian island of Langkawi as two new marinas will be added to the current three to offer a total of 800 yacht berths.

“Phuket is having high season all year long as tourists from the Middle East fill in during the low-season period between June and September, a time of hot weather in their region.”

Phuket property is also attracting South Asian investors. Last week institutional investors from Bangladesh and Pakistan with total funds of at least 10 billion baht asked the company to seek Phuket property projects in which to invest, she added.

For more information on our private island near Krabi, click here.

Phuket development shifts to private islands

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Developers eye change in plan, to boost sales

The Nation

Firms mull ways to lure buyers amid likely rise in interest rates

With the slight success of the government’s economic package and a rise in interest rates on mortgage loans likely, developers are mulling a change in strategy for the second half.

The burden on home-buyers will likely increase 5-6 per cent on rising rates and soaring home prices.

This will dampen their interest in property investments in the second half of the year. Keeping this in mind, developers are busy devising ways to stir things up on the sales front.

Land and Houses is planning to stick to its strategy of offering houses at originally stipulated construction costs, in order to lure buyers. It has priced houses at Bt3 million to Bt5 million. The developer expects the low-cost houses and government tax incentives to boost sales and help the company meet its sales target of Bt21 billion this year.

Land and Houses director and senior executive vice president Adisorn Thananun-narapool said high inflation and the expected rise in interest rates were not the only factors that would lower home-buyers’ purchasing power. Worsening consumer confidence will also play a major role in keeping them from house hunting, he said.

Asian Property Development plans to slow down sales of condominium projects for which the company has sought environmental-impact-assessment licences. This is because condominiums take longer to build.

“This strategy will protect customers in case the projects do not pass the assessment or there is need for a change in building plans,” a company source said.

The company is buying construction materials in advance and speeding up projects, in order to keep costs down. It recently put up 23 projects for sale and has also launched three-storey modern townhouses and single-detached houses at competitive prices.

LPN Development is planning to concentrate on low- and middle-income customers. The company is confident of meeting its income target of Bt7.5 billion to Bt8 billion this year. This is because 90 per cent of its projects undergoing construction are reserved.

It plans to launch a new Bt5-billion project in the Rama IX Road area, which will help its presales reach Bt11 billion for the whole year.

Meanwhile, Property Perfect is speeding up new project launches, raising prices and lifting up margins.

It plans to factor in increased construction costs this month and in the second half.

The company expects the move to push buyers who are otherwise reluctant to go for a house now to rush in and snap them up before prices rise.

The company predicts presales of Bt10 billion for the entire year, up Bt1 billion from previous projections, with the launch
of seven new projects worth a combined Bt20 billion.

It looks set to achieve presales of Bt3.2 billion to Bt3.3 billion in the first five months of the year, up Bt2 billion from the same period last year.

Developers eye change in plan, to boost sales

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Legal pitfalls of purchasing a brand new condominium

Source: WERACHON LAW OFFICE / Pattaya Today June 17 2008

THERE are pros and cons of buying a condominium unit in a brand new project, a brand new product is always good. However, it is advisable not to use your brand new brain to buy a condominium in Thailand because a brand new brain means that it has never been used. In Thailand, you have to use your brain more than you normally used it in your own country.

The pros for buying the brand new project are:

1. The starting price of a condominium unit in a brand new project is quite low comparing to the finished project. Many foreign buyers of a brand new condominium unit can easily make good speculative profits in the short term especially for a renowned project or well positioned.

2. Some demanding buyers feel obliged to check the construction from the foundation until finishing stage to see if the quality is in compliance with the specification.

The cons for buying the brand new project are:

1. Some developers may have problems with their contractors which may cause a delay in construction, and some unscrupulously construct more buildings in the common areas.

2. Some developers hand over condominium units, which are defective or units where the quality has not complied with the specifications.

3. If you have to make a down payment for one or two years, it is risky that a change of the economic situation could adversely affect the high profile developer. As we are aware “Everything is impermanent”. The cost of construction depends on many factors which sometimes suffer from an “Act of God” or “Force Majeur” which are beyond our control. Many developers become bankrupt by the laxity of their financial management, and a project becomes a “Non Performing Loan” (NPL) with a bank, you will be involved in a time consuming judicial process. You may not draft a contract requiring the Developer not to become bankrupt. The good developer should have a good financial record, e.g., Rattanakorn or Viwtalay who always keep their promise as goodwill which is their great assets.

4. Some crooked operators in the guise of developers may easily set up a “paper company” and put banners in an empty plot of land with a cabin sales office. They may arrange for the classy grand opening parties with good food and wine with a fancy show and a rhetorical MC to get reservation money from gullible foreigners and then disappear. If the crooked developers are foreigners, you cannot find out their whereabouts easily, because they just pack their bags and clandestinely leave Thailand.

We strongly believe in the old maxim that “Forewarned is Forearmed”. To avoid a legal dilemma, it is advisable to comply with the following advice:

1. It is advisable to have a due diligence search for the corporate and financial information of the company who is the developer of the project. In this regard, you may retain a qualified lawyer and accountant to check the corporate documents and balance sheets. You may verify who are the shareholders and directors, and some prudent buyers even check the credit background of each incumbent director. If the development project is financially supported by a bank or financial institution, you may discuss this with the bank or finance company concerned.

2. Most of good projects will have a signboard showing the details about the registration number of the land title deeds (Cha Nod) and a construction permit of the project. It is advisable to retain a qualified lawyer to check the details of the land with the Land Office to verify if the land for the project actually belongs to the developer. The mortgage on the land should be also checked.

3. With the title deeds and the construction permits, some prudent buyers check all the common areas and utilities to ensure that the developer will not use for its own commercial purposes, e.g., parking lots, recreation areas, club houses and swimming pool, etc. There are many developers using the common parking lots for the weekend market.

4. The developer of the project has to apply for the construction permits with the “Civil Works Office” (Sum Nuk Ngan Yo Tha) of the Pattaya City Hall. If the project is of more than 80 units, the developer will have to get a clearance certificate from the Office of the Environmental Protection, and it is advisable to check these permits have already been granted to the developer.

5. You should get a clear confirmation from the developer that the percentage of foreign ownership is not more than 49%. You cannot register the ownership of the condominium unit under your name if there is more than 49% foreign ownership in your project. This restriction is currently applied without exception. If the foreign ownership is more than 49%, many foreigners circumvent the restriction by setting up a Thai company to own the condominium. Incorporation of a company will be definitely burdensome for you to absorb expenses for incorporation plus preparation of annual balance sheet.

6. To register the ownership of the condominium unit under your name, you have to show the documents with the Land Registrar proving that the money you pay for the condominium unit is from your offshore source. Accordingly, you have to bring the foreign currency into your bank account in Thailand and convert it into Thai currency. The receiving bank will issue a “Certificate of Remittance” or “Thor.Tor. 3 (Sam)” if the remitted amount is more than $20,000. This Certificate of Remittance or Thor.Tor. 3 has to be produced to the Land Registrar for registration of ownership under the name of a foreigner and given to the Immigration Office for one-year visa. Many foreigners mistakenly transfer money directly into the bank account of the developer, and in this case, these foreigners cannot get the “Certificate of Remittance” or “Thor.Tor. 3” from the bank. Consequently, these foreigners cannot register the ownership of the condominium unit under their names. You should keep all remittance documents in good order to be able to justify all transactions with the “Anti Money Laundering Office” (AMLO) for repatriation of money to your country once you sell your condominium unit in the future.

7. The payment for the price of the condominium unit should be made by bank draft or cashier checque payable to the name of the developing company, and it is strongly advisable not to pay by cash.

8. The Consumer Protection Act requires that a contract to buy and sell a condominium unit must comply with the requirements under the “Announcement of the Consumer Protection Board” which ensures all clauses are fair for all buyers. There is a standard form drafted by the Consumer Protection Office.

9. The contract should be signed by with the authorized director of the developing company. However, as most of the authorized directors do not sign the contract in your presence. How do you know that it is the real signature? This problem can be solved if you make every payment by cashier checque or bank draft payable to the company who is the developer. If the company cashes the checque, the company cannot deny or raise the point that the signature in the contract is not the real signature of its authorized director.

10. The standard contract specifies that the buyer should share with the developer only the transfer fee of 2% from the appraised price. The income and business taxes including stamp duties should be solely absorbed by the developer. Most adhesion contracts drafted by developers always contain clauses in favor of the developers for their non-liabilities for breach of contract. You should have a proper English translation of the sale contract to compare with the standard form drafted by the Consumer Protection Office.

11. Once the construction is completed and approved by Pattaya City Hall, the developer will have to register the Condominium Juristic Person with the Land Office to separate title deeds (Cha Nod) for all units. At this stage, you will make a final payment by cashier checque or bank draft to the developing company at the Land Office in exchange for the title deed (Cha Nod) and house register book (Tabien Ban).

12. After the transfer of ownership, the co owners of condominium units in the project may join together to set up a committee to look after the management. The committee should control all the common areas and utilities to ensure that the developer will not abusively use these common areas for their own purpose. The committee may call for the general assembly of all co owners to draft a constitution and by-laws to protect the rights of all co owners.

The above protective measures are the minimum prudence you should have if you wish to avoid the legal dilemma in this land.

You should not be fatalist to believe that your fate is dependent upon only an “Act of God” or “Force Majeur”.

We believe in the axiom that the “Power of Knowledge” can save you from all dilemmas in this land.

By: Mr. Ponthep Werachon, Thai Solicitor & Mrs. Darunee Werachon, Thai Solicitor & Accountant of WERACHON LAW OFFICE, 448/17

Thepprasit Rd, Pattaya, 038 300 967, 081 423 4255
e-mail: thai(at)werachonlawyers.com,
Reading room about Thai laws www.thaisolicitor.com

Legal pitfalls of purchasing a brand new condominium

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Tourism driving sales of resorts close to capital

Source: Raimon Land/Bangkok Post

The tourism industry continues as the main driver behind interest in Thailand’s resort condominiums, with holiday destinations close to Bangkok receiving the most attention, especially from international buyers lured by attractive prices.

Thailand’s seaside resorts; namely, Pattaya, Phuket, Koh Samui and Hua Hin, where more than 30% of the country’s luxury condominium inventory is now located, have experienced 9.5% annual growth in international arrivals since 2003, and these strong figures are supporting resort property expansion.

A surge in condominium launches during the second half of 2007 reversed a slowdown that began in mid-2006 and propelled the year-end tally to 2,415 new units. Of these, 67% were located in Pattaya, 26% in Hua Hin, 4% in Phuket and 3% on Koh Samui.

Pattaya’s strong performance was boosted by impressive economic expansion along the eastern seaboard and its proximity to Bangkok and the new Suvarnabhumi Airport.

Luxury condominium launches in Pattaya are trending towards both inland projects with sea views and those with beachfront locations, a reflection of buyers seeking affordable properties regardless of whether or not they have direct beachfront access.

Located three hours southwest of Bangkok, Hua Hin remains attractive due to its relaxing atmosphere, more affordable prices, appeal to Thai buyers and faster development completion schedules. Hua Hin sprang back to life in 2007, with the introduction of 640 units from prominent Bangkok developers, many of whom are launching new projects this year.

Lacklustre demand in Phuket and Koh Samui was linked to hesitant developers baulking at external factors such as currency exchange rates and possible amendments in the Foreign Business Act to make residential property rights more restrictive for non-Thais.

Should the government’s policies on foreign ownership change to allow a higher percentage of foreign ownership, developers will likely introduce more projects in Phuket and Koh Samui to satisfy international demand.

In spite of the deceleration in the rate of new resort development launches in 2007, combined sales value leaped 12% year-on-year to 17 billion baht on the take-up of 1,789 condominium units.

Pattaya’s luxury condominiums sold 544 units worth 6.6 billion baht in 2007, compared to 1,609 launched, for an average of 12.3 million baht.

Hua Hin captured 6.3 billion baht on the sales of 979 units, averaging 6.4 million baht. These projects received strong interest from local investors leading to a majority of the 640 newly launched units being sold.

Limited supply on Koh Samui led to low sales last year, with only 52 units selling for an average of 15.6 million baht. The purchase of 214 units in Phuket generated 3.2 billion baht for an average price of 14.8 million baht.

The average price per square metre (psm) in Pattaya climbed 10% over 2006 to 96,332 baht psm, the highest among all resort areas, followed closely by Phuket at 95,181 baht. Samui units averaged 87,420 baht while those in Hua Hin jumped 14.6% to 72,063 baht.

Of the total resort condo sales in 2007, 27% of the units sold were priced over 100,000 baht psm, and 21% between 80,000 and 100,000 baht psm. Units in the 60,000 to 80,000 baht psm range commanded 29% while those under 60,000 baht made up 23% of the total.

It should be noted that very few of the beachfront or seaview developments are now priced under 100,000 baht psm, and sales at the top 10 most exclusive projects averaged 123,715 baht in 2007.

Of all developments launched since 2003, 1,814 units or 23% were completed as of December last year. Of the remaining 6,177 units, 3,632 were still under construction and 2,545 units were in the planning stages.

These figures demonstrate that there is still very little supply in completed condominiums, as well as a limited number of completed projects in Thailand’s resort locations.

This situation has lifted resale prices, allowing developers to increase the prices of units in new projects while opening the door for investors seeking impressive short-term capital gains.

Foreign buyers accounted a significant portion of condominium purchases in Thailand’s resort areas in 2007, though the most active markets have changed.

Russians rose from outside the Top 10 to head Raimon Land’s 2007 buyer chart, followed by Thais, British and Australians.

Germany and China also moved higher while the US and Swedish markets started to slide.

Russians, Thais and British lead Pattaya’s property market, and Phuket is commanded by Russians, British and Australians. Hua Hin remains a predominantly Thai destination, with emerging international interest now making up 20-30% of acquisitions.

In 2008, look for more players and new groups of buyers in Pattaya, with limited completed stock driving up prices. Hua Hin will continue to exhibit strong local demand, with prices increasing in both resale and off-plan projects.

Phuket and Samui will remain vulnerable to external factors. New supply in Phuket will push demand, and look for new areas on the mainland adjacent to the island, now being referred to as Greater Phuket, to open up. Koh Samui will remain a niche market leaning toward branded real estate.

This is the fourth and final article based on research by Raimon Land in ‘Condominium Focus Thailand: Update of Inner-city Bangkok and Key Resort Areas’. Nigel Cornick is Chief Executive Officer of Raimon Land Plc.

Tourism driving sales of resorts close to capital

Technorati Tags: Tourism driving sales of resorts close to capital

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Legal pitfalls of purchasing a brand new condominium

Tourism driving sales of resorts close to capital

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