How to Buy Property in Phuket
In our previous article, we considered the various options available for foreigners to own property in Phuket. In this article, we will consider the various ways to buy property.
Buying property is the biggest investment most people will make in their lives. It is therefore important to get it right. Buying property is fraught with difficulties at the best of times and even more so when the investment is made in a foreign country. You not only have to deal with the legal difficulties but also language and culture barriers. In addition to this, countries like Thailand have variable standards of workmanship and reliability. You need to be sure you make the right choices.
There are plenty of estates agents or property agents around Phuket. These agents are mostly looking to serve foreign buyers. Very few Thai people would ever think about using an estate agent to find a property. That is just not the way they do things in Thailand. It is just as easy to deal direct with the seller so why pay extra to a middleman.
Estate agents do provide a service. They can save you legwork, help you deal with the legal aspects and are especially useful if you are arranging the purchase from abroad. As long as you understand that they will charge for the service and you are happy with the fees. There are plenty of good estate agents around. You can find them on the internet and most of them have offices in the tourist resort towns. There are also a few dodgy agents about so be on your guard.
Generally, if you are in Thailand yourself and you are willing to do a bit of legwork, then you will save money by buying direct from the seller.
Do not be surprised if Thai acquaintances seem surprisingly keen to help you with your property search by taking you around housing developments. The developers usually pay commission to anyone who brings a buyer so your Thai friend is probably on for 2-4% of the property price. In fact, if you have a Thai friend that you trust, you could let them collect the commission and agree to split it. Have them go around the developers first and check what commission rate they will pay.
This is the simplest and most popular way to buy a property. Developers are completing new housing projects in Phuket all the time. Whether they are houses or condominiums, there is such a wide range of supply that properties are available for just about every taste and budget.
Some of these housing developments are small, containing only a few properties. Others are large housing estates with hundreds of properties. Price ranges can start from 1-million baht for a small townhouse or condominium to tens of millions of baht for luxury homes with their own pool and near the beach.
You can simply go for a drive around the area of the island where you want to live and almost certainly, you will find housing projects with new homes for sale. Just go into the sales office and ask what they have to offer.
Many of these developers also have stalls in the major shopping malls. Rather than driving yourself, you can just visit your local shopping mall and see the plans and deals available from a range of developers. They will then arrange to take you to see the projects that interest you.
These housing projects usually have gated security and perhaps some communal facilities such as swimming pool, fitness room or social club. The purchase may therefore include an annual maintenance fee for upkeep, garbage collection, etc. This is usually only a few thousand baht a year.
Some of the bigger developers offer finance packages for the purchase. The majority of developers expect you to pay the full amount up front. It is difficult for foreigners to get mortgages from banks so you will probably need to have the full amount in available funds.
This is the same as buying new, except you are buying the property before they build it. That is, you look at the plans, select your plot of land and the design of property. The developer will have models of the project and property designs to give you a good idea of what you are buying.
This is the option I would recommend for people who want a good deal for their money and can wait for the property to be completed. Project completion times are typically around 2 years, although of course this can vary greatly.
The developers are willing to give very good deals to people who buy off-plan because you are effectively subsidizing the development of the project. You will make a down-payment and then probably monthly payments during the development of the project. Usually, there will be a final payment on completion of the property.
Many Thai investors buy off-plan properties with the intention of making a good profit by selling the property once the project is complete. This has been a successful tactic in the past but these investors may be disappointed in the current economic climate. You may think that will mean they will reduce their asking prices but that is rarely what happens. If Thais are not getting their hoped for asking price, they will generally just sit on the property until they do eventually get the price they want, even if that means waiting years.
Some developers are willing to make customized changes to the property design to suit the off-plan purchaser. Others are not willing to change plans because savings of scale are how they maintain their profit margins.
The big risk with purchasing off-plan is you cannot see what you are buying. Thai building standards are variable and there is no guarantee your property is going to finish looking like the beautiful model you saw in the sales office. There is also no guarantee they are going to deliver the property in the timescale they promise. That is why I always recommend going with an established developer if you are buying off-plan. You are looking for a company with a proven track record of delivering other projects on the island.
Buying Second Hand
The second hand buy from owner property market in Phuket is a little odd.
Thai buyers, and many foreign buyers, would much prefer to buy a new property. Therefore, the second hand market tends to be much slower. Second hand properties are sometimes on the market for years. The values of second hand houses do not go up at the rate you might expect. It is the land prices in Phuket that are really booming rather than the value of the property on the land. In fact, sometimes the buyer will purchase a house, then knock it down and build a new house on the land.
Sometimes, Thais will purchase a property, move in and then immediately put it up for sale. They are not actually actively trying to sell the property. They have simply declared a nice big price at which they would be willing to sell. If someone passes by and agrees to meet the price then they will sell. In the meantime, they happily live in the property.
So your first challenge is to find a seller who is genuinely looking to sell rather than just chancing their arm.
You can use estate agents or search for properties on the internet. However, the generally accepted approach is to choose your preferred area and then drive around looking for the 'for sale' signs. You then call the owner, look at the property and start negotiating.
Build it Yourself
This is certainly the most challenging approach but if you do it right, it can also be the best deal and you can design exactly the house you want.
The first challenge is to purchase or lease a suitable plot of land. The land will need road access and electricity supply. A water supply is preferable but you also have the option of digging a borehole down to the water basin and then setting up a water pump. The lands must have a suitable title deed for property development, preferably a Chanote title. You will still need to submit your development plans to the local authority for approval.
Of course, you won't actually be building it yourself. You now face the biggest challenge -- finding a reliable building contractor. A personal recommendation or a well-established local firm is your best bet. Even then, you will need to monitor the work on a regular basis. It really helps if you know something about the building trade and if you can visit the site on a regular basis.
It is also advisable to sign a well-written contract with the building contractor. The contract should include clear target dates and penalty clauses if the targets are not met. You should not pay the full amount up front but should pay in stages as the development takes place.
Perhaps the biggest challenge of all is finding an honest and reliable lawyer. We all know the jokes about lawyers and they apply just as much in Thailand as anywhere else.
There isn't actually any reason why you definitely must have a lawyer. Thai property laws are not so complicated that you cannot do the contracts and property registration yourself, although you will certainly need a Thai helper. However, the extra complications that face a foreigner often mean that you will want a lawyer in situations where most Thais would not bother and would do the work themselves.
I'm afraid the same advice as to finding a good building contractor applies. A personal recommendation or a well-established local firm is your best bet. You should agree the services required and the fees upfront.
Phuket Property Market - With a worldwide recession looming, we take a look at the possible effects on Phuket's property market.
Property Ownership Options - An overview of the different options to own a property in Phuket.
How to Rent Property in Phuket - We take a look at the long-term property rental market in Phuket.