The price of property is soaring in Thailand despite laws preventing foreigners owning land.
Since the Asian tsunami struck on 26 December last year, the number of tourists visiting Thailand has fallen dramatically. About a year ago, 192 holiday flights landed at Phuket airport every week – last week that figure was only 35. Hotels are suffering too, with reservations running at well below their usual capacity.
However, while tourists cancelled their holidays and tour operators cut prices, sales of property to foreign buyers have remained remarkably resilient.
“Not one person cancelled a reservation at Royal Phuket Marina,” says Gulu Lalvani, the billionaire founder of the Binatone electronics empire, who is creating a development of waterside flats, villas, shops and restaurants on the island’s east coast.
In fact, since January, Lalvani, who is credited with launching the business career of Sir Alan Sugar, has raised prices at Royal Phuket Marina by 10 per cent — two-bedroom flats start at £137,000 and villas with private moorings rise to £900,000. “Sales have been very good,” he says. “And 65 per cent of phase one is now sold.”
As well as apartments and villas, the marina will have a range of boutiques, bars and cafes as well as upmarket dining rooms. Lalvani’s daughter Divia, who recently sold her stake in Knightsbridge’s Zuma restaurant, is opening her own place here.
Martin Phillips, the managing director of Engel and Voelkers’ new Phuket office, is also optimistic: “The tsunami does not seem to have affected the confidence of serious property buyers at all. The subject hardly enters the conversation, as they recognise that this was a very unfortunate and isolated incident.”
One key fact that could start a property boom is the sudden availability of mortgages for overseas buyers, which started with the launch of a new home loan from the Bank of Bangkok.
Stephen O’Brien of the estate agent Knight Frank, says: “Financing to foreigners up until now was impossible. Those who wanted to obtain financing usually went offshore to their own mortgage lender. This bank product will start a flood of opportunities.”
The bank will lend up to 50 per cent of the value of a property, subject to valuation and status.
It will also allow more of the mum-and-dad investors into the market and will fuel the property boom that we were experiencing well before the tsunami,” he says. “Phuket has also traditionally been seen as a lifestyle market, however, and with the ready emergence of financing, it will generate more demand for affordable products.”
Thai ownership rules have also deterred some foreigners from buying, but O’Brien believes that they are quite straightforward, as long as you deal with a reputable developer. Under the laws, foreigners can own a building on land, but not the land itself.
There are two ways round this: either set up a company registered in Thailand to hold the land, or marry a Thai national.
Foreign buyers can own 49 per cent of the freehold of a condominium project and then buy a lease. However, it is illegal to grant a lease for more than 30 years, so developers sign three 30-year leases on completion, two of which do not come into force until years 29 and 59, thus giving an owner 90 years’ occupation.
Buying a villa is different, as foreigners cannot own land. For about £2,000 and administration costs of £50 a month, buyers can set up a Thai company to own the land and then grant them a lease. On large complexes this is done by the developer, but buyers must ensure that the lessor is a reputable company, preferably listed on the stock exchange.
Lalvani built the marina after persuading the government to cut punitive import duties for boat owners. That tax has now been abolished and Lalvani believes that Thailand can now compete with the world’s other sailing destinations.
It is already a top destination for golfers, and Phuket is home to one of Asia’s best golf resorts: Blue Canyon, designed by the Japanese architect Yoshikazu Kato. It is a tough test, demanding accurate tee shots across ravines, lakes and through narrow gaps in the rubber trees.
As its name suggests the other course — the Lakes — is awash with water. In fact, 17 of its holes include such hazards. The second and 18th holes are among its best known. The second, a short par three, has an enormous green, which is 57 yards across.
The last hole gives drivers a terrible choice as a single tree splits the fairway. The ambitious shot gives players a perfect view of the green, but playing safe can leave you with an awkward shot from a rough slope.
Whatever happens on the course the clubhouse, with its option of Thai or Western food, is a relief from the sweltering heat that starts at 7am and barely cools.
When the resort was developed 15 years ago, homeowners were given life membership of the golf club with tennis courts, swimming pool and Jacuzzi and discounts in the spa and salon. However, as properties have changed hands, owners have retained their membership, so new buyers must pay their own fees. The initial charge is 1.2m baht (£15,000) for a family of four and annual fees are a nominal 4,500baht (£600).
Property on the vast estate is 10 minutes drive from the island’s international airport, which is 16 hours from Heathrow (via Bangkok). It varies from three-bedroom condominium apartments to vast villas.
Prices for secondhand condominiums start at about £181,000. However, while the golf course, clubhouse and surrounding parts are immaculate, some of the properties seem neglected. Many sit empty and unloved and potential buyers should ensure their problems are only superficial.
On the Andaman Sea shore, a small development of 26 apartments is being built around a swimming pool, openair dining room and bar. Owners will have access to a concierge style service in which food and wine can be delivered to their apartment.
The development is being marketed by Engel & Voelkers and prices for a two-bedroom apartment start from about £170,000.