Is It Worth the High Risks of Investing in Real Estate in Thailand?
In 2022, Thailand became one of the top 10 most popular destinations for Russians relocating abroad. The year before, it ranked 20th. Many choose to buy homes in Thailand either as a place to live or as an investment. In this article, we’ll explore the risks associated with purchasing real estate in Thailand.
Thailand is a leading country in Southeast Asia, boasting some of the region’s most important ports. Bangkok International Airport serves as Asia's largest transit hub, and numerous global corporations have offices in the country. Thailand also has one of the highest GDPs in Southeast Asia, thanks to its booming tourism industry, active trade, and developed infrastructure, making it a prime interest for international investors.
Content:
- Benefits of investing in real estate in Thailand
- Risks associated with purchasing real estate in Thailand
Benefits of Real Estate Investment in Thailand:
Favorable exchange rate (Thai baht to Russian ruble): The Thai baht currently holds a favorable exchange rate against the Russian ruble, making property purchases more attractive for Russians. Historically, 1 Thai baht equaled about 2.5 rubles (e.g., in 2021). Now the exchange rate stands at 1 Thai baht to 1.62 rubles.
Stable Thai baht to USD exchange rate: Despite internal political changes, the Thai baht remains one of the world’s most stable currencies. For example, in 2010, 1 USD was worth 33.37 Thai baht, and by November 2022, it was 37.44 Thai baht.
Rising property prices: Real estate prices in Thailand, especially in Bangkok and resort areas, are on the rise. New land price assessments set for January 1, 2023, are expected to drive prices even higher. Additionally, infrastructure developments like the new high-speed train lines connecting Bangkok’s three airports (Suvarnabhumi, Don Mueang, and U-Tapao) further increase demand.
New real estate projects: After pandemic-related delays, many developers have resumed work on new projects, often offering discounted off-plan properties. These incentives, along with favorable payment plans, attract foreign investors.
Political stability: Thailand has not imposed sanctions on Russia, and direct flights between the two countries have resumed. Foreign investors, including Russians, face no restrictions or negative perceptions when buying property in Thailand.
Advancing digital economy: Thailand is embracing new technologies with the launch of innovation incubators and digital platforms. As a result, it is a top destination for digital nomads, offering fast internet, an excellent climate, and a high-quality lifestyle at a low cost. Phuket, in particular, ranks among the top 20 cities for freelancers, and the government is considering creating a special IT zone on the island.
High real estate demand: Popular destinations like Phuket and Koh Samui guarantee year-round demand for rental properties. The limited land available for development, combined with national reserves and restrictions on building large structures, ensures a growing demand and rising property prices.
High returns: Real estate investments in Thailand yield annual returns of around 5-8%.
Low taxes: Thailand’s low property taxes make it an attractive investment option. Depending on the appraised value of the property, residential property taxes range between 0.03% and 1%.
Risks When Purchasing a Home in Thailand
It’s essential to address the potential drawbacks. There are still limitations on foreign ownership of real estate in Thailand. Until recently, foreigners were not allowed to purchase land, and could only lease it for long terms. However, in September 2022, the Thai government introduced a new long-term resident visa, which allows holders to own land under certain conditions.
Another restriction is the 49% ownership limit for foreigners in multi-story buildings and housing developments, which remains in effect.
Thailand currently rates several common real estate risks, such as depreciation or a developer failing to meet agreements, as low. Government investments in large infrastructure projects, especially in transportation, are expected to drive real estate prices even higher. Developers are also subject to strict regulations by law.
To mitigate risks related to natural disasters, having the right insurance in place is highly recommended.
Before the COVID-19 pandemic, Thailand was a top destination for foreign property buyers. The country’s stable economy, rising real estate prices, and strong returns on property investments continue to attract international buyers. Now is a good time to enter the Thai real estate market, as many potential buyers, particularly Chinese investors, have yet to return following the pandemic.