The Most Profitable Destination for Investment in Thailand: Phuket

The Most Profitable Destination for Investment in Thailand: Phuket

Why does real estate in Thailand, particularly in Phuket, yield 7–12% per year, while property in Turkey and other popular destinations offer significantly lower returns? What strategies do experienced property investors in Thailand follow? Here, we share insights from the experts.

CONTENT:

• Why Thailand?
• Economy
• Tourism
• Taxes
• Real Estate
• How to Profit from Real Estate in Phuket?
• Investor Strategies

WHY THAILAND?

Today, there are numerous opportunities to invest in foreign real estate and earn passive income through rentals. If you're considering such investments, it’s essential to base your decision on facts, analytics, and figures rather than emotions when choosing where to buy.

Economy

One key indicator of potential investment profitability is the stability of the national currency.

For example, by the end of 2021, the Turkish lira plummeted by 70% against the U.S. dollar. As of 2023, the lira continues to lose value. For property investors in Turkey, this translates to a loss in real income, even if nominal rental income in the local currency remains unchanged.

The Thai baht, on the other hand, is one of the world’s five most stable currencies, making it a safer choice for investors.

Tourism

Thailand surpasses Turkey and even the UAE in tourist numbers, as travelers visit the Kingdom year-round.

In Turkish Mediterranean cities, the tourist season lasts only 5–6 months, ending with winter’s arrival. In the UAE, the best time for tourism is from March to December, with extreme heat during the remaining months.

In contrast, Thailand enjoys a 12-month tourist season, divided into high and low periods.

• High Season: From October to May, Thailand attracts tourists from the post-Soviet states, America, and Europe—regions experiencing bad weather during this time. Hotel occupancy rates range from 80% to 95%.
• Low Season: Tourists from Australia and Southeast Asia flock to Thailand, with many Chinese visitors year-round. For Chinese travelers, a trip to Phuket is as common as a vacation in Hawaii for Americans.

China’s proximity to Thailand greatly benefits its tourism sector, as Chinese tourists are known to spend generously, often renting high-end properties.

Phuket, Thailand’s most popular and developed resort, welcomes 10 million tourists annually. On average, each tourist spends $250 per day, with a large portion going towards renting apartments or villas.

Experts predict that with the lifting of COVID-19 restrictions, tourist numbers will continue to rise. Thailand's Ministry of Tourism forecasts that by 2024, the number of visitors will reach 13–14 million annually, with continued growth in the following years.

Taxes

Before calculating the income you can generate, it’s important to understand the mandatory expenses. These include taxes that all foreign owners of apartments or villas in Thailand are required to pay.

Home Purchase Tax

In Thailand, buyers pay the government between 1% and 2% of the apartment or villa’s value, depending on whether the property is purchased under freehold or leasehold.

In comparison, this tax rate is 4% in Dubai and Turkey. According to Turkish law, both the buyer and seller must pay a 2% tax, but in practice, the seller’s tax is typically included in the property price, meaning the buyer effectively pays the entire amount.

Annual Tax

The maximum annual tax rate for foreign property owners in Thailand is 15%.

For comparison, in Turkey, rental properties that generate up to 6,600 Turkish liras per year are exempt from income tax. However, if the income exceeds that amount, the owner pays between 15% and 40% in taxes, depending on the income level. Property owners in the UAE do not pay annual property tax, but they do make annual contributions for the maintenance of the residential complex. These funds cover the upkeep of common areas, maintenance, repairs, and upgrades to amenities like gyms and playgrounds. The exact amount is set by the developer and depends on the apartment’s size and the rates of the specific complex, averaging between $14.6 and $58.7 per square meter annually.

Real Estate in Thailand

According to the Central Bank of Thailand, property prices in the country have been increasing by 4–5% per year over the past decade.

Tourist hotspots like Phuket are seeing even faster price increases. Phuket’s real estate market is particularly balanced and developed, making it an attractive destination for property buyers.

Phuket also benefits from restrictions on high-rise construction. Buildings on the island are limited to seven floors, and large complexes with 400–500 apartments are rare, unlike in Pattaya, where such developments are common. This restriction attracts wealthier tourists and positively impacts rental occupancy and income from local properties.

How to Profit from Real Estate in Phuket?

Resort properties offer the most lucrative investment opportunities in Thailand. Among these, the best option for investors is to buy apartments managed by a large hotel chain for the following reasons:

• Hotels have extensive customer databases and partnerships with travel agencies worldwide.
• Professional management increases income and reduces costs.
• Tourists are willing to pay more for well-known brands.

Investor Strategies

Due to low taxes, affordable maintenance costs, and high year-round occupancy rates, apartments in both secondary markets and new developments in Phuket generate higher returns compared to other popular tourist destinations like the UAE and Turkey.

Investors generally use three strategies:

1. Buy-to-sell during construction:
   This strategy involves purchasing property at an early stage of construction and reselling it before the building is completed. In 1 to 3 years, you can potentially double your investment.

2. Buy-to-rent for the long term:
   This reliable strategy involves buying an apartment and leasing it for the long term. Apartments in Phuket can generate an annual income of about 7% of their value. In this case, property management is handled by a specialized company, which takes care of finding tenants and maintaining the apartment, resulting in minimal risk.

   Many developers offer a buy-back option, allowing the developer to purchase your apartment at the end of the lease period. However, it’s entirely up to the owner whether or not to sell.

3. Buy-to-rent-to-sell:
   This strategy yields the maximum return when:

   • You purchase the property during the early construction phase, securing the lowest price.
   • You lease the property through a hotel chain.
   • You sell the property after 5 years, when its value has increased by 20–25%.