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History tells of Phuket boom and bust cycles, this one dating to 1997

Phuket Condo Buyers Face High Risk, Consumer Meeting Told

Friday, April 19, 2013
PHUKET: Buyers of condominiums on Phuket are being warned of ''high risk'' and being advised to check their contracts and their rights.

There have been ''lots of complaints'' about developers who failed to deliver on schedule, the Director of the Damrungtam provincial complaints office, Praphan Khanprasang, told a meeting yesterday.

Vice Governor Somkiet Sangkaosutthirak said he wondered whether investors in condominiums on Phuket were ''concerned in the same way that we are.''

''I am not sure that business people are looking at Phuket in the right way or the wrong way,'' he said.

Regulations governing condominiums and their sale needed to be overhauled, the meeting at Phuket Provincial Hall in Phuket City was told.

Phuket Chamber of Commerce Director Keangsak Suksomboon said that regulations required parking spaces to be provided for 30 percent of condos in any development.

With everyone on Phuket forced to use motorcycles or cars because of the lack of public transport, the figure should be more like 60 to 70 percent, he said.

Thai law also meant that condominium developers were required to finish construction then take the chanote land title to the Phuket Titles Office before the accommodation could be registered.

In most cases, sales these days were taking place off the plan, before completion, Khun Keangsak said.

Where banks had provided loans to developers and held the title as collateral, complications sometimes ensued, he said.

Vice Governor Somkiet said he was concerned about the effect the number of condos could have on the economy of Phuket.

Figures from a recent newspaper report suggested that 15,500 condominium units worth 34.6 billion baht have been launched on Phuket as of last month.

Seventy-five percent have been sold, according to the Agency for real Estate Affairs. Sales average 1630 units a month, so the inventory in the market would take about 2.3 months to sell out.

However, many of the sales are believed to be to low-start off-the-plan buyers who face larger payments later in their purchase contracts. Some purchasers are known to have ''bought'' several condos in the hope of making a profit on resale.

Industry experts are concerned about whether resale values will be as high as investors expect and whether some developments could be forced to convert to tourist accommodation as a stop-gap measure.

Comments

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Real estate developments (or size of which), especially commercial real estate developments, in other countries are primarily dictated by parking.

Parking requirements are typically based on a formula.

Development in Phuket has proceeded in a haphazard fashion and has resulted in it's thoroughfares choked with vehicles parked in the streets because little or no parking has been made available onsite to businesses and residential developments.

Legislation should be enacted to remedy this situation and qualified people should be hired to replace many of the current people in the Awbitors and Thesabahns who are not to qualified to perform this function.

It incomprehensible that the Thai government has not made more efforts for foreigners to purchase condominiums within a more transparent, secure manner. After all, a registered condominium is the only real estate investment that foreigners are allowed to purchase in Thailand.

Why haven't surety, performance bonds and title insurance been made available to allow foreigners to enter into a purchase with some degree of safety?

Due to the legal restraints on foreign ownership of property in Thailand, it could be argued that condominiums are severely overpriced in relation to similar purchases in other countries where those restraints do not exist. My feelings are if foreigners must pay a premium for a condominium, at least make the purchase more convenient and risk-free.

If Thailand wishes to charge developed-world prices, it should deliver developed-world quality services and a suitable legal structure to facilitate foreign investment.

Posted by bustersizemore on April 19, 2013 20:52

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There is nothing safer than buying a condo (i.e. for a foreigner) in Thailand (in comparison to other forms of property investments) for the following reasons:

i) It is required to use a standard SP Agreement which comes from the GOVERNMENT itself. Any changes to it can only be made in favor of the BUYER otherwise the provision is deemed to be null and void. Therefore, no hefty forfeiture clauses for instance are allowed to be included in the agreement for the disadvantage of the buyer.

ii) Buyer/consumer protection: A Condominium can only be registered if the project land is a chanote deed which is not only the most accurate but also the only land document actually providing the owner with ownership rights.

iii) A condominium can only be registered if secured access (either by public road or private land with recorded servitude) is provided to the project land.

iv) Each buyer receives by law a say in the project management; voting rights in the condominium managing juristic person are attached to each condominium unit.

v) All marketing materials used by the developer form automatically part of the sp agreement and are binding upon the developer.

vi) The applicable condominium act includes various safeguards in favor of the condo unit buyers;

vii) A condominium unit may be passed on in case of its owners death (subject to conditions);

viii) Each condominium unit owners receives a title deed.

So, if you are worried about condo buyers, then what about villa and apartment buyers?

i) All the potential issues applying to a condo purchase apply also to land or apartment leases and building purchase and in addition:

(a) Residential land, building and apartment leases are available for 30 years only (plus renew option) which is very short considered that a) they are sold for the same price as freehold and b)in comparison to other SEA legislations.

(b) There are unresolved issues with respect to the lease renewal and inheritance of leases;

On top of that there seems to be a problem with the land titles in Thailand. It is simply a joke that the legitimacy of titles which have been issued DECADES ago may all of a sudden be questioned and at the same time no title insurance available.

So what about looking into all property laws and improve such to internationally recognized minimum standards instead of condos laws only...the ones which are providing at least a bit of security to buyers!!!???

Posted by Joss on April 19, 2013 21:38

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At least someone seems to be taking an interest in protecting buyers and altering regulations. How long this will take is anyones guess.

As for 30% parking, that explains why this place is pure chaos.

Posted by Tbs on April 20, 2013 11:11

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"There is nothing safer than buying a condo (i.e. for a foreigner) in Thailand (in comparison to other forms of property investments".

Registered condos are the only form of true real estate ownership (other than egregious leasehold interests) available to foreigners. Other real estate investments in Thailand are a real gamble for any foreigner.

There are no safety devices such as performance bonds to insure that the project will actually be completed after the developer has taken deposits.

There are no surety or fidelity bonds to insure against loss of homeowners assoc funds due to fraud, conversion, etc.

There is no title insurance to insure that title to the project (or individual units) will not be subject to change or revocation without due compensation. It has become quite common to hear about the validity of chanot deeds , nor sor 4 and nor sor 3 gor being in question years after they were issued.

There is (to my knowledge) little or no guidelines and/or enforcement to ensure that the association budgets for common area expenses is adequate and fully paid on all units until sale by the developer.

As far as the condominium act, st'd gov't SP agreement and gov't enforcement of those legal safeguards that are mentioned - Those issues are subject to a whole different discussion.

Posted by bustersizemore on April 20, 2013 17:23

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@ Joss: all good points and valid conclusion.

For me reasons not to buy into the property market here.

Posted by stevenl on April 20, 2013 18:35

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@Tbs:

Someone should care about ALL property investors in Thailand!!

An investment in Thailand should be possible in accordance with internationally recognized standards.

Just to mention a few points which should be look at and considered:

a) Longer (residential) leases up to 99 years registered;

b) Codified transfer of leases in case of a lessee's demise;

c) Simplified and mandatory escrow schemes i.e. in case of off-plan purchase;

d) License requirement for developers;

e) Simplified visa regulations as well as visa for property owners;

f) Title deeds for buildings;

g) Revision of the land title system;

h) 100% foreign ownership in condo projects in tourist areas;

i) Unconditional inheritance of (freehold) condo units;

Posted by Jonny on April 20, 2013 20:48

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@Bustersizemore

"There is (to my knowledge) little or no guidelines and/or enforcement to ensure that the association budgets for common area expenses is adequate and fully paid on all units until sale by the developer."

There is BUT AGAIN only for condo buyers and not for investors in apartment or villa projects!

The condo act clearly stipulates that the management fees for unsold units shall be paid by the developer and must not be pro-rata allocated towards the owners of units.

Posted by Frizz on April 21, 2013 15:57

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The only purchase I'd ever consider these days, would be a turn-key. And even then there's always the possibility the land title could be questioned years down the line.

The photo shows a development on the bypass road that was abandoned long before I first arrived on these shores, back in 96. Does the editor have any information about that? I'm sure there's a long and sad story to tell.

Posted by agogohome on April 25, 2013 12:25

Editor Comment:

I was told it was a result of the 1997 Asian financial crisis. But I don't know for sure. Could have been an earlier crisis.


Friday September 18, 2020
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