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Market Watch - Page 20:

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How We Should Protect The Property Cash Cow.



The property market in Phuket is unique, rare and endangered. For the duration of the real estate boom of the past six years, its growth has been driven almost entirely by cash. Finding similar models, though they do exist, is hard. It's a true idiosyncrasy, even within other markets in Thailand.

While Bangkok, Hua Hin or Pattaya, for example, are driven more from the domestic market along with some foreign investment, our island is a virtual cash cow when it comes buying villas, condos and lifestyle investments.

With the market softening over the past 12 months, together with a spate of new projects entering the arena, new options are emerging for buyers.

Banks in Thailand are not allowed to loan money to foreigners. Over the years, this regulation has plagued the market, especially for buyers looking for investment-grade properties.

Overseas hot spots, such as London, Australia and even Hong Kong and Singapore, allow the leveraging of units with the ability to obtain financing.

For resort properties in Spain in areas such as the Costa Del Sol, buyers can secure financing over a long term with a small down payment.

The winds of change have arrived with the Bangkok Bank out of Singapore offering foreigners the option to finance freehold condominium units. There are some restrictions, including an age limit of 65 years and that terms not exceed 20 years.

Loans may be secured in three currencies: Euros, US dollars and Singapore dollars. Applicable interest rates depend on the relevant currency. Security for the loan will be on the condominium title.

Since loans for condominium units will be secured on titles, only 49% of the freehold units in a development will be open to this type of loan. Leasehold condominiums are not eligible as they lack the title



documents required for loan security.

Processing of documentation early on may be done through domestic branches of the bank, but the final processing approval will be with Bangkok Bank's Singapore office.

There are a number of requirements in documentation so it's best to check with the bank on exactly what is required.

While this is a positive move, it addresses only the condominium market and not the luxury villa developments so prevalent in Phuket.

Seasoned speculators in property anywhere in the world look to get the most from their money; leveraging up property with manageable debt is a good use of funds that allows investors to spread risk across a wider range of properties within their own portfolios.

No foreign buyer financing is yet on offer for the ailing leasehold and villa products in the market. With some notable exceptions, including Laguna Phuket's successful Dusit-hotel-managed projects and a handful of developer's self-financed offers, there is little diversity or choice except to part with the entire purchase price of your dream house.

While Bangkok Bank's offering is a breath of fresh air, in order to attract a larger and more diverse base of customers from abroad, Phuket needs more financing options.

New initiatives are often borne as a knee-jerk reaction. Perhaps a downturn coupled together with rising inflation will cause financial institutions and the government to reduce restrictions on foreigners obtaining loans and recognize the importance attracting international investment.

Our industry, along with tourism, is a bright spot on a cloudy horizon and there's potentially a much wider audience interested to invest in Phuket. As for now, when buying that next piece of paradise, you'll still be asked to "Show me the money".





Bill Bamett is Managing Director of C9 Hotelworks a Phuket hotel and residential consulting firm With more 20 years experience in the region, he has played an active role in some of the island biggest develovments.

Articles: 2009

Koh Samui's Luxury Market Emerges


The Next Big Thing In Ocean Front Real Estate


Predicting The Year Ahead - 2009


Phuket For Sale


Is Phuket Property Too Expensive


Is Phuket Ready For Fractional Ownership?


Koh Samui's Emerging Luxury Market Part 2


The Winds Of Change


Phuket Luxury Villa Market Update Part 1




Archived Articles: 2007 - 2008


Krabi - On The Edge Of A Boom


Khao Lak, Back To The Future


Rental Income - Investment Rent And Raves


US Financial Crisis - Living The Sub-Prime Life


Hotel Branded Realestate, Battle Of The Brands


Aesthetics - Out With The New, In With The Old


Rental Property - Plus & Minus, Buying A Hotel Unit


Local Communities - Cables Gone Wild


Agent Commission, The Low Down About Paying Up


Aesthetics - Bold Designs Keep Boredom At Bay


Phuket - The Next Big Property Trend 2007


US Financial Crisis - Clouds The Property Horizon


Pre-plan your purchase, and prevent future pain


Vietnam, Too Fast Too Soon


Timeshare, High End Fractional Ownership Matures


Budget Hotel Brands Shake Up The Scene


Re-Inventing Patong


Bali, (property) Supply Surges Ahead


Property Developers - Number Crunching Pays Off


Phuket, Battle to preserve the beaches


Aesthetics - Designing For Success


Phuket Luxury Villa Market Update Feb 2009


Low Season - Cyclical Cynics



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