THE ARRIVAL OF EXPAT PROPERTY FINANCE

STUART FOULKES
HARPPREET SAJJAN.

Property has been a good longterm investment in Thailand with double-digit returns despite a rocky economic and political a rocky economic and political climate. This has attracted many foreigners despite the difficulties in owning and obtaining financing for property in Thailand. Only Thai nationals can fully exploit the property market as they face few restrictions on what they can own.

Most receive better purchase prices on the property and banks stand ready to issue them mortgages. Foreign buyers' options are usually limited to condominiums, with no ability to own freehold land.

Typically they buy the condominium outright, as Thai banks restrict lending to foreigners. Furthermore, even if you have the money to buy in a development you like, there is a limited foreign ownership quota of 49% of the saleable space. If the developer has already filled its quota you simply will not be able to purchase.

Traditionally property finance comes in three forms:

• New local Thai mortgage: Using a local bank to fund your property purchase.
• Re-mortgage: Releasing equity on an existing property.
• Asset Finance: Providing cash to a bank and receive a loan back. New mortgages are usually freely available in your home country but in Thailand are far less common. Few expats have secured mortgages and you can never commit to a purchase until your mortgage application is successful. The property in question may even have been bought by another potential buyer during the application process.
  However, there is now a new conceptual facility that has given more hope to expats. A New hedge fund loan allows first-time buyers to purchase property in Thailand without the need to use a local bank. A straightforward applocation procedure is in place and can be completed within Thailand.

So how is this done?

First, there is flexibility with money coming from a fund rather than a traditional bank, and therefore full local banking stipulations are not required. The fund itself is an offshore vehicle set up by those who saw a way to address the Thai property conundrum. It is a unique tool for those who wish to purchase but simply don't have the means. So, if you wish to purchase a condo with a limited window of opportunity, you could secure a loan. Similar to local banks, the fund will lend you 50% of the purchase price.

This will allow you to either live in the property or treat it as an investment, giving you the benefits of growth appreciation. It will also give you the freedom to make renovation improvements without the need to speak with a landlord.

The minimum loan amount is US$150,000 and terms of up to 30 years at four percentage points above the Bank of Thailand rate are available. Typically, both interest-only and principal-and-interest repayment options are available to suit your budget, with the flexibility to pay additional amounts as a standard. Upon loan redemption, the property title transfers from the fund to the borrower in ther normal way.

Coupling a fund with direct borrowers allows foreigners to purchase in Thailand with the backing of a robust and proven offshore structure to protect anonymity. This tax-efficient structure allows one to either live in the property or treat it as an investment.

Ultimately legal issues around actual ownership of land and property and the current political situation seem to remain against the flow of money coming into Thailand for property ownership. Thailand is one of the few countries in the world that has not seen significant property crashes over the past 20 years even after all the coups, political problems and the recent recession.

Bangkok's condominium market in the last 10 years has seen a doubling in price per square metre to more than 100,000 baht for high- grade property. The above is a guide to funding a purchase of a property in Thailand and ultimately, the purchase is an investmenr that carries a degree of risk. Speaking with a professional financial adviser who can explain all the options and cover all the jurisdictions can help you minimise the risks when purchasing property.

BANGKOK POST