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Pattaya Market Report – Property Situation in 2016
The market situation
Pattaya Property Market 2016
While in 2015, the prices have increased a lot, the Pattaya property market has weakened in 2016.
Very important in this context is probably the weakness of many major currencies: the Euro, the British Pound have lost value against the relatively stable Thai currency. The Russian Rubel lost even more. But even the US dollar has lost value in 2016 against the Thai Baht.
Recently the Brexit referendum did put even more pressure on the British Pound.
These changing values made properties for buyers from these countries subjectively more expensive.
However, the markets for houses and condos are different :
Condos: The number of completed condos in Pattaya has increased again in 2016. At the same time demand was lower than in 2015, so prices did decrease.
Many sellers however calculate in their “home currency” and from their point of view they have achieved more profits at some lower selling prices because they had less money to pay for their “home currency”, i.e. they got more Euros for the sales price in Thai Baht than before.
Due to the market the developers have reduced new projects or are even not planning any new projects in the near future.
This will lead to less offers and the prices will rise again. Already now, we note that in certain areas, such as Apartments with sea view, prices are already on a higher level than last year.
Housing: The market for family homes / houses is a little bit different. The demand was also down here, but at the same time, the number of homes offered for sale did lower as well. So the price reduction in this part of the market was lower than in the condo market.
This is particularly evident in the houses which are on the ocean side of Sukhumvit Road. In this area there are not many houses on the market and the demand is increasing, which means rising prices. In this market segment, this trend is likely to continue, while at locations on the east side of Sukhumvit Road prices in the near future are likely to rise moderately.
How should a prospective buyer decide?
Despite the relatively weak “home currencies” and the associated weak exchange rate buyers should not postpone buying decisions and rather use the current relatively favorable situation in which even some sellers may be slightly more “willing to talk” about price or contract terms .
In addition, is also questionable whether the major currencies in the foreseeable future will recover. With the money printing programs in Europe, Japan and the United States this is not very likely. Perhaps these currencies will even loose more value against the Thai baht, making then properties more expensive for new buyers. If this is indeed to come so it would be advisable even preferable purchasing now before the own money is even more devalued.
Fundamentals
Why is the real estate market in Pattaya or Phuket so stable?
There are essentially three reasons:
1. No real estate loans for foreigners
The property market in Pattaya is determined largely by foreign buyers. Very few Thais can afford properties offered in Pattaya. But: Foreign buyers have de facto no chance of getting a mortgage in Thailand. This means that (almost) all the properties in Pattaya are paid with cash money – no mortgages.
So a credit-financed housing bubble, how it was seen in the United States, virtually impossible. Also, there are not really urgent sales, as we know them from many other countries, i.e. the homeowner looses his job and can not pay his loan installments and must sell his property as fast as possible in order to avoid reposession of the bank. This and other reasons like that are producing a lot of pressure on the property market.
However, since nearly all properties in Pattaya are paid in cash , this important risk factor is not existing and gives the market an enormous stability.
2. The real estate market in Pattaya is determined by buyers of (almost) all rich countries on earth
Most buyers in European countries or in the USA are “domestic” buyers .
In Pattaya, however, most buyers are foreigners, and indeed from almost all rich countries. This means that if e.g. the currency or economy of one these “buyer countries” just weakens, the situation of other rich countries might perhaps be better and attracts buyers from these countries. This is a situation that Pattaya has experienced in many years and results in a constant balancing of buyer potential, because the one replacing the other.
Few places in the world have such a large foreign – share of buyers in the real estate market as Pattaya has. And this is the second factor, which gives the local real estate market such a stability.
3. Taxation
In Thailand, unlike most other countries on the world, there is no capital gains tax or similar for sales profits in the Reeal Estate Market. Even when buying and selling within a week, any profit is exempt from taxation. There are only the usual transfer fees and transfer taxes to the Land Registry to pay. (Exceptions as a special case only when companies sell their real estate holdings at a profit, then there might be income tax because the company makes a profit.)
The tax on rental income are very moderate at 12.5%. Due to double taxation agreements with most western countries, you can enjoy rental income at low taxes without having to run the risk of coming into conflict with the domestic tax authorities in your home country. So there will be no illegal money or dirty money. However, it is also a fact that in Thailand probably the vast majority of landlords pays no taxes at all, especially when it comes to owners who have only one or two properties.
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Despite all the gloomy predictions over the past 20 years that the prices “tomorrow” will fall, prices have multiplied over the whole period and the hope of falling prices have remained only a wishful thinking of some buyers until today and they will probably remain so.
About the author :
Tommi Jaspers is German and for more than 15 years as a real estate – Agent in Pattaya. He is a trained real estate – broker and a member of international organizations and brokers, CRS (Certified Residential Specialist) and speaks German Thai and English.
He is probably one of the most experienced real estate – consultants in Pattaya.
Feedback & Questions welcome:
Tel. +66 (0) 81 926 1929
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