BANGKOK — Agency for Real Estate Affairs (AREA) points to the trend towards foreign ownership: a new post-COVID peak will be reached in 2024. It is estimated that 5,700 units will be transferred by the end of this year, surpassing the 1,000-5,000 units that will be transferred annually in 2020-2023.
The government is recommended to collect taxes from foreign property buyers in four areas: “transfer, property tax, inheritance and capital gains” with higher rates than for Thai citizens, ranging from 1-20 percent or 10,000 to 200,000 baht per million baht.
Dr. Sopon Pornchokchai, president of the Real Estate Research and Valuation Center of the Agency for Real Estate Affairs (AREA), told Prachachat Business that in the first half of 2024, foreign buyers purchased 2,885 condominiums in Bangkok and the Bangkok metropolitan area. This leads to an estimate that foreign buyers will purchase a total of 5,770 units this year, the highest since the COVID-19 pandemic.
From 2020 to 2023, 1,017, 1,243, 4,203 and 5,036 units were sold to foreigners respectively. The forecast of 5,770 units in 2024 therefore means growth of 15 percent compared to 2023.
According to AREA’s overall statistics, there were 97,813 condominiums on the market in the first half of the year, of which 17,306 units were sold, worth 76.355 billion baht. Foreign buyers purchased 2,885 units, representing 16 percent of the market and 18.205 billion baht ($535 million) or 23 percent of the total market value.
The initial assessment indicates that the decline in Thai purchasing power due to the ongoing economic downturn has led to an increased role of foreign buyers.
The Ratchada-Ladprao zone is a popular area where foreigners bought 1,024 units out of 2,012 available units worth a total of 4.031 billion baht. This represents 51.7 percent of the total sales value in the area. However, the area with the highest sales value is the city center, where foreigners bought 895 units out of 3,730 available units with a total value of 10.373 billion baht ($305 million), accounting for 27.7 percent of the total sales value in the area.
Foreigners tend to buy units at an average price of 6.31 million baht, which is higher than the average price of 4.5 million baht paid by Thais. In the 2-3 million baht price range, foreigners bought 985 units, followed by 752 units in the 3-5 million baht range. The most popular price segment among foreigners are units costing over 5 million baht.
Dr. Sopon further mentioned that it is obvious that foreigners have a strong preference for buying condominiums in Thailand. Therefore, AREA proposes to the government under Paetongtarn Shinawatra to regulate the purchase of real estate by foreigners by imposing higher taxes on foreign buyers than on Thai nationals, as is common practice in many countries.
He proposed four types of property taxes on foreigners based on market transaction prices (rather than government-assessed values) to raise revenue to boost the economy and increase funds for national development:
- Purchase tax or transfer tax: Levied at the Land Department on transactions, with a tax rate of 10-20 percent or 100,000 to 200,000 baht per million baht.
- Property Tax: With a tax rate of 1 percent or 10,000 baht per million baht.
- Capital gains tax on resale: With a tax rate of 10-20 percent or 100,000 to 200,000 baht per million baht.
- Inheritance tax: Proposed at a rate of 10 percent of the market value of the estate or 100,000 baht per million baht.
This is in line with the viewpoint of Prasert Taedullayasatit, president of the Thai Condominium Association, who stated that it is time for Thailand to regulate taxes for foreign property buyers. This is a model practiced in many countries where foreigners are taxed at higher rates than locals.
In the case of Thailand, if such taxes on foreign buyers are introduced, initial estimates suggest that the tax revenue could amount to 10-20 billion baht annually. This revenue could be used to set up a fund to help low to middle-income people gain access to home ownership, easing the burden on the national budget.
Importantly, this measure would boost the economy both directly and indirectly. The real estate sector has a 2.9-fold multiplier effect, i.e. for every million baht ($29,400) in property value, the economic impact extends to related businesses, including renovations, repairs, furniture purchases, household appliances, home decoration and construction projects, generating an economic turnover of 2.9 million baht ($85,200) in the Thai economy.
________
