When is the best time to sell your property? Part 1.

It can be difficult to answer this, especially if purchasing within an unfamiliar market and having to solely rely on your own judgment. This can be tricky without the correct guidance.

In Thailand it’s important to do your research on the location you are considering buying into. Of course one needs to be sure that the demand will be there in the future. In cities such as Bangkok, Phuket, Pattaya and Chiang Mai, these have seen substantial growth within the real estate sector and therefore good locations to consider buying into at this time. As with each city there are also favorable areas that are currently popular or will be popular amongst the resale market in the future.

If we were to take Phuket for example, the island has seen a steady increase in land prices from 2010. Typically there has been an increase of around 10 percent per year, this again is area dependent but for most of the touristy parts of the island, this seems to be the case.  If you were to consider an island such as Phuket does not have an unlimited supply of land and with current regulations tightening up, there will be less and less development taking place in the future. As this island’s tourist market continues to increase and recently was ranked as the top fifth tourist destination to visit, we can certainly expect the demand to continue to increase, in the coming years. With fewer projects able to go ahead, those who have ready built properties will be at an advantage to sell and make a decent profit. 

Being smart of course one should take careful consideration to price their properties according to the market value, as many inexperienced buyers tend to ignore the market prices and price themselves way above the suggested market value. Depending on what your ownership structure is, there will of course be Capital Gains Tax to consider, should you intend to purchase under the “Foreign Freehold” ownership structure. Should one sell their property within the first five years then the Capital Gains Tax is approximately 23% and is applied, however after this no Capital Gains Tax is applied. As you can see this greatly influences people’s decision making process.

With regards to ownership structure some also feel that this will affect the resale process. Many are of the understanding that anything purchased under a “Foreign Freehold” structure is easier to sell and Leasehold properties are more difficult to sell later on, especially in the case if needing a quick sell. While perhaps a decade ago this may have been the general consensus as to how things were, this has since changed. Previously most buyers were European and this did have an impact. In Europe Leasehold ownership is not an option as this does not exist, therefore they are unfamiliar with this concept and tend to stick with freehold. Other countries such as China, Australia and UK are familiar with the leasehold structure and do have this option in their countries, so therefore feel more comfortable to purchase as such in Thailand. As the markets have changed over the years we are now seeing a lot more activity from these nationals and therefore “Foreign Freehold” structure no longer the preference anymore, thus making it easier to resell “Leasehold” properties too. The more people are educated on their ownership options, the more secure people feel going forward under Leasehold ownership, which has good benefits attached such as lower taxes. 

For many the question of rental return also comes into the decision making process. With tourism increasing each year, the demand for accommodation is constantly growing. If you are to look at all the new hotels and apartments entering the rental market, you can be sure that they know the kind of demand one can expect in the future. For those purchasing with the intention to receive a strong rental yield, it is advisable to wait until around year three to really see if your property will make as strong a yields to what is predicted, beyond what you have been receiving for years one and two. You might want to check with the well-known hotels around as to what their expected occupancy rates are for year three too, as this will give you a good indication on what they expect from the market during that period.  The other factor to consider is that anybody who is under a “ Rental Guarantee “ contract will need to find a buyer who wants to enter into a rental guarantee scheme, as they will be obligated to continue this for the number of years that was agreed to when the property was first sold. If they new buyer is not happy to continue and would like to live in the property full time or rent this out on their own, then the seller will have no choice but to terminate the rental guarantee agreement and compensate the hotel/developer for loss of income during the remaining period of which the guarantee was supposed to continue.

If you have bought into a project and this is still under construction as you well know flipping properties is common practice around the world, you would be wise to wait until closer to the completion date. Typically from pre- construction to completion the value to which the property will have increased can be as much as twenty percent. Flipping to soon is not recommended as this will not provide a decent profit once you resell and if you consider payment of all admin fees and other associated costs, people find they have just about no profit in the end. This is only advisable if one is unable to continue with the purchase and forced to sell before the completion date.

In terms of area of course this is another strong factor that warrants close investigation before making any final decisions. As there has been a lot of development within many Thai cities as well as the coastal areas and islands, it does pay to research what other plans are in place for that area. If you can see that there are improvements in terms of infrastructural changes on the horizon, it may be a good idea to wait as this will most certainly increase the value of your property. Changes and implementations such as schools, hospitals, and shopping centers are all positive contributional factors that positively impact the property market of that particular area.