Real Estate Investments - Thailand: Pattaya and Eastern Seaboard Property Newsletter, October 2011

It is a bit of a strange time at the moment here in Pattaya. While we have not been directly affected by the terrible floods that have hit much of the rest of Thailand so hard, the indirect effects are starting to grow. The most noticeable right now is undoubtedly the enormous influx of people from Bangkok who typically appear to be coming down here for the next four to six weeks, by which time they (and I think everyone else) very much hope that the floods waters will have receded.

The numbers of people arriving over the last week or so have been absolutely huge. Traffic has been incredibly busy and affordable short term rental properties have been snapped up at an astonishing rate. The vastly increased numbers of people in town, along with the effect of those who have been coming down for a short time to stock up on essential supplies, means that the other particularly obvious effect is the shortage of certain groceries on supermarket shelves. Good quality bottled water is especially hard to come by at the moment.

Still life goes on and an initial slow down in business earlier in the month has now started to be reversed in large part due to the visitors from Bangkok. In fact things have been so busy in recent days that I am a little late with the newsletter this month, for which I apologise.

A question I have been contemplating over the last week is whether this might be a sign of things to come in the future. The catalyst for this train of thought came from a friend of mine who lives in Bangkok. The approaching floods encouraged him to do a bit of research on-line and he was a little shocked to discover that Nasa predicts that Bangkok will be permanently submerged by rising global sea levels within 30 years.

Obviously an awful lot of things can happen between now and then, but nevertheless there is clearly a significant issue for Bangkok to deal with one way or another. Now that Bangkok's airport is located on this side of the capital, while Thailand's busiest port is located just up the road from Pattaya in Laem Chabang and so much of the country's new commercial development and foreign direct investment is on the Eastern Seaboard, one might suggest that there are good reasons to believe that in years to come Pattaya might become an awful lot more than what it is currently. Certainly I would not be at all surprised for the increased interest in the Pattaya real estate market amongst Bangkok Thais, that we have seen over the last couple of years, to grow still further in light of the problems caused by the floods. It is so close, so easily reached and a place that has grown to a very significant extent in the last few years so that it now offers very impressive infrastructure. As such it is a great place in which to escape Bangkok, be it for a holiday home or in times such as now or during 2010's political demonstrations when staying in the capital city is perhaps not the best of ideas.

In my last newsletter I mentioned that I had decided to invest in an off-plan condo in the new Amazon development from Matrix Iguana. A few readers asked me what my reasoning was behind the purchase. It is really very simple, in that I think that a number of different circumstances make it a very good investment right now. A number of factors were prominent in my thinking. In no particular order they included that in 2010, notwithstanding the huge economic problems in the West and the political demonstrations in Bangkok, tourist arrivals increased from 2009 by nearly 15% and that those numbers are predicted to increase by a similar amount this year. Moreover, those increases are being achieved when arrivals from traditional tourist sources, notably in Europe, are down due to the continuing economic problems which are at their worst in the West. Once those Western economies start to recover, once would anticipate that those numbers will start to increase again. At the same time, arrivals from the new markets are likely to continue to grow. Indeed by the end of this year, China will be the biggest single source of tourists for Thailand.

In light of those facts, along with the resort nature of the Amazon development and others like it will, I think it will do very well with short term rentals by holidaymakers.  I think these developments will be especially popular in Pattaya where many of the older, more affordable hotels do not have so much outdoor space, typically being built on small, cramped plots of land, nor the huge swimming pools, other amenities and beautiful features that Amazon and a few other similar recent developments can boast.

I also took into account that, especially at this early stage, the units are extremely good value for money (some Thai/company name units are still available for not much more than a million Baht), particularly bearing in mind that they are one bedroom units and come fully furnished, including a small European style kitchen. While the unit sizes appear small, when people go inside similar units in other developments by the same developer, they are usually surprised at how spacious they appear.

Units in those similar, but not so nice, developments close by that are already built sell even now for quite a lot more than the off-plan prices now available so one would expect that there will be scope to sell for a healthy profit once the development is nearly finished or totally complete, should purchasers choose to do so. Alternatively, if you hang on to your unit, even if you can only rent it for what similar units in those lesser developments are now going for, that will still provide a return on investment of well over 10% per annum after costs.

Of course when buying off-plan, all those considerations would be irrelevant if you could not trust the developer to finish the project. However, Matrix Iguana is a well funded company that has a very impressive track record of delivering what they promise and in a timely manner. Personally, I have faith in them and so on the basis of those considerations I felt it was a good investment for me to make. Of course, it is also relevant that in the current uncertain economic times, holding too much cash is probably not a great idea. On the other hand, buying real estate at the right price is, I believe, a very sensible practice as part of a diversified investment portfolio.

This month, our associated financial advisory company raised the topic of Inheritance Tax planning for British expats.  Many such individuals may not be aware that, in spite of their non-resident status, they will normally still be liable to pay tax on their worldwide assets upon their death, at the rate of 40% after the personal allowance of 325,000 GBP is taken into account.  Sensible tax planning can mean that you are generally able to virtually eliminate the need to pay any such tax.  In the coming weeks, the partners of our associated company will be undertaking free initial assessments on this very subject in Pattaya.

By www.investments.by Investments into Thailand, Belarus, Vietnam Laos and Cambodia.