Why does real estate in Thailand—especially in Phuket—easily yield owners 7-12% annually, while in European resorts even 5% is considered a good result? What profit strategies do investors choose? This article is a must-read for anyone planning to invest in Thai real estate. We hope you find this material useful.
Why Thailand? Why Not Germany, Spain, Italy, or Turkey?
There are plenty of opportunities around the world to invest money wisely. The key is, when comparing available prospects, don’t let emotions guide your decisions. Choosing an investment direction should be a rational process—based on facts, figures, and analysis. The International Wealth team will gladly help you find an attractive investment object in Thailand.
Economy
Take a look at the key economic indicators of the country you intend to invest in. What drives its earnings? Are incomes rising? Are revenue sources diverse, or does the economy rely on a single industry? All of this is crucial for the long-term stability of the real estate market, which directly influences the safety of your savings.
One of the most important indicators for an investor is the stability of the national currency. After all, your income will be denominated in that currency. The Thai Baht (THB) ranks among the five strongest and most stable currencies in the world. Over the past decade, its purchasing power has remained constant.
For comparison: The Turkish Lira lost about 40% of its value in 2018 alone. So, if you previously earned 10,000 a year from renting an apartment in Antalya, now you’d only be able to withdraw 10,000 a year from renting an apartment in Antalya, now you’d only be able to withdraw 6,000.
Tourism
Thailand holds a significant advantage over all European countries as tourists flock here year-round. In Turkey, Spain, and Greece, the “season” lasts 5-6 months, while Black Sea resorts, like Bulgaria, experience only three months of full occupancy. During the off-season, apart-hotels and the entire infrastructure often sit idle, with many closing down.
In Thailand, there’s no off-season—just a “high” and “low” season. The difference between them is as follows:
- In the “high” season, tourists from the CIS, Europe, and America come here—those escaping bad weather from October to May. Hotel occupancy during this time ranges from 80% to 95%.
- In the “low” season, many guests arrive from China and other Southeast Asian countries, as well as Australia. Chinese tourists visit Phuket throughout the year.
The proximity to China is a massive advantage. The market is enormous, the Chinese have money, and they love to spend it. They rent high-end apartments and indulge in shopping. Simply put, they don’t hold back.
Every year, Phuket—the most popular and developed resort in Thailand—welcomes 10 million tourists. The average expenditure per person is $250 per day. A significant portion of this money goes towards renting accommodation.
The flow of tourists continues to grow. Thailand’s Ministry of Tourism expects the number of visitors to reach 13-14 million annually by 2025. A project is already approved, and construction of a new international airport in Phuket is underway, marking the second airport for such a small island.
Taxes on Real Estate Purchases
In Germany, buyers pay a property acquisition tax of 3.5-6.5%, depending on the federal state; in Spain, it’s 6-10%; in Italy, it’s 9-10%, and for luxury properties, it can reach 22%. In Greece, when purchasing older homes (with building permits issued before 2006), the tax is 3.09%, but all new constructions are taxed at 24%.
For comparison: In Thailand, buyers pay the government 1-2% of the property price, depending on whether the deal is structured as freehold or leasehold. The difference is clear.
Annual Property Taxes
Thailand has no annual property taxes, while in European countries, the sums can be substantial. For example, in Italy, all property owners pay three taxes—property tax, municipal tax, and waste disposal tax—which together consume 1-2% of the property value each year, not counting utility expenses.
Taxes on Rental Income
In most European countries, the income tax rate is progressive and can reach 45-50%. In Thailand, the maximum rate for foreigners is 15%. However, it can even be legally reduced to 3%.
Real Estate in Thailand
According to the Bank of Thailand, real estate prices rise by 4-5% annually, and this trend has persisted for the last decade!
Of course, Thailand is not uniform. The most popular tourist locations see the fastest price increases. Among these, Phuket boasts the most developed and balanced market.
Besides its obvious tourist appeal, it has two significant advantages for investors: a shortage of land plots and restrictions on mass high-rise construction.
Buildings taller than seven stories aren’t constructed here. A complex with 400-500 apartments is considered monumental for Phuket, while in Pattaya, 1,000-room hotels are commonplace. Naturally, this positively affects occupancy rates and income from real estate in Phuket.
All these factors—tourist influx, a stable economy and currency, year-round seasonality, and low taxes—lead major hotel chains like Best Western, Wyndham Group, Renaissance, Sheraton, and Mövenpick to want a presence in Phuket. Here, they can run a successful business.
However, land is scarce, and obtaining construction permits is challenging. Therefore, hotels choose developers with solid experience and sign management contracts for the completed complexes. As a result, apartment buyers benefit. Thanks to professional management, they earn an average of 7% to 12% per year from rentals. Such returns are hard to find in European countries.
How to Earn from Thai Real Estate?
The most interesting investment avenue in Thailand is resort real estate. A significant portion of the money tourists spend in Phuket (remember: 10 million people a year at $250 a day each) goes towards renting accommodation.
Among resort properties, the best solution for investors is purchasing apartments managed by a large hotel chain. First, they uphold international quality standards. Second, they have an extensive client base and contracts with travel agencies worldwide. Third, they have skilled management that helps hotels reduce costs and increase income. Finally, a strong brand means people are willing to pay more.
No Thai company or real estate agency can provide an owner with the same income as a Sheraton-level hotel.
Remember this key point: it’s not the apartment itself that makes money, but the management behind it.
So, our answer to the question “where to invest money?” is in apartments with hotel management.
Now, let’s break down how the income will be formed.
What Income Does Thai Real Estate Generate?
Due to low taxes and maintenance costs, as well as high year-round occupancy, real estate in Thailand yields greater returns than in European countries. The average return here is around 7% of the property’s price annually.
And this is just from rental income. There’s also capital appreciation to consider.
Let’s look at a typical scenario. Today, you buy an apartment for 100,000. Over five years, at a 7% annual yield, you’ll earn 35,000. Plus, the property itself appreciates—let’s take the minimum—at 5% per year. So, in five years, you could sell the apartment for 125,000. In total, over five years, you’ve increased your capital by 125,000. In total, over five years, you’ve increased your capital by 60,000 or 12% per year.
And this isn’t even the most profitable scenario. You could have purchased an apartment at the start of sales for $80,000 and rented it out through a Rental Pool program, allowing you to earn even more.
Still hesitant? You should probably seek some professional advice that will help you make up your mind in a faster manner.
