Investing on Koh Samui isn’t for everyone. Most residential investment properties also double as holiday homes. Exotic villas or stunning condotel units that owners can use for a set number of days annually. During the rest of the year, an on-site property management company rents it out, usually as part of a larger hotel or resort complex.
This means investing on Koh Samui is unique. While the financial benefits of property ownership are significant (we’ll get to those in a minute), it doesn’t make sense as a straight investment play. Buying a Koh Samui property and not using it is like buying a 1969 Corvette Sting Ray and not taking it out for a spin. You’re missing the best part.
The island is one of Southeast Asia’s premier tourist destinations thanks to its blue waters, white sands and lush greenery. Investing on Koh Samui doesn’t simply provide monetary returns, it also gives you a residence in one of the world’s great paradises.
Koh Samui property investment makes financial sense
The foundation of Koh Samui property investment is the island’s robust tourism sector. Arrivals to Koh Samui International Airport were up 15 percent last year and the number of visitors to the island have doubled over the course of the past five years, according to research from C9 Hotelworks.
The average length of stay for guests coming to Koh Samui was five days. This provides strong demand for rooms throughout the island. Of course, these numbers do fluctuate and there where some quarters where arrivals decreased. But when you look at the macro-level picture, the trend continues to move upwards and the outlook remains positive.
Investing in Koh Samui real estate also provides you with an opportunity to take advantage of capital appreciation and rental returns. Some developments have reported capital appreciation of 10-20 percent between 2015 and 2018 but that is at the high-end of the spectrum. The majority of Koh Samui properties will record capital appreciation of 4-8 percent annually.
For most investors, the rental returns of Samui property are quite lucrative. According to CBRE estimates, an actively managed property on Koh Samui that hits 100 night’s occupancy will provide returns of 6-12 percent annually on average. Of course, properties in good locations and with higher demand can easily surpass this.
Most Koh Samui developers do offer guaranteed rental returns of at least five percent during the first few years to protect investors.
Property ownership on Koh Samui
Thai law states that condominiums are the only type of freehold properties in Thailand that can be owned by foreigners. However, it is possible for non-Thais to obtain leasehold rights to land, houses and other property types. On Koh Samui, land and villas can only be acquired via a leasehold agreement.
The length of a property lease cannot be more than 30 years, but these agreements can be extended. It’s possible to increase the lease terms to 90 years via 30-year extensions. While some investors may scoff at the idea of buying a leasehold property, it is the only way to own a land and villa on Koh Samui.
Understanding that some buyers may have reservations about non-freehold agreements, some developers will offer a guaranteed buy back clause. These ensure the developer will purchase the property from you at an agreed upon price whenever you decide to sell.
Investment visa
In 2014, the Thai government launched a THB 10 million (USD314,700) investment visa designed to bring more foreign capital into the country. Leasehold property is one of the qualified asset classes. Other investments that are part of the investment program include freehold condo units, Thai government or Thai state-enterprise bonds and deposits into a Thai bank account.
In order to apply, you’ll need to have proof of your THB10 million investment. But apart from that, there aren’t many other requirements. There are no age restrictions on applying for the visa and most nationalities are eligible. Additionally, the THB10 million investment can be spread across multiple asset types should you wish.
Depending on the purchase price, this means investing in Koh Samui property could also make you eligible for this visa type. It is good for one year and can be extended as long as you haven’t withdrawn your fund from Thailand.