Alan Sadd loves the blues. So when the 58-year-old British director of CoCo International Properties Co Ltd ("Real Estate in Paradise") was looking for a way to put his island home on the map last year, he hit on the idea of a music festival.
A contact in the industry put him in touch with some world-class names, and for 10 days late last year, Koh Samui rocked to the likes of Jerry Lee Lewis, Jools Holland, Ike Turner, Zakiya Hooker, UB40, The Wailers and Big Brother and the Holding Company. Held by the lake just behind Chaweng Beach, the festival was a triumph of rumbustious son et lumière and a miracle of smooth organisation.
Talk about great balls of fire. In the space of just over a week, Samui made the quantum leap from Thai holiday spot to international destination, and it was a move largely fuelled by the massive property developments that are transforming the island's 247 square kilometres. The road that roughly circles Koh Samui is scattered left and right with hoardings beseeching passers-by to buy in, and it's seldom that the copy lines eschew mentioning "paradise". Welcome to construction paradise.
"The prime idea of the music festival was to promote the island, pure and simple," says Sadd. "We plan to build it up in future years – after all, events like the Glastonbury pop festival started small, and now it's one of the world's best-known musical celebrations. We didn't get the numbers of people that we wanted in 2005, but still it was a resounding success. We made our footprint in the sand, you might say."
That a property development company is organising an international music festival says a lot about the industry's clout on Koh Samui. No longer content with a mere fortnight's sun, sand, sea and sybaritism, the travelling public is looking to invest in Koh Samui, The Brand. And considering that a one-bedroom villa can command as much as US$400 per night in rental, owners are looking at healthy returns as a reward for successfully negotiating the labyrinth of property purchase in the Kingdom of Thailand, where foreign currency is accepted with alacrity, though foreigners sometimes with slightly less enthusiasm.
CoCo is one of dozens of developers buying up land on Samui and trading on the paradise label. Sadd's commercial empire also embraces seaplanes, restaurants, a diving operation, a live music bar called CoCo Blues, a yacht building and chartering service and a property management arm.
"I was working in the Middle East, building factories, when a relative who had bought land here asked me if I was interested in joining in," explains Sadd. "That was back in 2001. I'm not an engineer or a pilot or anything like that, simply a businessman making sure that things run properly. There's massive potential here, and we are forecasting yields of 25 per cent.
"The worst thing that could happen if you buy here is that you are left with a very nice place to go on holiday, but the indications are that the island's potential is simply going to keep on increasing."
Certainly, Koh Samui has become more user-friendly over the past few years. The international airport hosts non-stop flights from Singapore, Hong Kong and, soon, Kuala Lumpur. Three international hospitals are aiming to lure a slice of the lucrative health tourism market. The sprawling aisles at Tesco, one of the world's leading supermarkets, do a roaring trade seven days a week, 365 days a year, accompanied by such distinguished acolytes as Kentucky Fried Chicken and Dunkin' Donuts.
Two schools merged to form Open Gates in 2004, providing international-standard education, while boarding establishments such as the British Curriculum International School in Phuket and Harrow International School in Bangkok are only an hour's flight away. Dining out has moved on from plates of noodles in beachside shacks to show a certain sophistication, whether in five-star resorts like the Evason and the Anantara, or in the more homely Fisherman's Village. Here, ocean-view restaurants with contemporary cuisine and decor sit side by side with charismatic local shops and residences.
Nightlife is equally alluring, with everything from Irish pubs to the Siam Bar at Lamai, where entertainment options include ladies mud wrestling every Sunday (which will appeal to some more than others). Throw in Koh Samui's natural charms – broad sandy beaches, excellent marine sport opportunities and a lifestyle that remains pretty laid-back – and it's a wonder the estate agent's brochures don't run out of superlatives.
Property prices at the top end of the market can top the million mark (US dollars). However, compared to prices around the world, Koh Samui property is highly reasonable, with a solidly designed and built four-bedroom, 225sqm house going for around US$200,000.
CoCo's multifarious offerings give some idea of what's on offer. Ocean View, on Tong Son Bay, is a fully serviced project containing two- and three-bedroom villas that sweep down to the sea, employing a neo-Thai design to blend in with the lush surroundings. A sister project, dubbed Palm Villas, comes with a guaranteed fixed lease-back return of 12 per cent per annum for eight years, with one month every year allowed for owners' personal use.
Bophut, at the northern end of Samui, handy for both airport and the main drag of Chaweng, is one of the more popular areas to live. Plumeria Place Residence's villas, with 56 garden plots and three on Bangrak beach, are priced from US$95,000.
On a marginally less lavish scale, Monlak "Mon" Inkeaw, manager of Countryside Properties, is marketing two developments with prices as low as 6.1 million baht (US$154,697) for a two-bedroom, three-bathroom villa in a purpose-built estate on the west coast near the port of Nathon.
"All the Samui Sunshine Villas have their own pool, and owners can shop in the local market but be back at home within five minutes. This is not a tourist trap, but part of a genuine Thai community," says Mon. "Much of the attraction of Koh Samui is that it's summer 12 months a year. Get off the plane and you are in shorts and flip flops. Wine prices are pretty much what you might pay in Europe, but otherwise you can eat and drink amazingly inexpensively."
Barry Gutteridge, CP's director, adds: "The Samui property boom has still got a long way to run. It started about four years ago and at the time, you could buy land for as little as 400,000 baht (US$10,125) per rai (1,600sqm). "Now, you are looking at two million minimum, and more like five million for prime areas.
"If you can find beachfront land on Samui, it will cost you about 10 million baht (US$253,120) per rai. However, if you look further afield, to islands like Koh Phangan across the bay, it would only be three million baht (US$75,976) per rai.
"Currently there is very little in the way of infrastructure on Koh Phangan. However, land has been earmarked for an airport, and some roads have been concreted. If you are seriously looking to invest in the long term, that's the place to put your money. However, if you are simply looking for a holiday home that will go up in value, there are some very reasonable options on Samui."
What might be termed the Samui property stampede is largely being engineered by expatriates, and it's no surprise that it is mostly foreigners buying. Hong Kong, Singapore, Europe and Australia are prime markets, but citizens of the former Soviet Socialist Republic are working to unite their part of the world with this part of Thailand.
"Russians are starting to come to Samui to buy. They've got a pretty big toehold in Pattaya but are now branching out," says Terry Blackburn, who publishes an online property report and co-ordinated the Thai pavilion at the Moscow International Property Show last year.
Blackburn adds: "Part of the attraction of Samui is that it is different to Phuket, the other big resort island in the south of the country. There are fewer big brands here, more chances to acquire beach land, and if you're keen, you can buy somewhere and commission your own architect. The reaction to the Moscow show was tremendous, and I think we are going to see more Russians coming here in the future, with an eye to both investing and having their own place to stay."
There's certainly no shortage of choice on Samui, and no shortage of developers looking to get in on the act. Just 'Tec, a European technology company that has diversified into property, is currently building Tondhama Village at Choeng Mon Beach on the northeast coast. Comprising apartments, villas, and more exclusive "residences", this might be described as the one-stop-shop of Samui developments.
The complex includes a swimming pool, clubhouse, restaurant and 24-hour security; three optional interior design packages are available, and Just 'Tec will also set up 70 per cent mortgages, though only in US or Singapore dollars, which must be paid off in ten years. Not that the company's prices are overwhelming, with a 203sqm three-bedroom apartment being marketed for as little as 5.3 million baht (US$134,232).
"The project's coming along extremely fast, and we should have most of it completed by April," says sales manager Craig Beechey. "People like the idea of everything being sorted out in a single package, and of course, if they want we can also manage the property, so they can enjoy rental income as well if they are not going to live here full time."
To end on a cautionary note, potential purchasers should be warned that there are pitfalls in paradise. "The quality of workmanship can be highly dodgy," explains one experienced developer, who has this advice for prospective house hunters: "Make sure you get all the paperwork straight, and if you are going into this with a local partner, make sure it's somebody you trust implicitly. Don't expect things to happen in a rush. Even though you are paying the piper, you can't always tell the locals what tune to play, or how to for that matter."
Patience Is Key
There is a less rosy side of property purchase in Koh Samui. Three years ago, Hong Kong PR guru Susan Field bought a patch of jungle on a hillside above Bophut in Koh Samui, with the intention of building a holiday villa. At the time of writing, it's still a brownfield site.
"We went back to inspect at one stage to find someone had removed a couple of tons of our earth," says Field. "The locals said there'd been a landslide, but strangely enough, the site was flat and just right for a volleyball court, which was how they'd put it to use."
Field remembers the time when there were just two hotels on Chaweng. "There wasn't even a dirt track when we first visited the site, it was pure jungle, but I could see the potential and the views out to sea were fantastic."
Progress on her property has been slow. "We've both been busy, so we haven't got on with this as fast as we should. We had to part company with our first architect, but in the meantime we've seen construction costs shoot up by 20 per cent."
Field took a 30-year lease on one rai of land — 1,600sqm — at a cost of 1.5 million baht (US$38,096). She estimated at the time that building her dream holiday home would cost six or seven million baht (US$151,966 or US$177,294). "We've altered our plans slightly, but even so, our costs are now looking more like nine or 10 million baht (US$227,938 or US$253,120)."
Field's baan (house), once finished, will comprise an upstairs living room to take best advantage of the view, with two ensuite guest rooms below, and a fully fitted kitchen. The master bedroom will be contained in a separate structure, with a sala ("somewhere we can work or relax and fix a snack without having to go up to the kitchen") next to the infinity pool.
She says: "We've now engaged a second architect at a cost of US$10,000, who is based in Bangkok, but we really see eye-to-eye. We've also got an English project manager who comes highly recommended. The next stage is for the construction to go out to tender. We've asked the architect to line up three possible contractors.
"I hope within a year we'll be going on holiday there. The key thing is to find professionals you are happy with and who respond to your requests. And to be patient!
"Koh Samui's still magical. I went there with a friend not so long ago and she fell in love with the place and bought some land more or less straight away.
"Mind you, she paid three times as much as I did. And there's not much sign of costs going down in the future."
The Checklist
The phrase "red tape" takes on new significance in Thai property purchase. Foreigners can own a house, but not the land on which it stands, which may seem to be stacking the deck unfairly toward the home team.
Of the following four options, all offer a route to home ownership, but forming a limited company is probably the least problematic. A fifth alternative is to buy a condominium, which is open to foreigners with fewer restrictions.
Marriage/Partnership
The option of placing house and land in a Thai partner's name is an obvious one, but also fraught with financial pitfalls should the marriage run aground at some stage in the future. Cases of born-again bachelors, who've lost both marital partner and marital home in one fell swoop, are the mainstay of bar talk the length and breadth of the kingdom.
Limited Company
The best option is to form a limited company, and subsequently register the land and house as its assets. A foreigner will own 49 per cent of the company shares with the remainder held by Thai nationals. On initial registration, the Thais (a minimum of six) own 61 per cent, but this can be changed subsequently.
As the nominated sole executive director in the articles of association, you effectively control the entire company and all its assets, as the Thai shareholder nominees should sign undated share transfer contracts when the company is registered. The Thais receive no executive power within the company, nor need they be consulted about any company business.
As executive director, you may also replace them whenever you wish. Setting up a limited company takes a professional attorney about 30 minutes (and about as many of your signatures). The cost is approximately 30,000 baht (US$770), and the obligatory annual audits as much again.
Some would-be purchasers have considered the possibility that future changes in the law might deprive them of their paradise real estate. However, legal counsel points out that limited companies are Thai juristic entities, and as such subject to the nation's commercial law. Any changes in legislation would apply to every limited company in the land, not simply those owned by foreign directors.
Lease
It is possible to take out a 30-year lease on land, which, once registered at the Department of Lands, can be extended to a maximum of 990 years. The owner's heirs are under legal obligation to honour the agreement and you can bequeath the lease to your own heirs. One possible snag is that the owner, or his or her descendants could claim that you are "mismanaging" the land, though this would have to be proved in court.
Contract of Credit
Contract of Credit is a sort of half lease. The land is registered as a loan to the seller, with the value set at the market rate plus the building cost. Your name goes on the title deed as creditor, which should prevent the registered owner from selling before repaying the loan. However, with property values shooting up, it's conceivable that the debtor could get a bargain by buying the land back, via the simple expedient of repaying the loan.
Condominiums
You can own a condominium outright, but must transfer funds in foreign currency (US$20,000 or more) from a bank outside the country to an account at a Thai bank. Your own name must appear both on the transfer documents and the final purchase contract. Major financial institutions such as Thai Farmers, Siam Commercial or the Bangkok Bank are used to such transactions, but it is imperative that they are informed (and acknowledge) that the funds are for a condo purchase, so they can issue the requisite Foreign Exchange Transaction Form. Fail to produce this and the Lands Department will get decidedly sniffy when it comes to the ownership transfer.
