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David Greenfield living in Japan writes "I have noticed several houses built on the side of the ocean in Phuket. Is sea erosion an issue that needs consideration when buying a property in Phuket" ?

Generally not. There are in fact not that many homes or apartments built directly on the edge of the sea in Phuket and new planning codes introduced last October prohibit any new construction within 20 meters of the high tide mark.

Geologically most of the island of Phuket is granite, so any property built on a steep rocky shoreline is invariably built above a layer of granite and you can be assured that your underlying ground will outlast your building (even if it is built by a top notch contractor).

Most level beach areas are however composed of sedimentary sand, and where there is not a protective coral reef, these can be prone to some movement.

The beach which has seen the largest movements (both with erosion and with new sand deposits enlarging the shore line) has been Bang Tao beach. This instability can be largely attributed to the tin mining onshore and dredging offshore that took place thirty years ago moving considerably quantities of sand and totally changing the drainage and river systems on the beach. Too a lesser degree problems were re-started to the opening of the Lagoons (tin mines) by the Laguna development ten years ago, but these seem to have been pretty much stabilized now. Most construction in these area is in any case and quite wisely well set back from the beach. Other beaches notably in the Kata Karon area also had minor problems about 12 years ago and a couple of wooden bungalows (built without foundations right on the sea shore were lost). That lesson of opportunistic expansion has now been learnt.

In conclusion I don’t believe that there are any homes in existence now in Phuket or that could be built (legally within the new planning codes) in the future that are going to face any sea erosion problems. Settlement of foundations in filled land and general control of construction quality is a far more real issue.

Bob Flehman e-mailed to ask "I tried to ask banks about financing and most realtors in Pattaya just said.; very tough. Pay cash and don't worry. Is it any different in Phuket."?

Not really. I wrote about this a year or two ago (see back copy at gaz6.htm) and while the legal issues remain the same, the situation has changed a little in as much as money is now very tight and the banks really don’t have new money to lend for real estate acquisitions. Big developers however still seem to be able to arrange finance in a few cases and in the resale market it is usually still possible to assume a mortgage (or at least a part of it) if buying into a property with existing finance.

The old problems that limit or deter foreigners from taking mortgages still remain. These are principally 1) that interest rates are very high (now higher than ever in the vicinity of 18 to 19% p.a.) and 2) unless you are buying a foreign freehold condo unit, you can’t directly own property (a requisite to get financing) and you either have to work through a nominee or corporate structure for the purchase or leave a leasehold unregistered and let the land owner guarantee the loan. On top of these prevailing issues there is now an entirely new one. Exchange rate fluctuations. The Baht as most other Asian currencies is in see-saw motion. Next month, next year or in five years from now it could easily be 50% up or down from it’s current position entailing a huge risk (or of you are a gambling man the potential of a huge gain) in borrowing in a currency in which you do not earn or hold significant other assets. Currency hedges don’t help much either because they are typically not available in domestic property value sized units and are with the all current volatility very expensive too.

The best advice still has to be borrow, if you must, in your local currency (usually you will have to place assets at home as the collateral), and then choose a moment when the Baht seems to be at a weak spot to convert you local currency to Baht for the best possible exchange rate advantage and then repay your loan in your local currency without further exchange rate risks.