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Bringing money in to Thailand to buy a property

 

When buying a property in Thailand, one of the stipulations is that you will need to bring the money in from overseas. There are plenty of ways to do this but getting the best rate is key. Since you will bring in a large mount of money for the purchase of a property, every percentage point of exchange rate change will cost or save you a good deal of money

 

By Proglen

 

The first thing to do when bringing in money from overseas is to look at the mechanism for bringing money into Thailand. Fortunately Thai banks are very fair when it comes to the exchange rate offered if your money is wired from another country by way of a telegraphic transfer or SWIFT transfer. For example if you wanted to bring money from France and the Euro was quoted on the interbank market spot rate of 40 Thai Baht to one Euro, then a Thai bank will probably pay you out around 39.6 baht when it receives Euros and changes these to Thai baht for you.

This equates to around 0.4 baht spread or 1 per cent. So, unless you can find a better deal, this is the method you should use: Open a Thai savings bank account and ask the bank for the SWIFT code for an incoming transfer.

European bank are greedier than Thai banks

Banks in Europe and the US tend to be much greedier when it comes to these types of transfers. If you asked a French bank to first transfer your Euros into Thai Baht and then to send it, they might only send 38.6 baht for every Euro and will pocket a much larger percentage of your money. Losing 1 baht per euro might not sound like a lot if you were bringing in a small amount but if you were transferring 100,000 Euros to buy a property then you would lose 100,000 baht on the exchange rate alone. This equates to around 2,500 Euros simply lost in the transaction. Of course the French bank will pocket this and hope you won’t notice. Indeed if you tried to shop around in France you will probably find that all banks operate with similar margins and you may even find that 38.6 baht per Euro is a good rate as compared to other banks or money transfer services that may offer an even worse deal. Some banks even have the audacity to charge a commission on top of their appalling rates.

So the main thing to do when transferring money into Thailand is to ensure that your home currency is sent so that the Thai bank can do the actual exchange. In the case of European currency be sure to expressly send Euros, in the case of the money coming from a UK bank account be sure to send Pounds and so on. Then the Thai bank can get this money and give you a good exchange rate.

 

Rates can be fixed before transferring

The exchange spot rate itself can move quite a bit. Thus in the above example don’t bet on the Euro staying at a 40 spot rate. It might move higher or lower over time. The factors behind the moves are interest rate expectations in various countries and also the economic outlook. At times the Euro can move as much as 5 per cent in a few days. The Japanese Yen moved 22 per cent in just 3 months. So you could say that timing is everything. Yet how can you be sure the rate wont move before you can make your transfer?

What you can do is fix the rate in your favour if you like the rate that you see today but are not sure if it will hold up for a future purchase. Lets say the Euro rose to 43. It might go even higher but you are pretty happy with that move already and want to preserve the new higher rate of 43. You plan to transfer 100,000 Euros to Thailand. You want that rate in 3 months time but you are scared that it will move lower during that period.

You can fix the rate by shorting the Euro in the spot market. This is achieved by changing Euros that you don’t yet have to Thai baht at 43 baht per Euro. A broker or spread betting company will happily lend you the Euros if they hold the equivalent Thai baht as security. Two outcomes are possible.

 

The Euro can fall or rise in value

The first outcome is that the Euro does indeed fall in value back say to 40. You will have gained on your short trade as you will have to only pay 40 baht per Euro to close and you received 43 at the outset. You will have 3 baht per Euro in hand as a windfall from the trade. Alas when you come to change your actual money for the property purchase you will only get the 40 baht of the current rate. Still when taking into account the windfall, your losses are covered and you managed to fix the rate at an effective 43 baht per Euro.

The second outcome is that the Euro will rise in value. Lets say it goes up to buy 46 baht. Your short position loses some money because you will have a shortfall when closing the trade. You will only have 43 baht per Euro in hand and you will have to pay 46 baht to close. That means you will have a deficit of 3 baht per Euro. But you will make extra money when it comes time to transfer your 100,000 Euros because the rate will be 46 baht to the Euro. When you take off the 3 baht you lost on the short trade, the net effect is that while you will lose out on the extra rise, you will have still fixed the rate at 43 nonetheless.

Entering the short trade will require a small deposit and some commission charges but it is highly effective in securing the current rate. You can’t secure any rate you want; it must be a current rate. Airlines and building companies do this all the time to hedge against currency movements as part of their business.

With the above two tips in mind you should be able to fix the rate and get the best deal with which to buy your property.