When Scandinavian Village, basically as the sole Scandinavian developer on the market at that time, was trying to introduce its project in Thailand for Scandinavian retirees back in 2003, it was no easy task, even if already then the allure of European hotspots started to wear off due to very high costs. The region was suffering from a succession of events with a negative impact such as the Iraq war, the Bali bombing, bird flue – and not forgetting SARS.
And as the pioneering project offering purpose-built retirement homes, they had to face both prospective buyers’ hesitation to buy into an entirely new market, and that Scandinavian Village was targeting a defined target group, limited to persons aged 55 years old or more.
“Sales have not gone as we had hoped,” admits initiator and Executive Director Otto Kreuger.
“The old concept was something entirely unique which required more time for people to digest. Also it was difficult to convey its advantages.”
“But we have realized that we have a product which is a greater challenge to promote and we are selling to the most critical prospective buyers. Our customers have unlimited time and are generally affluent, well-travelled and well-educated and can with ease understand the different alternatives available on the market. That means they scrutinize very carefully, before taking a decision. That is a prolonged process but therefore we have a very high percentage of satisfied buyers”
Scandinavian Village gradually also understood that their expectations from sales to this core customer group were perhaps a bit exaggerated in the beginning.
“We only turn towards those over 50 being willing to pay for this level of service and appreciating it.”
Today the market looks different with many more Scandinavian players and projects in the hundreds to choose from on all the major resort destinations. And not even proposed changes to the Foreign Business Act – at least not to any significant extent – seems to prevent wealthy Scandinavians seeking second homes abroad from looking for holiday and retirement homes in Thailand in order to be able to spend most of the year here.
Besides, any future tightening up of the rules, Scandinavian Village can turn to its advantage, being a Board of Investment (BOI) project, and under a special category allowing that land and property can be 100 per cent foreign-owned.
And with the age restriction relieved to 50+ the project is selling according to established goals. As a result its second phase Riverside Park, consisting also in villas and semi-detached houses in addition to apartments, was launched in the end of February 2007 to maximise the chance of wooing Scandinavian retirees. With this additional project the developer expands the options for its prospective buyers but still under its unique concept of membership living with security, quality and full property management service.
The extension is being built with the point of departure that the area should become a park environment. Villas and semidetached houses will be placed in the centre and in the fringe areas apartment blocks.
Scandinavian Village had its grand opening in November 2003 and 65 apartments out of 96 were sold up to March 2007.
Having been granted a BOI certificate in January 2002, as the first project ever under the category ‘Retirement homes and care centres’, it soon became clear, explains Mr Kreuger, that the initial concept with the buyers as members depositing a sum into the company would not work.
“Thai tax law does not allow such long-term deposit; the revenue department would therefore consider it an income and tax it as income.”
“That made it impossible, and from that I took over here in September 2003, we have developed a new form. Today the customer buys preference shares from the company. And the number of shares depends on the apartment’s size, placing etc. We then enter a user agreement, describing the rights the member has against the company and the responsibilities the company has towards the member.”
The concept for Scandinavian Village is Mr Kreuger’s own and was born out of his family business’ involvement in construction of nursing home property in Sweden.
“We looked at various models but there was no prototype that we used.”
Mr Kreuger denies that difficulties in selling the initial concept made them forced to change it.
“That is not correct. Today, it is difficult to say which one had sold the best. Now you have the possibility to benefit from potential value increase on the apartment. If you sell in the future, you might get a higher price, or you might get a lower depending on how the market develops. I find it remarkable how many still today are asking about the initial concept and claim that they would prefer a guaranteed sum than the potential profit.”
As a membership living it gives the user unlimited right to use a specific apartment. With that also come various amenities and facilities such as transportation, gymnasium, a pool plus the technical maintenance of the property.
The criteria which applies for the buyer is to be over 50 years old, speak a Scandinavian language and having the recourses to pay around minimun143 000 US dollars for the unit and the 11,770 baht (325 dollars) monthly service fee.
“My idea is that when you have lived for such a long time in one country that you can speak the language; then you also know that culture. And living like this in an entirely different culture, in a different society, one perhaps wants to have a base to start from. We see that this has been working very well. Scandinavian Village’s foremost advantage is the social community. We see people flying down to Thailand, buying a membership and meeting completely new friends, when they are in their sixties. Then when they go back home, they travel around visiting each other.”
Being appointed as the pioneering project by many of its followers, this distinction is not denied by the Executive Director and also majority owner.
“As far as I know, we were the first one, at least on this level. When we first joined the ‘Property abroad’ show in Stockholm, we were they only company from Thailand. There were then around 30 companies from Spain. If you compare that to the show in October 2006, I think there were 19 companies from Thailand and 15 from Spain. That says a bit about the trend.”
The increased competition he only sees as beneficial, even if Scandinavian Village is doing their own thing with no need to differentiate from any competitor.
“It is absolutely positive, the more players the better it is. Our ambition is to be the best on what we are doing. And up to today there is not really any competitor. The fact that there are alternatives leads to increased acceptance towards buying a home in Thailand. The fact that people are buying villas, I think it is positive for all. We see no negative aspect.”
So why has not Scandinavian Village jumped on the bandwagon selling homes to any prospective buyers in general?
“My idea is to become the best at one thing, I think that will be most profitable in the long-run. That competition in that business sector is also steadily increasing.”
It should perhaps also be made clear that this retirement residential project is not a place where the residents are in need of any medical care on site, nor is it a rehabilitation centre.
“We turn towards active senior people full of vitality who are semi-retired or have stopped their working career and now want to enjoy a nice life.” Mr Kreuger points out.
There was one point, though, when Scandinavian Village and Mr. Peter Diurson (Healthy Living Thailand) initiated Scand Care, a rehabilitation centre primarily for rheumatics, also to be placed in Bang Saen. Thailand would be an ideal country with its warm climate along with low costs for living and labour.
“Unfortunately we could not gather a large enough customer basis to feel safe in that investment. We would love to continue with such a project but we cannot be dependent upon county councils in Sweden only. That group is too small today, and it is hard to predict what will happen with the compensation to individuals in the future. Starting that today, we would prefer doing it with several others, maybe for instance a German or Russian partner.”
“All rehabilitation stretching over a longer period could with great advantage be performed in Thailand. Thanks to that it will come sooner or later,” predicts Mr Kreuger.
Anyhow the retirement home developer can already reap the fruits of the booming market for Scandinavians in the Southeast-Asian tourist haven, though seeing several reasons for it.
“Yes, it is considerably easier now. But there are several factors. One is that many buying from us today has followed our project during some years, observing the development. And there are not many questions marks when they are coming to us. The questions we answer today are of a different character than the ones we got a few years back. There is confidence in the company and a base trust in the project. And we have very pleased customers living at Scandinavian Village who are willing to answer any questions.”
Scandinavian Village have gradually come to realize that their core customer group is somewhat limited and that their expectations were perhaps a bit exaggerated in the beginning.
“We only turn towards those over 50 being willing to pay for this level of service and appreciating it.”
About the rapidly growing property boom he can see one danger in that things are happening so fast: “Quality-wise, I think there is a risk here. In Thailand a larger responsibility falls on the buyer than in for instance Sweden where there are such well developed construction standards and protection for consumers and end users. But I see another risk, which is that some of the projects might never be completed. And should that happen a few times, concern could spread that would hurt all on the market. I see that as a larger risk than if one single project perhaps does not meet up to the standard they are claiming to have.”
What is clear is that the trend of owning property and retiring overseas is going to grow in Thailand as the preferred location in Asia. More developers are targeting retirees, who are considering staying here permanently or seasonally, as well vacation property investors. Thailand is well-positioned as a well-recognized tourist brand.
“The increasing interest from the Scandinavian market is directly connected to the upsurge in tourism to Thailand. When we started the project, tourism was already fairly large. Then Thailand was among the most popular destinations. A few years later it became the most popular destination, whereas today, also in numbers, it’s the most popular destination in the world for Swedes. Today we have mass tourism with an acceptance that you can travel Thailand. Following on that, with people having already travelled here several times and found their favourite destination, the urge also arises to buy a home.”
Once people recognize what Thailand currently has to offer it just seems unbeatable.