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99 year leases are now
needed in Thailand
source: Pattaya Today May 16 2008
Freehold and leasehold wouldn’t matter
NOTWITHSTANDING the current problems in Thailand of a super baht, rising prices
and continuing political uncertainty, the global trend amongst expat retirees is
to buy property in the chosen destination. Thailand is far and away the most
popular country in south east Asia for westerners and easterners planning to
make a fresh start in their fifties or sixties.
Research suggests that most of these potential buyers spend from one to three
months in the country before making their selection of property. They spend a
lot more during that period than average tourists, thus composing a segment
which is very desirable in overall financial terms. In areas such as Pattaya,
over 90% of holiday homes costing more than four million baht are believed to be
bought by foreigners.
Condominiums are obviously a popular option as the foreigner can own the unit in
his or her own name provided that not more than half of all the flats in a given
development are owned outright by aliens. Even where the foreigners exceed the
50% ceiling, there are several alternative routes to buy including the setting
up a company. Some foreign owners are married to Thai nationals and may feel
comfortable with the documents in a Thai name.
But Thailand, as is well known, does not allow foreigners to own freehold land
and restricts leases to 30 years. It’s common in resort areas to provide leases
of 30 years, along with options to renew by 30 years each (30+30+30), and the
prices tend then to be similar to the freehold value. However, there is no
experience of what actually happens after the first 30 years expires. It seems
that the freeholder and the lessee will need physically to contact each other to
renew the lease even though the full price has been paid. As buyers frequently
remark, this is a complicated process.
It would be the best way forward if a simpler process was established to permit
foreigners to have a longer lease than 30 years. The most suitable lease would
in fact be 99 years which has the advantage of being well known in European
countries. The lease would be registered for 99 years with the land department
upon payment of the lease value. Such properties could then be sold without
equivocation at virtual freehold prices.
In turn, Thailand would become more attractive to overseas investors than
competitor countries in the region and would generate a growing demand for
resort homes at the mid and high end of the market. In other markets, including
Vietnam, 70 year leases are being offered to aliens with options of multiple
extensions.
China, for its part, offers up to 70 year leases as well and Singapore up to 99
years in some specially promoted areas such as Sentosa Cove. Malaysia as its own
special retiree programme and offers both the opportunity to buy freehold land
or to obtain leases up to 99 years according to the location in the country.
The investment market would also benefit as foreign institutions and property
companies tend to fight shy of countries where the hotels and office blocks
can’t be owned by foreigners. Cambodia has the same problem at the moment as
major investors await the outcome of a government committee currently looking at
lease and purchase options for non Cambodians.
The Thai government, if it is serious about longer term tourism and investment, has to bring the property laws up to date.
One of the most important recommendations, if not the most important, is the
extension of leases on freehold property. If Thailand is to be a serious player
in an increasingly competitive environment for cash inflows and transfer of
capital, it’s high time that property legislation was put under the microscope.
A review is already long overdue.
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