Government Considers Longer Leasehold Terms

[george]

FOREIGN PROPERTY OWNERSHIP

Government considers longer leasehold terms

BANGKOK: -- The government is considering allowing greater foreign ownership in property firms and extending leasehold periods beyond 30 years to stimulate the business, according to Finance Minister Surapong Suebwonglee.

The amendment would stimulate market segments that have been hit by sluggish demand, he said yesterday.

''This has been discussed quite seriously over the past two to three months. We need to think about the percentage of shareholding and leasing access compared with the number of years. The crisis that we have had in the past two years led us to think and look at a new paradigm,'' he said at an investor forum held by Euromoney.

Dr Surapong said the government would consider new rules on leasing more on par with the region. The government has also abandoned a controversial proposed change to the Foreign Business Act, which tightened the [more ...]

--Bangkok Post 2008-05-15

[wilko]

"Allowed only in specific areas" - so essentially the attitude remains the same, which is deterrent rather than encouragement.

[stevenl]

"Allowed only in specific areas" - so essentially the attitude remains the same, which is deterrent rather than encouragement.

That quote does not come from Dr. Surapong, who presented the idea, but from Mr. Issara, who is opposed to more freedom for foreigners on the housing/land market.

[nikster]

Awww... well I trust market forces to take care of the attitude. It's very simple: Protectionism is bad for business. Once Vietnam zooms by Thailand on the passing lane, things will change rather quickly.

[Simbo]

I have a 30 year lease on my property. leased from my ex-wife. what good is a 90 year lease to me, unless I can 'will' it to a person of my choice. I'm 64. I would have to live a very long time to complete my lease.

[iang]

I have a 30 year lease on my property. leased from my ex-wife. what good is a 90 year lease to me, unless I can 'will' it to a person of my choice. I'm 64. I would have to live a very long time to complete my lease.

Because a 90 year lease, even with 60 years left to run on it, becomes a very saleable commodity and thus convetred back to hard cash again - in theory at least, at a profit.

[chrisdom]

Vietnam's tail lights are in view. Cambodia will be next to pass by. If I were investing in this region now, it wouldn't be here.

[mstrtptn]

even with 60 years left to run on it, becomes a very saleable commodity and thus convetred back to hard cash again - in theory at least, at a profit.

60 years lease term?

I must have missed something very important.

Or NOT!

Please, stick to the realities; 30 is 30.

It is NOT 60, 90 or 150. LOT of discussion on this matter easily searchable.

[haltes]

God knows why they have this aversion to letting foreigners buying a place to live, they let the Chinese and Indian Thais eventually have the right to own land; poor Thais who cannot buy are priced out by RICH Thais not by the few westerners who might like to buy a house.

Relaxing the laws to create a free market would bring in a lot of investment, Thailand is not that cheap when compared to other countries and this image of barbarian house buyers at the gate who are just chomping at the bit to buy up all the precious Thai land is really getting a bit much.

Edited May 15, 2008 by haltes

[pjallittle]

Awww... well I trust market forces to take care of the attitude. It's very simple: Protectionism is bad for business. Once Vietnam zooms by Thailand on the passing lane, things will change rather quickly.

The "attitude" of protectionism goes back so far that attempts to relax the provision will be a tough one. The USA & Canada have none of this systemic prohibition, even China has worked out a reasonably comfortable means of accommodating Western companies.

Thailand can't get out of their 19th century mentality and that isn't about to change. I think Vietnam has already whizzed by and doubt that Thailand even noticed.

Progress isn't all that it's cracked up to be, it's part of the charm, be careful what you wish for, it may be the worst thing for the people.

[cclub75]

However, Assoc Prof Manop Bhongsadadt of Chulalongkorn University said the issue was ''very sensitive'' and unlikely to survive the three readings required in Parliament to change the law.

That's the key sentence, ladies and gentlemen.

The rest (modification of condo quota, modification of land ownership) is nothing but drums rolling... from the boiler room (the ubiquitous Jones Lang LaSalle).

"New paradigm" ? "Seriously discussed quite seriously over the past two to three months" ? Bullshit.

Surapong says what his audience (european) wants to hear.

But who is speaking about those issues -seriously- in Thailand ? The boiler room only, aka the real estate agencies. That's all.

Politicians ? Nil. The establishement ? Nil.

People on the streets? Certainly nil.

As for the 99 years lease... in certain areas (always the same dumps : Pattaya and Phuket) well, it's a little biscuit, on a little scale, like always in Thailand. And it could be seriously challenged by courts.

The Great Revolution is not for tomorrow...

[iang]

even with 60 years left to run on it, becomes a very saleable commodity and thus convetred back to hard cash again - in theory at least, at a profit.

60 years lease term?

I must have missed something very important.

Or NOT!

Please, stick to the realities; 30 is 30.

It is NOT 60, 90 or 150. LOT of discussion on this matter easily searchable.

If you'd have read the article from the Bangkok Post that the first entry referred to, you'd have realised that the discussion was based on the possible proposal of increasing the maximum lease term in Thailand from the current 30 years, to 90 years, in line with what's currently available in the UK. The forum entry I replied to was questioning whether it was worth even bothering about, as his current 30 year lease would 'see him out'. You need to read things in their correct context.

[Bruce1]

It's great to see they're finally showing some signs of getting over their anti-foreigner paranoia and moving towards more real-world rules. However, I still wouldn't buy on a lease, I'd want freehold outright and in my name only before I'd buy in Thailand or anywhere else.

Canberra has 99-year leases on government-owned land so it can be done, but I still think its a second-rate choice.

Over time, its the land value which goes steadily up, while house values fluctuate depending on whether they're maintained and how old they are. After 100 years or so, what you're buying is a block of land with a house which needs to be knocked down and replaced.

As someone said, allowing in foreign buyers won't price poor Thais out of housing, because they're in different sections of the market/. Plus, a bit of property price inflation would be good for most Thais because it would increase the value of their houses and make them wealthier. I bought my house in Brisbane for $320,000 4 years ago and the bank now values it at $480,000, which is very nice. Property is a 10-year cycle, not a quick buck.

The Thais have got to stop thinking like they're a poor third world economy and start thinking like they're managing the 37th largest economy in the world. For instance, they should also deregulate the rice market to shift power away from millers to the farmers, who would be able to play off the millers against each other or even store their rice until the price was right to sell. Instead of being so paternalistic, they ought to move more power to the people to make decisions for themselves.

But what would I know, I'm just a farang.

[A_Traveller]

I've noted in the business section that there is one very important sentence in the article,

{Finance Minister} Dr Surapong ... The government has also abandoned a controversial proposed change to the Foreign Business Act, which tightened the definition of foreign ownership to promote foreign direct investment, he added.

Regards

[BigSnake]

Great, however my guess is it will last as long as the current government is in power, after that it will be at the mercy of the new government.

[hardy1943]

Another laughing able promise

[h90]

I have a 30 year lease on my property. leased from my ex-wife. what good is a 90 year lease to me, unless I can 'will' it to a person of my choice. I'm 64. I would have to live a very long time to complete my lease.

if you get 100, they kick you out the last 6 years

[Tony121]

The property markert needs some kind of jolt to get it going again and if the leases were extended this would go a long way in helping.

considering nearly every politician owns land in tourist destinations it is possible it could come into effect.

This isn't about helping foreigners or the poor its about investment and the politicians lining there own pockets.

[ade100]

Sounds great but just a word of caution. I am sure there are many ex-pats who would love to be able to buy property and to protect their investments in Thailand. However, it is possible that a change in the law may not be beneficial to ex-pats.

In Singapore, about 2 years ago property prices started to rise and property, which is mostly condominiums, is available for purchase by anyone of any nationality. Almost immediately foreign investors (and I am talking about multi-million dollar investment companies not ex-pats with a few grand) were snapping up condos before they had even been built. Property and rental prices were close to doubling in the space of a year. Singaporeans and ex-pats alike were being priced out of the market.

A similar scenario could be played out in Thailand.

[turbog3]

God knows why they have this aversion to letting foreigners buying a place to live, they let the Chinese and Indian Thais eventually have the right to own land; poor Thais who cannot buy are priced out by RICH Thais not by the few westerners who might like to buy a house.

I think that's exactly the whole point with the Thai protectionism, to protect the RICH Thais.

If foreigners can't buy land, then who can? Thais, that's who.

Which Thais can afford to buy land? The RICH Thais, that's who.

If foreigners want to build a house, that's fine, but the land is owned and leased by the (RICH) Thais.

Want to build a new restaurant in Pattaya? Fine, but the land is owned by a Thai.

Want to buy a hotel in Bangkok? Ok, but you can only lease the land that the hotel stands on.

Great system, don't you think?

The ruling class in Thailand haven't exactly made themselves a reputation as protectors of the poor villagers out in the goonies struggling to get by, one day at the time.

They are not concerned with who owns the land that your house stands on in the village 10 miles north of Korat or 7 miles east of Khon Kaen. They don't care if your name or your wifes name is written on the deed.

What they are concerned with is who owns all the valuable land in Bangkok. Who controls all the valuable land in the booming tourist-locations? Who can make money buying and selling and leasing land to international corporations setting up offices and constructing buildings? There's a whole lot of money for the wealthy Thais to be made here... Which ex-PM, now turned football-club-owner and NOT(!?) a politician any more, stands accused in a shady land-deal in Bangkok? (Hint: his name starts with a "T" - and ends with "haksin"...) Whoops, better not go there...

There's a reason Thailand welcomes tourists to spend all their money on vacation, a foreigner visiting as a tourist spends a whole lot more money per day than a foreigner living in the country as a resident and doesn't require the Thai government to spend a whole lot of money on them. Tourists have to take care of themselves - education, child-care, health care and everything else has to be payed for by the foreigners home-country.

As a tourist, the Thai authorities don't have to take care of anything, except maybe build a few roads and a new international airport (but that can be a great OPPORTUNITY for the wealthy, ruling class...) but as for the residents of the country, the Thai government has to actually try to spend some money on education, health care and what-have-you. A tourist only spends money, a resident also consumes money.

As soon as the tourist wants to stay a little longer, as soon as he wants to buy a house and settle down - the Thai government show their true face by slamming a bunch of xenophobic prohibitions in the face of the farlang:

- You can own the house but not the land!

- You can stay in the country, but not for too long, you have to leave the country and then come back and the rules for all the different visa's change every two or three years so no-one really knows, not even the immigrations officers, eventually wearing and tearing the farlang down so he leaves the country (and the property, in the capable hands of the RICH Thais...).

- Compare the rules for visa or citizenship with most of the western countries, or even other SEA countries, and you'll see that Thai rules are not meant as an encouragement.

For the wealthy and rich foreigners looking to invest money in Thailand there are of course a whole different set of rules. Set up a corporation and let the company own everything - nemas problemas. The investment has been made, the money transfered in to the country and everything is owned by, uhm, at least 51% Thai nationals... which means that Thai lawyers and the RICH Thais control most of the foreign investments...

Great system, don't you think?

But at least the beer is served ice-cold and the women are hot-blooded in Thailand!

Edited May 15, 2008 by turbog3

[wineaux]

There's a reason Thailand welcomes tourists to spend all their money on vacation, a foreigner visiting as a tourist spends a whole lot more money per day than a foreigner living in the country as a resident and doesn't require the Thai government to spend a whole lot of money on them. Tourists have to take care of themselves - education, child-care, health care and everything else has to be payed for by the foreigners home-country.

As a tourist, the Thai authorities don't have to take care of anything, except maybe build a few roads and a new international airport (but that can be a great OPPORTUNITY for the wealthy, ruling class...) but as for the residents of the country, the Thai government has to actually try to spend some money on education, health care and what-have-you. A tourist only spends money, a resident also consumes money.

What a load of crap.

[jumnien]

The gentlemen behind the coup and their goons like the PAD will start killing people in the streets before relaxing laws against foreign ownership.

[wineaux]

Anyone missed this news? It's now cheaper to sell/buy as the taxes have been lowered for a year.

01/04/2008

2008 Tax Stimulus Package

Property Tax Cuts

Cuts to Property Conveyance Taxes

Effective for the one-year period of 29 March 2008 to 28 March 2009, registrations of property transfers are subject to Specific Business Tax (“SBT”) at the rate of 0.11%, instead of 3.3%. SBT is a tax that applies to a property upon registration of a transfer at the Lands Department and is payable on the appraised value of the property by the Lands Department or the actual price, whichever is the higher.

Also effective for the one-year period 29 March 2008 to 28 March 2009, a registration of a property transfer is subject to a Transfer Fee of 0.01%, instead of 2.0%. Transfer Fees are payable upon registration of transfer of the property at the Land Department and is payable on the appraised value of the Land Department. The reduced Transfer Fee at the rate of 0.01% of the appraised value of the Land Department applies to land and buildings including houses, townhouses, shop-houses, condominiums, and office buildings.

[Kerryd]

Yeah, I'm betting there's all sorts of you out there just clamping at the bit, hoping that Thailand will suddenly allow foreigners to own property outright in their names.

"Oh no. It won't affect property prices at all"

What a load of crap. With the existing loopholes already in place, property in many areas is well beyond the reach of the average local. New developments are priced towards farang purchasers, who still see them as bargains compared to where they came from. Other farangs are chomping at the bit, hoping to jump in and buy property at Thai prices and flip them to Euro/NA buyers at huge mark ups. (Well, to be honest it wouldn't just be "farangs", but Asian investors as well)

Yeah, that won't affect property prices at all.

Just like it doesn't affect property prices at all in Canada. Where rich (Hong Kong) executives buy houses for $250+k, then have the existing home demolished so that a newer, bigger and more expensive home can be built.

Yeah, that has no effect on property prices at all.

People working in Vancouver can barely afford properties in Abbotsford and Chilliwack, yet they buy them and do the 100+ kilometer drive to and from work everyday, because they simply can't afford to live any closer.

I was talking to a Belgium not too long ago about how expensive things were getting in Pattaya. His comment was that they were still considerably cheaper, perhaps a third the cost of comparable properties back home. He thought pretty much everything here was a "steal". Pretty sure most of the locals don't think that, at least not the ones I know and talk to, who sadly shake their heads when they see the prices being asked for some of the new shophouse buildings springing up everywhere. Where 3 years ago they could buy a shophouse with two floors above it for 1.2 million, now similar places are priced at 5 mil +.

Not that shophouses are aimed at the farang market, but when property values go up, it doesn't get restricted to one segment of the market. (meaning that a developer isn't likely to say "Well, I want to market this new shophouse/apartment building to local Thais, so I'm going to sell it at a quarter of the price that Somchai is selling his for across the road, because Somchai is targeting farang buyers). If Somchai is selling his units at 5 mil a pop, you can bet that Somtam is going to want the same (or more).

Let foreigners own property outright in their own names ? How long before half (4/5ths, 9/10ths) of the Isaan rice farms are owned by large multi-national corporations, and those former farmers find themselves out of work, out of money and out of luck ? Not long.

Many of those farmers are barely getting by as it is. Some slick multi's walk in and flash some cash and I'll bet alot of those farmers would jump at the (short term) opportunity, and not even consider how they are going to survive tomorrow, after spending their windfall today.

Longer lease-hold terms can be a double-edged sword as well. Even 30 year terms can be tricky.

Imagine you sign a 30 year lease, at 10,000 baht/year (300,000 total). 10 years down the road old Somchai notices that everyone around him is getting 40,000/year for their leases as property values soar. You think old Somchai is going to be content at getting 30,000/year less than his neighbours, for the next 20 years ? Not to mention what kind of a jump the price for a second term could be (assuming there will be a second term). What about if you signed the same kind of deal for 60 years, or 90 ?

Take for example a situation that occurred in Vancouver a couple years ago. The government arranged (30 year) leases on native land in the 60's. People built houses, raised families and retired. Suddenly the 30 year terms were up. The natives informed the home "owners" that the price for their (new) leases was going to jump from $300 per month, to over $3,000 ! The government decided that it was none of their affair (anymore).

Most of these people couldn't afford a thousand percent increase, and nobody was willing to buy the homes due to the uncertainty of the situation, and no long term guarantees.

The insurance companies actually cancelled the policies of a number of home owners, fearing that those who couldn't afford the new rates and those that couldn't sell their homes, might suddenly have a rash of "accidental" fires.

An accidental fire would be the least of a leaser's worries in Thailand. An accidental (drowning/car accident/hunting accident/poisoning/etc) would be more likely.

A 60/90 year lease would have some advantages, but could also have some drawbacks as well. Chances are it will all be for nought anyways. A lot of hot air and hollow promises which will slowly dissipate until the very subject is forgotten by all but a few that thought their shot at the jackpot was at hand.

[jbowman1993]

Yeah, I'm betting there's all sorts of you out there just clamping at the bit, hoping that Thailand will suddenly allow foreigners to own property outright in their names.

"Oh no. It won't affect property prices at all"

What a load of crap. With the existing loopholes already in place, property in many areas is well beyond the reach of the average local. New developments are priced towards farang purchasers, who still see them as bargains compared to where they came from. Other farangs are chomping at the bit, hoping to jump in and buy property at Thai prices and flip them to Euro/NA buyers at huge mark ups. (Well, to be honest it wouldn't just be "farangs", but Asian investors as well)

Yeah, that won't affect property prices at all.

Just like it doesn't affect property prices at all in Canada. Where rich (Hong Kong) executives buy houses for $250+k, then have the existing home demolished so that a newer, bigger and more expensive home can be built.

Yeah, that has no effect on property prices at all.

People working in Vancouver can barely afford properties in Abbotsford and Chilliwack, yet they buy them and do the 100+ kilometer drive to and from work everyday, because they simply can't afford to live any closer.

I was talking to a Belgium not too long ago about how expensive things were getting in Pattaya. His comment was that they were still considerably cheaper, perhaps a third the cost of comparable properties back home. He thought pretty much everything here was a "steal". Pretty sure most of the locals don't think that, at least not the ones I know and talk to, who sadly shake their heads when they see the prices being asked for some of the new shophouse buildings springing up everywhere. Where 3 years ago they could buy a shophouse with two floors above it for 1.2 million, now similar places are priced at 5 mil +.

Not that shophouses are aimed at the farang market, but when property values go up, it doesn't get restricted to one segment of the market. (meaning that a developer isn't likely to say "Well, I want to market this new shophouse/apartment building to local Thais, so I'm going to sell it at a quarter of the price that Somchai is selling his for across the road, because Somchai is targeting farang buyers). If Somchai is selling his units at 5 mil a pop, you can bet that Somtam is going to want the same (or more).

Let foreigners own property outright in their own names ? How long before half (4/5ths, 9/10ths) of the Isaan rice farms are owned by large multi-national corporations, and those former farmers find themselves out of work, out of money and out of luck ? Not long.

Many of those farmers are barely getting by as it is. Some slick multi's walk in and flash some cash and I'll bet alot of those farmers would jump at the (short term) opportunity, and not even consider how they are going to survive tomorrow, after spending their windfall today.

Longer lease-hold terms can be a double-edged sword as well. Even 30 year terms can be tricky.

Imagine you sign a 30 year lease, at 10,000 baht/year (300,000 total). 10 years down the road old Somchai notices that everyone around him is getting 40,000/year for their leases as property values soar. You think old Somchai is going to be content at getting 30,000/year less than his neighbours, for the next 20 years ? Not to mention what kind of a jump the price for a second term could be (assuming there will be a second term). What about if you signed the same kind of deal for 60 years, or 90 ?

Take for example a situation that occurred in Vancouver a couple years ago. The government arranged (30 year) leases on native land in the 60's. People built houses, raised families and retired. Suddenly the 30 year terms were up. The natives informed the home "owners" that the price for their (new) leases was going to jump from $300 per month, to over $3,000 ! The government decided that it was none of their affair (anymore).

Most of these people couldn't afford a thousand percent increase, and nobody was willing to buy the homes due to the uncertainty of the situation, and no long term guarantees.

The insurance companies actually cancelled the policies of a number of home owners, fearing that those who couldn't afford the new rates and those that couldn't sell their homes, might suddenly have a rash of "accidental" fires.

An accidental fire would be the least of a leaser's worries in Thailand. An accidental (drowning/car accident/hunting accident/poisoning/etc) would be more likely.

A 60/90 year lease would have some advantages, but could also have some drawbacks as well. Chances are it will all be for nought anyways. A lot of hot air and hollow promises which will slowly dissipate until the very subject is forgotten by all but a few that thought their shot at the jackpot was at hand.

Referring to all Thais as "Somchais" might not be racist (but it certainly feels that way)

Edited May 15, 2008 by jbowman1993

[nycjoe]

In the USA property taxes insure that you really don't own the land. If Thai's paid property tax they wouldn't collect deeds as though they were baseball cards. I am sure that some people don't even know what land they have they just keep collecting it.

[wineaux]

Of course if you have any doubts over leasehold then buy a house through a Limited Company. If the house is already in a Company name then all it requires is a simple change of Director.

As expected the proposed changes to the FBA were abandoned and the staus quo maintained.

No need to get upset, if you feel you can't manage the buying process then rent. Don't get your knickers in a twist, make your decision and stop moaning.

p.s can someone tell me where I go to get my free health insurance and child care as suggested by the new member??

[Arkady]

I have a 30 year lease on my property. leased from my ex-wife. what good is a 90 year lease to me, unless I can 'will' it to a person of my choice. I'm 64. I would have to live a very long time to complete my lease.

- Foreigners who are considerably younger than 64 may wish to buy on 90 year leases. These could become quite a trend if banks would lend to expats to buy a 90 year lease, although this may be a tall order for Thai banks who normally prefer to lend to the riskiest Thai borrower rather than a respectable expat with a decent income.

- Buyers may indeed wish to will their property to some one for the remainder of the lease. They may also want to sell the property which becomes more feasible with a longer lease. Heirs may also want to sell it.

- 30 year leases are currently no more protective to the lessee than a standard one year residential lease. It is to be hoped that the advent of a 90 year lease term would force a review of the whole system resulting in better rights for lessees. 90 year leases might end up useless, if there are still limited rights of reassignment and no proper protection of the lessee in case the land changes hands etc.

[Joensen]

Foreigners, Farangs or any non Thai shall not be able to by land in Thailand, and that is probably how it will be in the future or maybe for eternity.

Other countries have same law/regulations with owing land rules, in Europe you can not just by what ever you want and in USA they also have restrictions, shipping company can not own the land there own terminal is built on and so on this is very basic. What happen in Singapore is insane, Singapore will be a Country like Luxembourg or Monaco etc, with property/house prices only for the stinking rich people.

Land in Thailand is a piece of Thailand and a foreigner can not just own a piece of Thailand that is very clear for me, only the Thais can own Thailand.

I don’t know how many billionaires there are in China and India but there should be some, and if they can by land in Thailand they will do it, and it will be an invasion that will chock people.

The way the Thais control the ownership of land in Thailand is fine, and serious company do good business even if they don’t own the land, the foreign company have good condition in Thailand.

All that discussion about how stupid the rules are in Thailand only show that the people do not know the rules in other countries and maybe not even there own country( rules for foreigners), and by the way Thailand is a very liberal country to foreigners of all nationalities.

[Arkady]

God knows why they have this aversion to letting foreigners buying a place to live, they let the Chinese and Indian Thais eventually have the right to own land; poor Thais who cannot buy are priced out by RICH Thais not by the few westerners who might like to buy a house.

Relaxing the laws to create a free market would bring in a lot of investment, Thailand is not that cheap when compared to other countries and this image of barbarian house buyers at the gate who are just chomping at the bit to buy up all the precious Thai land is really getting a bit much.

You have hit the nail on the head. The Thais who make the loudest noise about the threats to poor Thais if foreigners are allowed to buy land are invariably the same wealthy Thai Chinese who argue that Thai businesses will not be able to compete any more, if foreigners are allowed to own their own businesses. They are happy that their families got here before the doors banged shut and now they want to make sure that no one else can get in and disturb them as they ruthlessly exploit the poor, uneducated ethnic Thais whom they regard as little better than animals.

The comments in question were made by Surapong at the Euromoney conference yesterday but I have not seen him or any one else in the government floating these ideas elsewhere. So I think we can assume this policy idea is extremely low priority for this government but Surapong wanted to put out a crowd pleaser to get a good applause at the conference. Pridyathorn for some reason made keynote closing remarks at the conference and he had also changed his tone radically for the foreign audience. Gone were his suggestions late last year to a Thai audience that foreigners should be chased out of the Thai stock market because they are dishonest and manipulate the market and that opening up brokerage offices in rural areas would easily allow foreign institutions to be replaced by Thai farmers. Instead he showed himself as amazingly welcoming towards foreign investors.

Unfortunately sincerity is not a quality often found in Thai politicians nor do they credit foreigners with a great deal of intelligence. Anyway it's an improvement on the outright xenophobia displayed by the Sarayudh government, including Pridyathorn himself during his disastrous stint as finance minister.