Lease hold 30 years - should I?

[jerrys1111]

In Europe I would not buy a flat with a leasehold under 80-100 years, probably. Why would I in Thailand? I'm told it's normal here. Is it? I need some advice, thanks.

[KittenKong]

I probably would not consider buying a short lease of less than 100 years either, unless it was extremely cheap. Thai leases of 30 years seem particularly unattractive, especially considering that the widely touted 30+30+30 lease arrangements are not legal and not enforceable.

Leases seem to be fairly common in Phuket but not elsewhere here that I'm aware of. I see no obvious reason for this and so I assume that it is just one more Phuket property scam. Elsewhere in Thailand most foreigners wanting to buy a condo would just buy it freehold, which they can do completely legally.

[jerrys1111]

I probably would not consider buying a short lease of less than 100 years either, unless it was extremely cheap. Thai leases of 30 years seem particularly unattractive, especially considering that the widely touted 30+30+30 lease arrangements are not legal and not enforceable.

Leases seem to be fairly common in Phuket but not elsewhere here that I'm aware of. I see no obvious reason for this and so I assume that it is just one more Phuket property scam. Elsewhere in Thailand most foreigners wanting to buy a condo would just buy it freehold, which they can do completely legal ly.

Thanks. My worry is mainly the landlord, not so much investment (I have property in my country, that's my safety net). If the leaseholder is trustworthy (there are companies that have an OK reputation and others unknown that I assume are dodgy) then the leasehold may be an OK idea? Where I want to be in Bangkok, and location is my first priority, there only seem to be leaseholds. I am waiting for some positive feedback on leaseholds, pleeease

[wordchild]

there seems to be something of a suspension of disbelief going on with the price of (new) leasehold property in Bangkok. There should be a very significant difference between the purchase price of a long term rental contract (ie a lease) which will depreciate in value over the course of the lease and the price of a freehold which is likely to hold its value and may well appreciate over time. But actually the discount (eg in price psm) for new leasehold condos seems to me to be quite small (certainly say compared to a few years ago) and the ones i have seem promoted recently (in Bangkok) look very poor value.

in the 2nd hand market, where leases are under say 10 years, you can occasionally find a bargain ie when compared to renting the same condo; some time ago a friend of mine bought a lease with just a few years remaining in an oldish building owned by the Crown Propert Bureau; he loved the location (Rajadamri) and looked at the purcase as a cheap way of renting.

This is not like the UK where the leaseholder has some protection (eg the right to purchase a lease extension at a fair price). In Thailand it is a false comparison to compare buying a lease with buying a freehold condo, here leasing is just renting by another name and all the rights are with the landlord.

Edited January 31, 2016 by wordchild

[trogers]

there seems to be something of a suspension of disbelief going on with the price of (new) leasehold property in Bangkok. There should be a very significant difference between the purchase price of a long term rental contract (ie a lease) which will depreciate in value over the course of the lease and the price of a freehold which is likely to hold its value and may well appreciate over time. But actually the discount (eg in price psm) for new leasehold condos seems to me to be quite small (certainly say compared to a few years ago) and the ones i have seem promoted recently (in Bangkok) look very poor value.

in the 2nd hand market, where leases are under say 10 years, you can occasionally find a bargain ie when compared to renting the same condo; some time ago a friend of mine bought a lease with just a few years remaining in an oldish building owned by the Crown Propert Bureau; he loved the location (Rajadamri) and looked at the purcase as a cheap way of renting.

This is not like the UK where the leaseholder has some protection (eg the right to purchase a lease extension at a fair price). In Thailand it is a false comparison to compare buying a lease with buying a freehold condo, here leasing is just renting by another name and all the rights are with the landlord.

Value of 30-year lease properties should only be about 65-70% of a freehold given similar location and quality.

Perhaps the lack of freehold highrise properties in a desired location causes demand to exceed supply?

Other than this, 30-year leases are for landed and commercial properties. Cannot equate them with your apartment flats.

[KittenKong]

Value of 30-year lease properties should only be about 65-70% of a freehold given similar location and quality.

How do you work that out?

In my book no 30-year lease could possibly be worth 65% of a freehold, unless the property was on the edge of an eroding cliff.

[Pinot]

I don't know about the rest of the country, just about Phuket. I always advise people not to buy for...100's of reasons. Buying property here is terrible investment. High risk for many reasons but the bottom line is...the value goes down.

Rent

[wordchild]

it seems to me that buying a new "Thai style" 30 year lease is the worst of all the options available; you have to make a big financial commitment so you dont have the flexibility that comes with renting. But also you dont have many of the benefits of ownership eg in purchasing a lease you have aquired an asset that would be very difficult to sell (particularly later on when only a few years are remaining) and you (usually) cant do any significant refurbishment or make any other changes you might like without the pemission of the landlord.

Edited February 1, 2016 by wordchild

[trogers]

Value of 30-year lease properties should only be about 65-70% of a freehold given similar location and quality.

How do you work that out?

In my book no 30-year lease could possibly be worth 65% of a freehold, unless the property was on the edge of an eroding cliff.

Totalling the present value of future rental values over the lease period vs freehold...

[fosseway]

I always thought that the lease "Dies" with the landlord. You would then have to deal with the beneficiaries, could raise all sorts of problems maybe.

[trogers]

I always thought that the lease "Dies" with the landlord. You would then have to deal with the beneficiaries, could raise all sorts of problems maybe.

Developers of highrise leaseholds are usually companies, not individuals...

[jerrys1111]

Thanks. Some folk try to convince themselves that throwing money away (i.e. renting) is better than having a place of your own. Freehold is a better option but a leasehold may be good. Monthly payments may be lower than an actual rent, although service charges may level the field. BUT you get a larger space (2 bedrooms for the price of 1 is my conclusion, after some research). Also, on a leasehold you CAN hang pictures on the wall. The landlord is never going to show up, not for the next 30 years. That's how I see it although I would rather buy a freehold obviously, but location is my priority.

[KittenKong]

Value of 30-year lease properties should only be about 65-70% of a freehold given similar location and quality.

How do you work that out?

In my book no 30-year lease could possibly be worth 65% of a freehold, unless the property was on the edge of an eroding cliff.

Totalling the present value of future rental values over the lease period vs freehold...

Well, that may make sense to the sort of people who would be prepared to buy a 30-year lease in the first place but it makes no sense at all to me.

To me it sounds like you are getting all the downsides of renting with none of the advantages of ownership.

[blackcab]

Don't forget the 1.1% it will cost you to register the lease. 1.1% of the total amount payable over the entire term of the lease.

You have to do this to get the lease recorded at the land office. If you don't, your lease will only have legal effect for 3 years.