Property Firms Seek Clarity On Foreign Buying

[kokothemonkey]

So lets recap: oversupply in Bangkok to begin with, and now 30% of any money is locked up for a year......well done Thailand, well done

Thursday December 21, 2006

NINA SUEBSUKCHAROEN

The Bank of Thailand's tough capital controls, although slightly eased after the stock market crashed on Tuesday, are scaring off foreign property buyers and will add further pressure to the market, says a local lawyer with many foreign and expatriate clients.

Under the new rules, foreigners who want to buy a leasehold property in Thailand will have no problem doing so if they can bring in Thai baht for the purpose, said Sally Ann Lefley, an associate at the Bangkok-based firm McEvily & Collins.

However, those buying freehold property, such as condominiums, will see the Bank of Thailand retain 30% of foreign funds interest-free for one year.

Ms Lefley also said that even though Thai authorities are trying to stop foreigners from setting up Thai companies to buy land and houses, those who manage to do so can buy landed real estate without having to deposit 30% with the central bank by using baht for the transaction.

James Pitchon, executive director of CB Richard Ellis, said yesterday that the central bank needed to further clarify how the controls on foreign capital inflows would affect foreign property buyers.

''We are still unclear whether it will affect overseas buyers,'' he said.

Should foreign real estate buyers have to deposit 30% of the purchase price with the Bank of Thailand for one year, it would be extremely damaging, Mr Pitchon added.

He said property was not a short-term speculative investment but a medium- to long-term one with most people buying houses and condominiums to live in. For this reason, funds used to buy property are not ''hot money'' as it cannot be sold quickly. By nature, property is illiquid. Mr Pitchon added that even if a 30% deposit with the central bank was not required, more paperwork generated by the new rules would still hurt the market.

Aliwassa Pathnadabutr, CBRE's managing director, added: ''We've been contacted by many foreigners who are concerned about not only how these regulations will affect their property purchases, but also what the effect will be in the medium to long term on the condominium market.''

Ms Lefley said that investors should simply look to lease land because the government has been enforcing regulations that restrict foreigners from setting up companies to buy land.

''Just totally forget about trying to buy land through a Thai company,'' she said. ''Things have taken place since the coup; it got very, very strict thereafter. So if a Thai company wants to buy a piece of land now, if it's 100% Thai, it's no problem. But if there is a foreign shareholder or director then the Land Office will investigate that company and check if the Thai shareholders are actually nominees for the foreign director or shareholder.''

The maximum term of a lease in Thailand is 30 years and Thai law allows one renewal of 30 years.

''You can still buy a house or a villa; it's just the land that you can't actually buy,'' Ms Lefley said. ''So you can choose to lease the house as well as the land or you can choose to buy the house outright.''

However, she cautioned that once the lease expires, the house, unless the lease agreement says otherwise, would actually become the property of the landowner.

''So whereas before sellers and buyers were concentrating more on freehold aspects, it seems that the sellers now are really getting to grips with leases and putting in more provisions, not only to protect themselves but also to protect the lessees,'' she said.

Even so, Ms Lefley noted that foreigners are not shying away from buying land and houses as her law firm had feared.

''It seems more and more are quite accepting of the option to lease. They don't seem too concerned about owning a freehold so that they can pass it on to their family when they die; it seems a lot are looking at using the property for themselves and not looking to pass it down.''

[johnnyk]

zzzzzzzzzzzzzzzzzzzzzzzzzzzz

[bkkandrew]

zzzzzzzzzzzzzzzzzzzzzzzzzzzz

Perhaps when you wake up you might offer up an intelligent post...?

[nev]

So lets recap: oversupply in Bangkok to begin with, and now 30% of any money is locked up for a year......well done Thailand, well done

Thursday December 21, 2006

NINA SUEBSUKCHAROEN

The Bank of Thailand's tough capital controls, although slightly eased after the stock market crashed on Tuesday, are scaring off foreign property buyers and will add further pressure to the market, says a local lawyer with many foreign and expatriate clients.

Under the new rules, foreigners who want to buy a leasehold property in Thailand will have no problem doing so if they can bring in Thai baht for the purpose, said Sally Ann Lefley, an associate at the Bangkok-based firm McEvily & Collins.

However, those buying freehold property, such as condominiums, will see the Bank of Thailand retain 30% of foreign funds interest-free for one year.

Ms Lefley also said that even though Thai authorities are trying to stop foreigners from setting up Thai companies to buy land and houses, those who manage to do so can buy landed real estate without having to deposit 30% with the central bank by using baht for the transaction.

James Pitchon, executive director of CB Richard Ellis, said yesterday that the central bank needed to further clarify how the controls on foreign capital inflows would affect foreign property buyers.

''We are still unclear whether it will affect overseas buyers,'' he said.

Should foreign real estate buyers have to deposit 30% of the purchase price with the Bank of Thailand for one year, it would be extremely damaging, Mr Pitchon added.

He said property was not a short-term speculative investment but a medium- to long-term one with most people buying houses and condominiums to live in. For this reason, funds used to buy property are not ''hot money'' as it cannot be sold quickly. By nature, property is illiquid. Mr Pitchon added that even if a 30% deposit with the central bank was not required, more paperwork generated by the new rules would still hurt the market.

Aliwassa Pathnadabutr, CBRE's managing director, added: ''We've been contacted by many foreigners who are concerned about not only how these regulations will affect their property purchases, but also what the effect will be in the medium to long term on the condominium market.''

Ms Lefley said that investors should simply look to lease land because the government has been enforcing regulations that restrict foreigners from setting up companies to buy land.

''Just totally forget about trying to buy land through a Thai company,'' she said. ''Things have taken place since the coup; it got very, very strict thereafter. So if a Thai company wants to buy a piece of land now, if it's 100% Thai, it's no problem. But if there is a foreign shareholder or director then the Land Office will investigate that company and check if the Thai shareholders are actually nominees for the foreign director or shareholder.''

The maximum term of a lease in Thailand is 30 years and Thai law allows one renewal of 30 years.

''You can still buy a house or a villa; it's just the land that you can't actually buy,'' Ms Lefley said. ''So you can choose to lease the house as well as the land or you can choose to buy the house outright.''

However, she cautioned that once the lease expires, the house, unless the lease agreement says otherwise, would actually become the property of the landowner.

''So whereas before sellers and buyers were concentrating more on freehold aspects, it seems that the sellers now are really getting to grips with leases and putting in more provisions, not only to protect themselves but also to protect the lessees,'' she said.

Even so, Ms Lefley noted that foreigners are not shying away from buying land and houses as her law firm had feared.

''It seems more and more are quite accepting of the option to lease. They don't seem too concerned about owning a freehold so that they can pass it on to their family when they die; it seems a lot are looking at using the property for themselves and not looking to pass it down.''

if you can trust your thai wife or partner better option is to buy in her name,sign a lease for you to live there 30 years,at least she and your children will get the house on the land not the land owner.emphasis on trust!!

[ThaiPauly]

I am in the process of buying a small condo in BK in my Wife's name

If I transfer the money to Her account when the time comes will I be affected by this new regulation or not?

Anybody any idea?

Thanks

TP.

PS. In the above report it staes that Condominiums are Freehold...I always thought they were Leasehold, but I could of course be mistaken

[taxexile]

condos are freehold usually , and can be bought in joint names with ones spouse.

[eljeque]

On leasehold / freehold....

I just learned that some new and reasonably nice low-rise condos in Pattaya are going to be leasehold 100%. As I have been here on and off for 16 years, I found this odd. The developer told me that this is not unusual throughout Asia. Although it may not be unusual, I think that a lot of his buyers better be ex-pats in HK or citizens from HK, Sing., etc. where this is common, as I cannot see a lot of typical foreigners buying this way. I may be wrong, but there better be a big discount to the "market price" of this units if outright ownership is not available.

From my limited Western point of view, I simply cannot se whay someone would pay for property and not own the land. In Thai law, the building becomes and integral part of the land below it. Yes, these leases can be legally enforced, and it will be unusual for someone to lose out before their lease is up--unless there is an outright scam (which I DO NOT expect to be the norm), but it becomes the equivalent of buying a house, renting the land, and depreciating it over 30 years rather than watching its value increase.

Also, if people are going to end up leasing the land, they are going to put less into building a nice house as they do not want to lose as much.

A couple of years ago, prior to coming here once again, I thought about renting some land, as there is plenty of it, and then building my own house, as building is fairly inexpensive here relative to the land. Then I learned that no one wanted to rent their land for a long enough period of time to make it worth MY investment, but maybe for someone else's.

Again, my likes are different than others, but I do not see this LEASEHOLD idea as being good for investment.

I am interested in other's ideas on this subject.

[Taggart]

I wouldn't mind buying a house (not a condo) in Thailand, where I leased the land, and just owned the house. Some community where there's recreation facilities and good security. Somewhere I can leave the house for months at a time, and not worry about it being broken into and vandalized. Anyone ever seen anything similar in the North or Northeast of Thailand?

[backflip]

"I just learned that some new and reasonably nice low-rise condos in Pattaya are going to be leasehold 100%. As I have been here on and off for 16 years, I found this odd. The developer told me that this is not unusual throughout Asia. Although it may not be unusual, I think that a lot of his buyers better be ex-pats in HK or citizens from HK, Sing., etc. where this is common, as I cannot see a lot of typical foreigners buying this way. I may be wrong, but there better be a big discount to the "market price" of this units if outright ownership is not available.

From my limited Western point of view, I simply cannot se whay someone would pay for property and not own the land...it becomes the equivalent of buying a house, renting the land, and depreciating it over 30 years rather than watching its value increase.

Again, my likes are different than others, but I do not see this LEASEHOLD idea as being good for investment."

It depends upon which side you are on if it is an appropriate investment vehicle. There are several reasons why property in Thailand, and elsewhere, is leased. In Thailand, for example, a lot of land is owned by the King. Although the King allows a developer to build on the property, the land itself cannot be transferred. In some areas, Manhattan for example, the property owners will not sell the land, allowing for substantial lease payments for generations. Many of Trump's properties in NY have 100-year leases. As you mentioned, it's difficult to have a leased condo appreciate with a relatively short lease. In the UK, a 99-year lease is common, and 999-year leases are not uncommon

[johnnyk]

Yes, leases are very common in the UK. Pretty well all the good parts of London are LH and simply not for sale (Duke of Westminster is no fool).

Millions of people in the West own condos or co-ops. In the case of condos you own inside your walls and the corp. owns the land and common areas which is not exactly FH land ownership. In a co-op, very common in NYC, you own a share in the co-op corporation. Basically, you own paper and you get to sell paper.

I don't like the 30-year LH for all the reasons above - depreciating asset and incentive for someone to get your arse off the land after 30 years if it increases in value.

I wouldn't mind a 99-year lease as it would see me out and my children too. Anything beyond 99 years would be pretty much irrelevant IMO.

[nev]

I wouldn't mind buying a house (not a condo) in Thailand, where I leased the land, and just owned the house. Some community where there's recreation facilities and good security. Somewhere I can leave the house for months at a time, and not worry about it being broken into and vandalized. Anyone ever seen anything similar in the North or Northeast of Thailand?

mate in khon kean there are a couple of this type of developements and for about between 1million and 2 million baht should get you a nice home,there are two lakes near to the centre, the smaller lake has some beutifull homes around it,and some nice resteraunts.

my ex girlfriends parents had a nice home here they paid 2 million baht, it was 2 storey 3 bed 2 bath room,thai kitchen, very nice and has security(well a thai man asleep on a stool at the gate) but he wakes up quickly and salutes you when you pass.

hope this help's i think one developement was by land and home,close by this one looked very nice some beutifull homes, i think there are a lot of falang buying homes for bar girls

[Maestro]

said Sally Ann Lefley, an associate at the Bangkok-based firm McEvily & Collins...However, those buying freehold property, such as condominiums, will see the Bank of Thailand retain 30% of foreign funds interest-free for one year.

I don’t know Ms. Lefly personally and she may be good at a lot of things, but not at giving financial advice. The purchase of a condominium is not subject to the 30% withholding. From the website of the Bank of Thailand:

1. Foreign currencies bought or exchanged against baht for the following transactions are exempt from the 30 percent foreign currency reserve requirement:

...

1.4. Investment in real estate such as land and condominiums (excluding real estate mutual funds).

--

Maestro