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Long Lease In Thai Property Market

Tourism is a critical element of the Thai economy, with income generated from tourism contributing significantly to the country’s GDP and likely to grow further.   In line with global trends, there is a growing demand for resort homes among longer stay tourists and expatriate retirees who are typically American, European and Asian high net worth individuals who choose Thailand as the location for their second or holiday homes.  With their longer stay, which is usually 1-3 months a year, they probably spend four to five times more during their visits compared to general tourists. This target group is therefore a segment that Thailand should focus on, aiming for quality not quantity.


99% of the purchasers of high-end resort homes priced at US$ 3- 10 million are foreigners.  Thailand does not allow non-Thais to own freehold land and restricts the lease term allowed by law to a maximum of 30 years.  It is quite common for such purchasers to buy villas in Thailand’s resort areas on leases of 30 years, with two to three options to renew for a further term of 30 years each (30+30+30), and with prices similar to the freehold value showing strong actual demand in the villa and resort home market.  However, with this structure of lease, in the 30th year, 60th year, and 90th year, both the freehold owner and the lessee will need to physically contact each other to renew the lease even though the full price has been paid.


It would therefore be beneficial to all parties if a more straight forward and simple process was established to allow a longer lease term by law for foreigners.  We believe the most suitable period is 99 years which would mean that such leasehold properties could be sold at close to freehold values.  The lease would be registered for 99 years with the government land department upon the payment of the lease value.  This would make Thailand more attractive to overseas investors than other Asian countries and would definitely generate more demand from purchasers of resort homes in Thailand in the mid to higher end of the market.


In other markets such as Vietnam, which is one of Thailand’s major competitors in the tourism and real estate industry, 70-year leases are being offered to foreigners, with multiple extensions.  Meanwhile, China offers up to a maximum of 70 years and Singapore, in some promoted areas such as Sentosa Cove, offers 99-year leases to foreigners.  Malaysia offers both freehold and 99-year leases to foreigners depending on the location.  In Europe, lease terms of 99 years are common.


The extension of the lease term for foreigners will also benefit the investment market. Currently, foreign institutional investors, such as foreign property funds, who would like to invest in large office buildings or hotels may bypass Thailand, where freehold ownership is not permitted and the existing lease term of 30 years is too short for it to be economically viable to own or develop large projects.  Longer leases should encourage investors to acquire properties and pay vendors similar amounts that are close to freehold prices for investment properties.


To strengthen the real estate market in long term, the fundamentals of the law and regulations should be updated to reflect the changing market environment.  Such regulations could be applied to specific segments of the market that require changes to be made to match market demand.  If the government is considering other measures to help the real estate market and long stay tourism, it should ultimately address the issue of extending lease terms for foreign buyers.

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