Thai property is gaining popularity abroad

Author: Prem Singh Gill, Thammasat University

Thailand has been a popular expat investment and retirement destination for decades. But foreign land ownership has long been restricted. Foreigners cannot own more than 49 percent of all condos and are not allowed to own most condos. Still, Thailand is keen to attract wealthy international investors – particularly those from China.

Thailand’s Prime Minister Prayut Chan-O-Cha on July 15, 2022 proposed a policy that would allow foreigners to own land for residential purposes. Thai officials claim this will boost the economy by enticing wealthy foreigners to spend and invest in the country.

Investing 40 million baht in Thai real estate, securities or funds for at least three years is now one of many requirements for foreigners to own up to 1 rai (about 1,600 square meters) of land from September 2022. Still, there are other ways foreigners can acquire rights to land – including through company ownership, long-term leases and other investment schemes available in special economic zones established by the Thai government.

When deciding to invest in Thai property, most foreign investors invest through corporations, which allows a Thai national to make property decisions on their behalf through a business committee. Foreign investors can also purchase real estate through a tax-free scheme set up by the Thai government-managed agency, the Board of Investment.

Thailand’s real estate market was recently characterized by an oversupply of apartments. There were over 90,000 unsold condominiums in the Bangkok Metropolitan Region (BMR) of Thailand 2020. By allowing foreign investment, the Thai government aims to provide liquidity to the real estate market by allowing a pool of wealthy investors to invest, boosting the Thai economy and increasing property tax revenues.

As a popular tourist destination and part of China Eastern Economic Corridor, many investors from China have invested in Thai real estate – so much so that half of all foreign-owned condos in Pattaya City, one of the country’s tourist destinations, are Chinese-owned. While deep in your pocket Chinese homebuyers are seen as the saviors of Thailand’s ailing real estate sector, some are disliked for spending their money lavishly and buying property through bogus legal partnerships. Some foreign investors even register under a Thai limited company or apply a specific leasing policy to get involved money laundering.

Selling land to foreigners and using the land for housing can exacerbate land inequality in Thailand. The additional taxes levied to collect rent from foreign homebuyers will present another barrier to entry for locals, who are increasingly being squeezed out of the housing market. However, there should be no mingling of permitting foreign land ownership, acquiring a bundle of rights over land, with surrendering Thai sovereignty.

The Phuea Thai Party (PTP), Thailand’s leading opposition party, opposes the plan. Arguing that nearly 80 percent of Thais don’t own land, they claim that allowing foreign ownership would only benefit those who own most of the land – the upper-middle class and the elite. Indeed, the proposed policy is unpopular outside of the military, civil servants and politicians – all of whom benefit from a system that would distribute revenue from the increased property tax to select groups.

Current tenure policies have been criticized not only for allowing foreign land ownership, but also for failing to improve the well-being of low-income families. Politics attracts wealthy investors in the short term, but Thailand has yet to create a business environment where investors believe it is worth bringing new technology, know-how and jobs to the country to reap long-term benefits.

The new proposed foreign land tenure policy will have a significant impact on land tenure inequality and Thailand’s economy. While Bangkok’s proposed bill aims to revitalize the economy, the government should instead look to improving the rule of law and the local business environment for better economic and housing outcomes.

Prem Singh Gill is Adjunct Lecturer at the College of Interdisciplinary Studies at Thammasat University, Thailand, and Senior Researcher at the University of Tokyo, Japan.

Comments are closed.