PM defends foreign condo ownership change and extended lease terms as public opposition makes itself felt. Government aims to extend foreign ownership from 49% to 75% and lease terms up to 99 years. Ex-Move Forward leader Pita Limjaroenrat opposes the scheme saying the priority should be ensuring more property ownership for Thais.
The government is moving fast to extend the proportion of foreign ownership of condominium projects from 49% to 75%. In addition, it plans to extend leasehold interests in Thailand from the current limit of 30 to 50 years. On Friday, Deputy Prime Minister Anutin Charnvirakul and the Minister of the Interior confirmed that his officials have received an order from the government to press ahead with the required legislation. However, the proposal is already facing criticism, not least from Move Forward Party former leader Pita Limjaroenrat. In addition, further opposition is expected at a time when Thai politics is becoming more fractious.
On Sunday, Prime Minister Srettha Thavisin came out to defend the government’s move last week making it easier for foreigners to buy property in Thailand.
On Friday, the Ministry of the Interior confirmed that it had received instructions from the government to look at a number of proposals and draft the relevant legislation.
Deputy Prime Minister instructed the Ministry of the Interior to draw up the required legislation amending two key acts to introduce the measures on Friday
In short, the government is seeking to amend the Property Rights Act of 2019 and the Condominium Act of 1979.
Firstly, lease periods are to be extended from 30 to 50 years. Secondly, the quota for foreign ownership of condominium developments is to rise from 49% to 75%.
The latter proposal comes during a difficult market for condominium units in Bangkok. A crackdown ordered by the Burmese government has successfully cut off flows of funds from Burma.
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These buyers had emerged this year as the second-largest group after the Chinese in terms of units sold, particularly high-end units in central Bangkok.
Prices in 2023 rose by 3.5% in Bangkok. However, nationwide, they are falling. For instance, in adjacent provinces to Bangkok, prices fell by 1%, giving a 2.7% growth on average for the Bangkok Metropolitan District.
Property market feeling the pinch as local buyers do not have access to funds and there has been a sudden crackdown in Myanmar impacting Bangkok sales
In short, Thai nationals are feeling the pinch. A faltering economy and tight reins on credit are holding buyers back.
In the meantime, there were 86,625 unsold condos in the Greater Bangkok area in the first three months of 2024, valued at ฿370 billion. Indeed, the situation for housing, most of it comprising low-lying developments, is even worse.
Shockingly, the Greater Bangkok area has 213,429 unsold properties with a total value of ฿1.2 trillion.
Following the recent crackdown in Burma, industry leaders such as Prasert Taedullayasatit, President of the Thai Condominium Association, are predicting the worst. In short, a bloodbath for quarters two and three.
These Burmese buyers, already incognito from the junta regime at home, had creative ways of circumventing the 49% limit. At length, this included such approaches as the use of registered firms and Thai proxies.
Move from the government comes in addition to lower transfer fees and duties also recently introduced by the cabinet to give the property sector a lift
This comes despite initiatives from the government to lower transfer fees and other taxes, which normally boost property sales.
This week’s initiative came from Deputy Prime Minister Phumtham Wechayachai. The Deputy PM referred to a cabinet decision on April 9th.
Measures were ordered to attract more inward investment, particularly to support efforts to attract foreign buyers and professionals.
This is seen by the government as a pathway to further investment and augmenting skills within the economy, especially in high-tech industries.
On Friday, Deputy Prime Minister Anutin Charnvirakul confirmed the move. The Ministry of the Interior will now begin formulating the required legislation.
Plan attacked this weekend by the Move Forward Party’s former leader and the public’s runaway favourite for Prime Minister. Take care of Thais first
However, the plan has drawn criticism from Pita Limjaroenrat, the former Move Forward Party leader, who clashed repeatedly with the government this week in parliament.
The Move Forward Party’s former leader is currently the clear public favourite to be Prime Minister. His party in May 2023, under his leadership, won that month’s General Election.
Mr Pita attacked Minister of Finance Pichai Chunhavajira for being behind the curve in terms of the government’s economic plans and particularly budgeting.
In relation to this measure, on Friday, he said it reminded him of a similar initiative from General Prayut Chan-o-cha’s government in 2022.
Previously, General Prayut’s government had promised a concession to LTV or Long-term Visa holders. They would be allowed to own up to 1 rai of land for residential purposes.
The proposal drew a groundswell of public opposition. Certainly, the opposition was led by the Pheu Thai Party and supported by the Move Forward Party. Finally, the then-governing parties also came out against the plan and it was quietly killed off.
Three-quarters of Thai people do not own property
Furthermore, Mr Pita said that at this time, three-quarters of Thai people own no property. He referred to the large number of farming families who held property allocated to them by the Agricultural Land Reform Office (ALRO).
In short, he called for the government to prioritise land reform for the Thai people instead of focusing its energies on improving the rights of foreigners.
Undoubtedly, the proposals unveiled by the government will prove unpopular with the Thai public.
Instinctively, Thai people, even those who are educated and work with foreigners, react negatively to the idea of diluting the kingdom’s restrictive land and property ownership controls.
The concern for the government may be that this proposal is coming at a time of growing political instability.
Certainly, it may be used by one of the more conservative coalition partners as a pretext for political gamesmanship.
In particular, the Palang Pracharat Party, which is at the core of rumours predicting its departure from the government.
Prime Minister defended the plan. Thai control over condo buildings would not change. At the same time, longer leases would certainly benefit Thais also
On Sunday, Mr Srettha, defending his proposal, made it clear that it would not impact the control of condominium developments.
For instance, he assured Thai nationals that Thai control at 51% of such developments would be maintained.
The new law, as specified by the directive to the Ministry of the Interior, would mean that any foreign owners over 49% will not have ownership rights.
The PM also pointed out that many countries offer foreign nationals leases of up to 150 years.
At the same time, the new dispensation would also still allow lease renewal agreements by the leaseholder. That would mean an effective lease ownership period of 99 years.
Better collateral for bank loans
This proposal may significantly alter the property market. A lease option is currently growing in popularity among foreign investors in Thailand. In particular, foreigners who come to live in the kingdom with Thai partners.
The Prime Minister also made it clear that the change will also benefit future Thai leaseholders. Certainly, the effect will be to make leasehold interests more attractive to banks as collateral.
Formerly, Mr Srettha, before entering politics, was a highly successful property developer. Recently, it was revealed that both the PM and his wife have a combined fortune of ฿1 billion.
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Further reading:
Myanmar Junta meltdown threatens to end Bangkok’s condominium sales boom as Kyat currency fails
Anger grows over land for foreigners plan as ex-MP says Thais may face a ban in upmarket areas
Pheu Thai opposes land for foreigners as industry leader warns of abuse from Chinese speculators
Cabinet approves land rights for rich foreigners as Thailand ramps up inward investment in 2022
Amazon becomes a key investor in Thailand as cloud computer firm AWS sets up shop in Bangkok
10 year visa a magnet for global citizens setting up in Thailand with zero tax on offshore income
Wealthy foreigners to own small landholdings associated with homes here agreed in principle
New plan for the Thai economy could see an elite foreign visa scheme generate up to 6% of GDP
Economic plan to put the smile back in Thailand’s appeal to western foreigners to live and work
Economic fears rising as Thailand faces a bigger crisis than 1997 with rising job losses and debt
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Loan bill passes but Thai economic prospects are not bright with a 1.8% 2021 GDP gain predicted
IMF urges government to loosen nation’s purse strings as finances tighten with the tax take down
Plan to allow high tech and skilled foreigners to live and work in Thailand for up to four years
