Long leases will help Thai property market

This share is likely to grow further. In line with global trends, there is a growing demand for resort homes among tourists who spend long durations in the country and among expatriate retirees - typically high net worth individuals from America, Europe and Asia.

Due to the longer stay - usually one month to three months in a year - they spend four to five times more during their visits compared to other tourists. This target group is therefore a segment that Thailand should focus on, aiming for quality over quantity.

Ninety-nine per cent of the buyers of high-end resort homes - priced at US$ 3million (Bt94.5 million) to $10 million - are foreigners.

However, 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 buyers to purchase villas in Thai resort areas on leases of 30 years, along with two to three options for renewal by 30 years each (30+30+30), and the prices turn out to be similar to the freehold value. 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 straightforward and simpler process was established to allow a longer lease term to foreigners. We believe the most suitable lease 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 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 for resort homes in Thailand in the mid- and high-end 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 options of 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. As of now, 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 would encourage investors to acquire properties.

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