Democrats have a history of enlightenment
Democrats have a history of enlightenment
2009 has started off politically in a way nobody envisaged even three months ago: the former opposition Democratic party in office under prime minister Abhisit Vejjajiva who has already given encouraging signals by stating he wants to stimulate the Thai property market which has been dawdling since the American sub-prime mortgage crisis set off a chain reaction of financial problems round the globe.
The last time the Democrats were in power in a coalition led by prime minister Chuan Leekpai, 1997 to 2001, and before the advent to the premiership of one Thaksin Shinawatra, the party had placed a number of measures on the table which were designed to stimulate the property sector as it was then. Thus the Condominium Act Number 3, put forward in 1999 by the then director of the department of land, stipulated that the foreign quota in a condominium could exceed the 49% ceiling during a set five year period – provided it met certain conditions.
Thus the condominium building needed to comprise more than 40 units, be situated in metropolitan Bangkok or Pattaya and occupy not more than 5 rai of land. It also had to be registered for at least one year before units could be transferred to foreign purchasers. The legislation went on to specify that, at the end of the five year period, units sold to foreigners or transferred between foreigners, could continue to be in foreign ownership even though the 49% rule might have been breached. In 1999 the whole point of these proposed changes was to stimulate the property market by encouraging foreign investment in the wake of the 1997 Asian financial meltdown, a situation not identical to today by any stretch of imagination but with some similarities. Both periods see property developers calling out for investors. In both 1999 and in 2008 the economy is sluggish and the government is searching for solutions to kick start the property sector.
There are two sets of proposals which would quickly attract foreign capital without risk to Thai sensibilities – to raise the condominium quota beyond 49% and to allow 60 or 90 year leases on residential property and villas in replacement of the current 30 years. Neither proposal means that foreigners would actually be able to buy land outright, a suggestion which in the real world is not a viable possibility whatever its proponents might argue.
Pent up demand for condominium units is seen in many parts of the country. It’s estimated that there are 20 projects in Pattaya, 35 in Phuket and 10 in Bangkok which have filled up their 49% foreign quota. Increasing the quota to satisfy the demand would inject billions of baht into the economy and help to sustain the market’s long term growth during a time of lacklustre domestic demand by Thais. A further point is that the government would further benefit from tax revenues through additional sales and new registrations.
It would also help if banks were encouraged to provide mortgages to qualifying foreigners, subject to status, such as those holding long term work permits. Farangs are currently hemmed in by restrictions to purchase funds from overseas and personally finance the entire transaction from the beginning.
In uncertain times, it’s important for governments to be both forward looking and innovative.Other countries in south east Asia have introduced policies to attract foreign investment. There are long leases in Vietnam and China and the possibility of outright purchase of residentiald wellings in Malaysia and Indonesia and even in parts of Singapore.
Even Cambodia is thinking of amending its property legislation to allow more foreign ownership, although it will likely take several years yet to introduce significant changes there. Thailand remains an attractive opportunity for many foreigners,
including the “new” markets of eastern Europe, the Middle East and the former Soviet Union block. Now is the time for forward planning in the land of smiles.
(This article is based in part on a piece by Nigel Cornick, chief executive of Raimon Land, which appeared in the Bangkok Post on February 1 under the heading “New Government Offers Optimism.”)
