How Thailand’s economy will benefit from property market innovations
Thailand’s economy has suffered significantly from global problems. The government is considering some measures to stimulate the economy. One of the most effective options is to attract investment in the property sector.
The Thai government is ready to relax several regulations to attract foreign funds. The authorities are studying the issue and the possibility of implementing innovations. Among the most realistic scenarios, analysts highlight the following:
– increasing the term of land leases with the possibility of extending them up to 99 years;
– increasing the percentage of local property ownership for foreigners from 49% to 75%.
It is worth noting that the Thai estate agents insist on these changes. They have sent a petition to the relevant ministry. Some officials also agree with this initiative. Isara Booneng, a representative of the Chamber of Commerce, also insists on extending the lease period of the property. According to him, such an option will increase the activity of big investors, both foreign and local players.
Need for changes
Current laws and regulations in the property sector have limitations that hinder the market’s development. Because of these factors, it cannot function as efficiently as possible, so innovations are needed:
1. A 30-year land lease can be a form of loan collateral.
2. Local banks often refuse to lend against such collateral.
3. Extending the lease to 99 years would make it possible to use the land as collateral for loans.
4. Such an option will be collateral for a business, like freehold land.
Experts believe the changes will boost demand for local property. This is crucial given the slowdown in the Thai market. In the first quarter of 2024 alone, transactions fell by 30%. Activities in the industry are at their lowest level in the past six years. Analysts say the main reason is the declining local population’s purchasing power.
The importance of foreign investment
Historically, foreigners’ transactions in the Thai market accounted for about 25% of the total purchase value. They mainly bought local properties as second homes. According to officials, the relaxed rules will increase this figure to 69%.
Due to several restrictions, foreigners find it difficult to buy property in the country. The market is divided into zones, each with its own ownership rules. Many properties and plots are not for sale but for rent. It is also extremely difficult for foreigners to obtain a mortgage from local banks. Obtaining citizenship is virtually impossible.
In addition to these restrictions, transactions involving foreign buyers are subject to additional taxes. At the same time, the yield on Thai property is quite low—in the range of 3-4.8%.
