Most investors experienced in purchasing property in the UK and Europe will be familiar with the concept of freehold and leasehold property, and the characteristics and benefits of each type of tenure.
However, for investors wishing to purchase in Thailand, the situation is somewhat different, so here we explore the differences between both leasehold and freehold tenures in Thailand.
Restrictions on Foreign Ownership in Thailand
Property Consultant Harry Stratford explains ‘Historically Thailand is more open than other Asian countries to foreign ownership, however restrictions still very much apply. Villas are still difficult to purchase under full foreign freehold terms since there is still political sensitivity around foreign ownership of land. However, for condominium type developments, there will generally be a quota that is reserved for Thai nationals usually 51% and the remainder of the properties can be offered to foreign investors on a freehold basis.’’
Interestingly, in Thailand, once the quota for foreign freehold apartments has been filled, developers typically offer foreigners the chance to buy leasehold in the Thai ownership portion of the building.
This presents certain considerations which buyers should be aware of before purchasing. Properties purchased on a Thai company/leasehold basis in Thailand are different to the UK, as a standard lease term is just 30 years typically on a term renewable basis by paying a small fee.
These limitations of leasehold property in Thailand make freehold ownership the far more attractive option to purchasers looking to safeguard their investment. That being said, considerations have to be made from one local market to the next.
For example, in cities where there are an abundance of high rise condominium projects for sale, such as Bangkok or Pattaya we would always encourage freehold ownership. In this instance, you may have large projects of perhaps 1200 apartments at a time and with these projects there is always going to be a certain number of apartments available on the resale market at any one time. If we assumed typical turnover to be perhaps 5% a year in resales, it could be argued that there may be 60 apartments available at any one time. In this instance, if there is always foreign freehold availability on the market and you own leasehold terms, it might prove tougher to sell down the line.
That being said, there is huge appeal in the islands and markets such as Phuket and Koh Samui are very popular with investors due to the low-rise building restrictions in place and picturesque beaches. In these markets, most projects are much smaller in size say 20-50 units in size. For this reason, leasehold ownership is more commonly accepted since there is never going to be huge supply hitting the market at any one time that might have an adverse impact.
While unlike the UK and Europe freehold in Thailand generally offers the owner rights over the building (but not the land), purchasing a freehold apartment in Thailand gives the buyer security of tenure and the full rights of ownership over the property.
Harry points out ‘Here at Benoit Properties, we typically recommend freehold ownership in the high-rise condominium markets such as Bangkok and Pattaya. The islands we offer both leasehold and freehold ownership terms dependent on the project. With the rights of ownership clearly set out, purchasing in Thailand is a very simple process with transactions typically taking weeks rather than months as you would expect in the UK.’
Benoit Properties have a range of investment opportunities available in Thailand which offer both great rental returns combined with an excellent opportunity for capital growth and personal usage. Whether rental investment or a holiday bolt-hold, properties in Thailand start as little as 1.4m THB (around $45,000) with flexible payment over 12/24 months.