Thailand struggles to allow more Chinese landowners

Thailand has been a popular expat investment and retirement destination for decades, but foreign land ownership has long been restricted.

Foreigners cannot own more than 49% of any condominium development and cannot own most freehold estates. Yet Thailand is keen to attract wealthy international investors, especially those from China.

Thai Prime Minister Prayut Chan-ocha, currently suspended, has proposed a policy that would allow foreigners to own land for residential use on July 15, 2022. Thai authorities say this will boost the economy by attracting wealthy foreigners to they spend and invest in the country.

Investing 40 million baht ($1.1 million) in Thai property, securities or funds for a period of at least three years is now one of many prerequisites for foreign nationals to own up to one rai (about 1,600 square meters) of land starting in September. 2022.

Yet there are other ways for foreigners to acquire land rights, including through business ownership, long-term leases and other investment programs available in the special economic zones (SEZs) set up. place by the Thai government.

When deciding to invest in Thai property, most foreigners invest through companies, which allows a Thai national to arbitrate ownership through a works council in his or her name. Foreign investors can also purchase property through a tax exemption program set up by the Thai government-administered Board of Investment (BOI).

The Thai real estate market has recently been characterized by an oversupply of apartments. There were over 90,000 unsold condominium units in the Bangkok metropolitan area in 2020.

By allowing foreign investment, the Thai government aims to provide liquidity to the real estate market by allowing a pool of wealthy investors to invest, stimulating the Thai economy and increasing property tax revenue.

As a popular tourist destination and part of the Eastern Economic Corridor, many Chinese investors have invested in Thai real estate – so much so that half of all foreign condominiums in the city of Pattaya, one of the tourist destinations of the country, are under Chinese ownership. .

Old and new apartments in downtown Pattaya, Thailand. Picture: Facebook

While deep-pocketed Chinese homebuyers are seen as the saviors of Thailand’s struggling real estate sector, some are hated for spending their money profusely and buying property through bogus legal partnerships. Some foreign investors even register under a Thai limited company or use a particular leasing policy to engage in money laundering.

Selling land to foreign nationals and having it used for residential purposes can deepen land inequality in Thailand. Additional taxes levied to capture rent from foreign buyers will pose another barrier to entry for locals who find themselves increasingly excluded from the housing market.

Yet, there should be no confusion between allowing foreign land ownership, acquiring a set of land rights, and ceding Thai sovereignty.

The Peua Thai Party, Thailand’s main opposition party, opposes this programme. Arguing that almost 80% of Thais own no land, they say allowing foreign ownership will only benefit those who own the majority of land – the upper middle class and elites.

Indeed, the proposed policy is unpopular outside the military, civil service and affiliated politicians – all of whom benefit from a scheme that would distribute the revenue from the property tax increase to certain groups.

The current tenancy policy is criticized not only for allowing foreign land ownership, but for failing to improve the welfare of low-income families.

The policy attracts wealthy short-term investors, but Thailand has yet to create a business environment in which investors believe it is worth bringing new technology, know-how and jobs to the country to long term benefits.

The proposed new policy for foreign land ownership will have significant implications for land ownership inequality and Thailand’s economy.

While Bangkok’s proposed bill aims to reinvigorate the economy, the government should instead seek to improve the rule of law and its local business environment to achieve better economic and housing outcomes.

Prem Singh Gill is an assistant lecturer at the College of Interdisciplinary Studies, Thammasat University, Thailand, and a senior researcher at the University of Tokyo, Japan.

This article was first published by East Asia Forum, which is based at the Crawford School of Public Policy within the College of Asia and the Pacific at the Australian National University. It is republished under a Creative Commons license.

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