EXPERT WARNS AGAINST “HONG KONG-IZATION” OF THAI REAL ESTATE MARKET
BANGKOK — Thai government, led by Prime Minister Srettha Thavisin, is considering a plan to boost the real estate sector by allowing foreigners to buy or rent property in Thailand for up to 99 years. This proposal aims to attract foreign investment and stimulate the economy but has faced opposition from various groups.
Chinese investment in Thailand is growing rapidly, affecting nearly every business sector. Chinese supermarkets are expanding into the provinces, restaurant franchises offer low prices using mostly imported ingredients, and Chinese companies are involved in transportation, construction, and real estate.
Previously, Chinese investors mainly bought property to live in or rent out. Now, they are forming joint ventures with Thai partners to develop real estate, focusing on major urban areas like Bangkok, Phuket, Chiang Mai, and Pattaya.
A notable project is The Mansion by the Chao Phraya River, near the Sanambin Nam area, valued at 100 million baht. Developed by Lianshang Co., Ltd., established in March 2022 with a registered capital of 1,500 million baht, it targets Chinese businessmen seeking a second home in Thailand.
Mr. Thanakrit Thaimee, Co-Founder and Managing Director of TA Law Firm, previously worked in the legal department of a major Thai real estate development company for over a decade before opening his own firm that focuses on providing legal services to Chinese clients. He reflected to Khaosod English that before the pandemic, there were many more Chinese in Thailand. Currently, only 52% of Chinese have returned compared to before the outbreak.
During the COVID-19 pandemic, many Chinese sought legal advice on various matters, mostly real estate. This demand led him to set up his own law firm four years ago.
“Before the pandemic, many Chinese tourists visited Thailand and sought opportunities to start businesses that catered to other fellow Chinese. This is why Chinese businesses continue to thrive, as their clientele is primarily Chinese. Most of these tourists came for tourism business, a sector typically handled by Thais. However, after the pandemic, this type of tour business has declined due to a drop in the number of Chinese tourists,” Thanakrit said.
Mr. Thanakrit told Khaosod English that since opening his law office, Chinese clients initially sought his services mainly for real estate leasing in Thailand. He noted that some Chinese investors often worked with unlisted real estate companies, which struggled to continue projects during the pandemic due to a lack of capital.
While initially, Chinese clients primarily consulted him on these real estate issues, their focus shifted post-pandemic. Now, most clients seek advice on relocating production bases from China to Thailand to avoid U.S. and EU tariffs. Many are exploring options to move their production to ASEAN countries, where costs are lower than in China.
Chinese Business
At his Law Firm, Thanakrit explained that besides helping Chinese clients with real estate legalization, he now also offers legal services for company registration and moving investments from China to Thailand, especially under the BOI framework. “Most of our clients are Chinese companies looking to move their production to Thailand, like China Sinopec gas stations and electric vehicle parts manufacturers,” he said.
Thanakrit noted that while Thailand benefits significantly from Japanese investments due to their working style, Chinese investments offer fewer benefits. He attributed this to the different work culture; Chinese investors often bring their own teams and prefer to work with other Chinese people, although this is starting to change.
“Chinese investors in Thailand usually bring many Chinese workers, though not necessarily all. This differs from Japanese factories, which follow BOI regulations for ownership and taxes.”
Thanakrit also discussed Chinese businesses opening stores in Thailand, such as cheap supermarkets spreading to the provinces. He commented, “Technically, some of these businesses shouldn’t be operating. Whether they have Thai nominees or not is up to Thai officials to investigate.”
“Chinese businessmen want to operate in Thailand honestly. If there are concerns about Chinese mafia entering through illegal means, it’s important to examine how thorough our investigations are.”
Regarding tax concerns with Chinese retail businesses in Sampeng, Thanakrit said, “If there are tax issues, the Revenue Department can investigate. They can look into Thai online merchants as well, so foreign businesses are also subject to checks. Officials can investigate to ensure proper permits and legal ownership. The government needs to take investigations seriously, and certain professions should be reserved for Thais.”
When asked if it’s easier for Chinese to invest in Thailand compared to Thai investment opportunities in China, Thanakrit admitted that it is challenging due to different governance systems and legal standards between the two countries.
Thailand Is Not Hong Kong
When asked about the Thai government’s proposal to let foreigners buy or lease real estate in Thailand for up to 99 years and to own up to 75% of condos in a project, Thanakrit, who has over 10 years of experience in real estate law, said, “I think 99 years is too long. This is Thailand, not Hong Kong.
Most people retire at around 60 years old. Most buyers of real estate in Thailand are middle-aged, around 25-35 years old. A 60-year lease would cover a person’s lifetime, but a 99-year lease spans almost two generations. I believe 60 years is a more reasonable period.”
Thanakrit explained that changing the law to allow foreigners to lease or buy real estate for up to 99 years would require amending the Property Rights Act B.E. 2562. Currently, leases are set for 3-30 years and can be transferred, inherited, or mortgaged. The idea of extending leases to 99 years aims to attract foreign investors, as the current 30-year limit might not be attractive enough.
The period not exceeding 30 years has also led to issues with nominees in real estate transactions. Additionally, with many unsold properties in Thailand, extending the lease term is being considered. However, Thanakrit feels that 99 years is too long, though he supports a longer term than 30 years.
He also discussed the proposal to increase the foreign ownership limit in condos from 49% to 75%. He noted that in some parts of Bangkok, like Sukhumvit’s On Nut and Bang Na areas, there are still condos available for foreigners, but in more sought-after areas like Ekkamai and Thonglor, 49% of condos are already rented by foreigners. Leaving only the remaining share available for Thai buyers with reduced purchasing power, allowing foreigners to own 75% of condos might be excessive and could impact the project’s voting rights.
He concluded by saying he is concerned that changing the law to address real estate and Chinese investment might take too long in Parliament, amid ongoing foreign capital influx.
Source: https://www.khaosodenglish.com/news/business/2024/08/10/expert-warns-against-hong-kong-ization-of-thai-real-estate-market/
