Author: Prem Singh Gill, Thammasat University
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 properties. Yet Thailand is keen to attract wealthy international investors, especially those from China.
Thai Prime Minister Prayuth Chan-O-Cha has proposed a policy that would allow foreigners to own land for residential use on July 15, 2022. Thai officials say it will boost the economy by attracting wealthy foreigners to spend and invest in the country.
Investing 40 million baht in Thai property, securities or funds for a period of at least three years is now one of several prerequisites for foreign nationals to own up to 1 rai (about 1,600 square meters ) of land from September 2022. Still, there are other ways for foreigners to acquire land rights, including through business ownership, long-term leases and other investment programs available. in special economic zones set up by the Thai government.
When deciding to invest in Thai property, most foreign investors invest through companies, which allows a Thai national to arbitrate ownership through a works council in her name. Foreign investors can also buy property through a tax exemption program set up by the Thai government-administered “Board of Investment” agency.
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 (BMR) in Thailand 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, boost the Thai economy and increase property tax revenue.
As a popular tourist destination and part of China’s Eastern Economic Corridor, many Chinese investors have invested in Thai real estate – so much so that half of all foreign condominiums in Pattaya City, one of the country’s tourist destinations, are under Chinese ownership. 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 Phuea Thai Party (PTP), Thailand’s main opposition party, opposes the program. Arguing that nearly 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 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.