Thailand’s U-turn on land-for-foreigners plan leaves property sector unruffled

[BANGKOK] Thailand’s plan to sell land to foreigners was nixed just a fortnight after the news went public, and the sense is this issue won’t be revisited for a while, at least until after the next general election in May next year.

Foreign ownership of land is a notoriously sensitive political issue in South-east Asia’s second-largest economy. On Oct 25, when the cabinet agreed to consider a proposal by the Interior Ministry that would allow certain foreigners the right to purchase up to one rai (0.16 hectare) of land, it sparked an uproar in parliament amid accusations by the opposition that the government was “selling off the country”.

The draft regulation was withdrawn from the cabinet agenda on Nov 8, and this was supported by Thailand’s business community. Players in the property sector whom The Business Times spoke to say they are largely unruffled by the policy U-turn.

The right for a foreigner to own up to one rai of land in Thailand has been on the books since the 1954 Land Act, so long as the foreigner’s home country has a bilateral treaty with Thailand.

The act was then amended in 1999 (under the Democrat Party-led government) to allow foreigners to purchase up to one rai, providing they invest at least 40 million baht (S$1.54 million at today’s exchange rate) in the country over a three-year period and receive the approval of the Interior Minister.

This was part of a wider effort to stimulate Thailand’s property sector in the aftermath of the 1997 Asian financial crisis, said Simon Landy, former head of property consultancy Colliers Thailand.

In 2002, the Thai Rak Thai-led government again amended the act to extend the 40 million baht investment period to five years, with the latest 2022 amendment changing it back to three years.

In the last two decades, only eight foreigners have been allowed to purchase one rai of land under the 2002 regulation.

“The fact that the minister’s approval is required for any transaction, and the number of hoops to be jumped through, means that (the scheme) has not proved popular,” said Landy.

The significant change in the draft 2022 legislation was that to qualify to buy land, a foreigner needed to have been granted a long-term residency (LTR) visa under a new government scheme launched on Sep 1. This scheme is aimed at attracting wealthy or talented foreigners to help promote Thailand as a hub for innovative and high-tech industries.

Since its launch, this visa scheme has attracted 1,338 applications as of Nov 4, with 40 per cent of them falling in the category of “work from Thailand”. This, presumably, means they would not need a plot of land to conduct their activities.

The government hopes that the LTR scheme can eventually draw one million wealthy or highly-skilled foreigners over the next five years and generate some 800 billion baht in new investments in the country.

In a recent press release, Thailand’s Land Department (under the Interior Ministry) explained that the recent tweak to the law allowing foreigners with LTR visas to buy one rai of land was put forward to help the government make the LTR scheme a success.

Instead, the proposal became a political football.

In general, Thailand’s property sector welcomes any legislative changes that makes it easier to sell or lease properties – either condominiums or villas – to foreigners.

“The idea is good, but it is a controversial issue here. If the implementation is subject to many restrictions, this will likely impact the success of the scheme given the unnecessary complications and a lengthy approval process,” said Nicholas Vettewinkel, the director of research at CBRE in Thailand.

In a Nov 9 report in The Bangkok Post, Tanit Sorat, vice-chairman of the Employers’ Confederation of Thai Trade and Industry, noted that the objective of the proposals to stimulate the economy is “relatively broad”, with most people not having a clear understanding of the measures.

“They are also concerned about future land speculation and its possibility of opening doors to foreigners – especially Chinese businessmen who run ‘grey’ businesses in Thailand such as bars, massage parlours and gambling dens – to buy vast land plots.”

Many international property consultants in Thailand have long been pressuring the government to increase the maximum length of lease terms for foreigners to 50 or 70 years (from the current 30-year limit) as a more beneficial fillip for sales than getting permission to buy one rai of land.

But even under the existing regulations, foreigners continue to buy condominiums in Thailand despite the limitations of leasehold length and foreign ownership. Under the current rules, foreigners cannot own more than 49 per cent of an entire condominium project.

According to the government’s Real Estate Information Center, an average of 10,000 condo units worth about 50 billion baht in total were sold to foreigners annually prior to the Covid-19 pandemic, accounting for 5 per cent of all transfers. Chinese buyers accounted for 46 per cent of the transfers in 2019.

“These existing schemes work well and I see no reason why foreigners will stop buying in Thailand if the proposed ‘one rai scheme’ for foreign land ownership does not become law,” added Vettewinkel.