Expert warns of ‘Hong Kong-ization’ of Thai property market

BANGKOK — The 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. The proposal is intended to attract foreign investment and boost the economy, but has been opposed by several groups.

Chinese investment in Thailand is growing rapidly and is affecting almost every business sector. Chinese supermarkets are expanding into the provinces, restaurant franchises are offering low prices using mostly imported ingredients, and Chinese companies are involved in transportation, construction and real estate.

In the past, Chinese investors mainly bought real estate to live in or rent out. Now they form joint ventures with Thai partners to develop real estate, focusing on major urban areas such as Bangkok, Phuket, Chiang Mai and Pattaya.

A notable project is The Mansion by the Chao Phraya River, near the Sanambin Nam area, worth 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 looking for 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 large Thai real estate development company for more than a decade before opening his own firm focused on providing legal services to Chinese clients. He told Khaosod English that there were many more Chinese in Thailand before the pandemic. Currently, only 52% of Chinese have returned compared to before the outbreak.

Mr. Thanakrit Thaimee, Co-Founder and Managing Director of Law Firm TA

During the COVID-19 pandemic, many Chinese sought legal advice on various matters, mainly 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 looked for opportunities to start businesses that cater to other Chinese citizens. Therefore, Chinese businesses continue to flourish as their clientele is mainly Chinese. Most of these tourists came for tourism, a sector that is usually managed by Thais. However, after the pandemic, this type of tour business has declined due to a decrease in the number of Chinese tourists,” Thanakrit said.

Mr. Thanakrit told Khaosod English that since opening his law firm, 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 Chinese clients initially consulted him mainly on these real estate issues, their focus shifted after the pandemic. Now, most clients are asking for advice on moving production bases from China to Thailand to avoid US and EU tariffs. Many are exploring options to relocate their production to ASEAN countries, where costs are lower than in China.

Chinese business

At his law firm, Thanakrit explained that in addition to helping Chinese clients with real estate legalization, he now also offers legal services for company registration and relocating investments from China to Thailand, particularly under the BOI framework. “Most of our clients are Chinese companies that want to relocate their production to Thailand, such as China Sinopec gas stations and electric vehicle parts manufacturers,” he said.

Thanakrit noted that Thailand benefits significantly from Japanese investment because of their work style, while Chinese investment offers fewer benefits. He attributed this to the different work culture; Chinese investors often bring their own teams and prefer to work with other Chinese, although this is starting to change.

“Chinese investors in Thailand usually bring many Chinese workers, but not necessarily all. This is different from Japanese factories, which follow BOI rules for ownership and taxes.”

Thanakrit also discussed Chinese companies opening stores in Thailand, such as budget supermarkets expanding into the provinces. He noted: “Technically, some of these companies should not be operating. Whether they have Thai nominees or not is up to Thai officials to investigate.”

The luxury villas are located in Khao Ma Ngon, Village No. 3, Bo Phut Sub-District, Ko Samui District, Surat Thani Province.

“Chinese businessmen want to operate honestly in Thailand. If there are concerns about Chinese mafia entering through illegal means, it is important to investigate how thorough our investigations are.”

On tax issues with Chinese retail businesses in Sampeng, Thanakrit said: “If there are tax issues, the tax authorities can investigate. They can also investigate Thai online traders, so foreign businesses are also being checked. Officials can investigate to ensure proper licensing and legal ownership. The government should take investigations seriously and certain professions should be reserved for Thais.”

When asked whether it is easier for Chinese to invest in Thailand compared to Thai investment opportunities in China, Thanakrit admitted that it is a challenge due to the different governance systems and legal standards in the two countries.

Thailand is not Hong Kong

When asked about the Thai government’s proposal to allow foreigners to buy or lease real estate in Thailand for up to 99 years and own up to 75% of the apartments in a project, Thanakrit, who has more than 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 around 60. Most property buyers 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 covers almost two generations. I think 60 years is a more reasonable period.”

Thanakrit explained that changing the law to allow foreigners to lease or purchase real estate for up to 99 years would require an amendment to the Property Rights Act BE 2562. Currently, leases are set for 3-30 years and can be transferred, inherited or mortgaged. The idea of ​​extending leases to 99 years is aimed at attracting foreign investors, as the current 30-year limit may not be attractive enough.

The 30-year term has also led to problems with nominees in property transactions. In addition, with many unsold properties in Thailand, consideration is being given to extending the lease term. However, Thanakrit believes 99 years is too long, although he supports a term longer than 30 years.

He also discussed the proposal to increase the foreign ownership limit in apartments from 49% to 75%. He noted that in some parts of Bangkok, such as Sukhumvit’s On Nut and Bang Na, there are still apartments available to foreigners, but in more desirable areas such as Ekkamai and Thonglor, 49% of apartments are already rented by foreigners. Leaving only the remainder available to Thai buyers with reduced purchasing power, allowing foreigners to own 75% of the apartments, could be excessive and affect the project’s voting rights.

He concluded by saying he is concerned that it will take too long for Parliament to amend the law governing real estate and Chinese investment, given the continued influx of foreign capital.

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