Land Ownership In Thailand

[GLCQuantum]

A word to the wise. Foreigners cannot own land in Thailand. Anyone who tells you different is lying.

Am I not wrong in saying thought that, there are a fair few options in which...if you buy a place in your name, you aint going to be leaving said abode until you die.

Granted, I don't think you're able to leave it to any kids either but basically - it will be your house until you pass. Am I also right in saying you can just continue the lease anyways when the time is up - for a payment.

Or am I wrong on all of the above.

If I had the money I would be quite happy getting a house on lease in my name that I couldn't get kicked off of for the remainder of my life. The length of the leases surely assures that, if anything happened to myself, my family would be okay. Or not? If you can extend the lease there shouldn't be any problem at all really.

I don't know much about this but, in comparison to the other way of securing land to live on I would be going for the lease option in my position. 'My' position needs to be emphasized there as... We're not all in the same boat.

[sargeant]

GLC the pre eminent law on land empasise land ownership is the land act
section 4 FOUR cannot be more precise
Foreigners CANNOT own Land

In 1998 the govt passed a law allowing foreigners to lease property for 30 years

There is a lot of what i call barrack room lawering with companies and 30+30+30 year leases and something called usufruct

But the land act section 4 will win out in any dispute in spades
The first 30 years of any lease should be protected but no one will know if the 30+30+30 will stand up in court until 2027 at the earliest

I have absolutely no nil nana vested interest in any property or land business whatsoever and never have had
I have lost three properties though

[johnnyk]

The Land Office will not register a lease of more than 30 years on the chanote. Basically, that is the only document that carries weight. Any other agreement is a private arrangement between two individuals and is irrelevant to the L.O. and its concerns.
Currently, the original 30-year lease is binding on the heirs and successors, they must honour it to the end of term but are under no obligation to renew or honour any other arrangement as they are not part of the original lease contract.

[dtaai-maai]

He seemed a bit taken aback when I explained that buying a property in Thailand is not such a clever thing to do if you've not got Thai family connections, and that renting is a much safer option.

... why are so many people obsessed with buying property, rather than renting?

I can think of several reasons for buying a property in Thailand, but to do so as some kind of retirement investment you'd have to have more money than sense.

I can also think of several reasons for buying a Stephen Leather novel.
No toilet paper.
Insanity.
Being Stephen Leather's Mum.


Hmm, perhaps 'several' was a slight exaggeration...

[Arcadian]

I bought a house in Thailand knowing full well the 30 year rule. Hell, if I live long enough for that to be a problem to me I shall be very happy.

[Super Joe]

A word to the wise. Foreigners cannot own land in Thailand. Anyone who tells you different is lying.

Am I not wrong in saying thought that, there are a fair few options in which...if you buy a place in your name, you aint going to be leaving said abode until you die.

Yes, both usufructs and right of superficies provide lifetime rights of land use. These are what's known as 'real property rights' as opposed to just 'contractual rights', and have been a right for Thais & foreigners under Thai law since the Civil & Commercial Codes were introduced in 1936. This is NOT ownership ofcourse, so not sure why Sarge is quoting the land code which regulates ownership. These early land use rights have remained unchanged by the land code and it's various ammendments that arrived decades later.

Thai CCC's extract on usufructs:
Section 1417:An immovable property may be subjected to a usufruct which the usufructuary is entitled to the possession, use and enjoyment of the property. He has the right of management of the property.
Section 1418: A usufruct may be created either for a period of time or for the life of the usufructuary.

Thai CCC's extract on right of superficies:
Section 1410: The owner of a piece of land may create a right of superficies in favour of another person by giving him the right to own, upon or under the land, buildings, structures or plantations.
Section 1411: Unless otherwise provided in the act creating it, the right of superficies is transferable and transmissible by way of inheritence. (Applicable to 30 year superficies, not lifetime.)
Section 1412: A right of superficies may be created either for a period of time or for the life of the owner of the land or the superficiary

These land rights 'systems' have been in existence for centuries and were adopted from French & German civil law, and as real property rights this means they follow the property, ie: registered rights on the land title and binding upon any new landowners. It doesn't rely or depend on any future actions, agreements being honoured etc.


SJ

[Super Joe]

He seemed a bit taken aback when I explained that buying a property in Thailand is not such a clever thing to do if you've not got Thai family connections, and that renting is a much safer option. Whilst you might pay a little more in the long run fom renting.
However.. why are so many people obsessed with buying property, rather than renting?

What scenario are you applying here to 'paying a little more'? I wouldn't wanna sell a property back home in order to finance it, or some kind of finance arrangement that could blow up on us, but if we take a straight comparison of a retiree who's got the purchase funds available to either buy cash or rent+invest, there's just no comparison imo. Ok I'm inherently biased cos I work in property here but please tell me how it's any better than this, and I know everyone's circumstances are different and a guy late inlife with no Thai family would not wanna buy a house here with his UK grandkid's inheritence money etc etc...

But, for the average joe among us who don't know anything about investing on the stock market, even using conservative figures I can't seem to come up with any better than 50% of your invested sum+interest earnings devalued with inflation & rents between years 8-11, with the whole lot used by years 14-18. That's based on...
1) Achieving interest/earnings on your lump sum invested of 3.5%p.a.
2) A rent-price-ratio (gross yearly rental/price) of 6-7% the reported Thai ave., I reckon HH's is more like 7-8% but used the lower figure.
3) Inflation on rental fees each year same 3.5% as savings, tho' I believe will be higher here as town gets busy again.
4) Inflation of 3.5%p.a. time value of money measure against lump sum.

Year 1 - You hold 100 units ('x'm Baht), you need 6.5% rent+3.5% money value=10%... you earn 3.5%, so physically 3% down, plus cash devalued 3.5%.
Year 2 - Now 97 units, 3.4 interest earnings, rent increased to 6.7, now 3.4 physical reduction, plus another cash devalue of 3.5%.
Year 3 - Now 93.6, earn 3.27, rent at 6.9, cash devalue again.
Year 6 - Now 81.5, earn 2.9, rent at 7.7, cash devalue again.
Year 9 - Now 65.6, earn 2.3, rent at 13.1, cash devalue again.
--------- 65.5 units x 9 years of inflationary time-money devaluation = 47 units... over half initial value gone----------
The curve starts going balistic after year 10. Even if you dropped the rent figure down to an unrealistic 4% ratio, it'll still be a disaster because your investment is devaluing by 3.5% inflation each year.

Other risks & considerations:
- Property values/rents increasing over and above average inflation as it continues developing fast.
- Above average inflation here increasing that 3.5% devaluation of your capital.
- You're exposing yourself to unknown exchange rate fluctuations.
- Lose the option of cashing in or raising borrowing against a paid up asset if you have an emergency (needs wife on board)
- If family purchase then practically guaranteeing security for your wife & kids future.

Why on earth would a retiree choose to take on all this extra risk if he's in a position to remove it from the get go!?

[uncle tom]

Ok I'm inherently biased cos I work in property

- It shows a little Joe!

A few things you miss from the equation:

1) Property value appreciation cannot be assumed - yes, it has happened in the past, but from the USA to Spain to China, the world's property markets are in meltdown.

2) The idea that a second hand property can be worth more than a new one is a peculiarly British thing - most of the world regards second hand houses as they regard second hand cars - an asset that depreciates over time.

3) If you rent a property, maintenance and refurbishment is not your problem.

Assuming (1) to be neutral, and factoring in (2) and (3) against a headline rent of 7%, the real cost of renting is likely to be around the 4% mark.

So rent vs investment returns are not light years apart, and if the situation changes, and the LoS - or your favourite corner of it - ceases to be quite so nice, you can up sticks and move on without grief.

If you live on stress, then by all means buy, and revel in the challenge. If, on the other hand, you want to retire without a worry, renting seems the sensible option.

[GLCQuantum]

If, on the other hand, you want to retire without a worry, renting seems the sensible option.

Until the landlord decides to triple the rent to get in line with what next door is getting. Believe me... I've been there.

[Super Joe]

A few things you miss from the equation:

1) Property value appreciation cannot be assumed - yes, it has happened in the past, but from the USA to Spain to China, the world's property markets are in meltdown. - Future property values, per se, were not part of the equation, except in relation to future rent increases, ie: they generally track each other over time. I didn't include for any rent inflation over-and-above general inflation of 3.5% which is equally applied to the cash investment growth. It would be a risky plan, imo, to plan your retirement around rental inflation being less than general price inflation... and even of rents stayed as they are today, with no increase... your invested capital still runs out because it's getting reduced from year 1. Ie: Out: Rent 6%+3.5% inflation on money, In: 3.5% earnings on the invested capital.

2) The idea that a second hand property can be worth more than a new one is a peculiarly British thing - most of the world regards second hand houses as they regard second hand cars - an asset that depreciates over time. - Generally property depreciates over time, I don't get that. Maybe the bricks and mortar of a ramshackled old place, but the land?? But again, it's nothing to do with the property price this wasn't my point at all, because, if your money is all spent on rent after 15 odd years, you wouldn't care if the house was worth 20 Baht or not... it's rent free!!


3) If you rent a property, maintenance and refurbishment is not your problem.
Assuming (1) to be neutral, and factoring in (2) and (3) against a headline rent of 7%, the real cost of renting is likely to be around the 4% mark.
So rent vs investment returns are not light years apart, and if the situation changes, and the LoS - or your favourite corner of it - ceases to be quite so nice, you can up sticks and move on without grief. - But your savings still run out after 15 odd years. You still have to then find rent money for another 10, 20, whatever years. And you still don't have security for your family after you've gone. And Thai landlords do not do half the maintenance they should, tenants do it or suffer, plus not always getting deposits back is a real factor to take into account. Maintenance and upgrading is usually not lost money because the value stays in the property, but anyway 3% is not a viable figure, that's 10,000 Baht/month on a modest 4M Baht property.

To start paying rent again after 15 years on this hypothetical 4M Baht house, requires another 4M Baht invested today, untouched so that it retains it's value and can run out again on year 30. When I die somewhere between now and then my wife and son can continue living there until he has kids. Or they can sell up, at whatever it may be worth, and have some options.

The major factor in all this is the white elephant in the room that never gets taken into account... INFLATION... it would be risky for any of us average joe's to even assume that UK/Europe/N.America based investments, after inflation rates/interest rates/taxes/property bubbles/recessions/exchange rates, would even be sufficient to hold value with Hua Hin's inflation. Let alone make inroads into paying rents. The last 8 years must have it at about -25%. There's your stress during retirement when you're not earning a penny any longer.

Interesting Tom, even if we have different perspectives on it

SJ

[MisterClean]

I bought a house in Thailand knowing full well the 30 year rule. Hell, if I live long enough for that to be a problem to me I shall be very happy.

Right.

[heartofmidlothian]

Buying a house when you are around 60 years old, on a 30 year lease. Most people think they won't reach 90, but if you do, I'd imagine it would be a horrible age to be homeless! Especially if you have a 20 year old wife!

[GLCQuantum]

Buying a house when you are around 60 years old, on a 30 year lease. Most people think they won't reach 90, but if you do, I'd imagine it would be a horrible age to be homeless! Especially if you have a 20 year old wife!

If you have a wife that age at 90 (or 60) ...I would place my last penny on a bet that the house is going to be the least of your problems when it comes to the crunch.

[johnnyk]

Buying a house when you are around 60 years old, on a 30 year lease. Most people think they won't reach 90, but if you do, I'd imagine it would be a horrible age to be homeless! Especially if you have a 20 year old wife!

Homeless and unmarried. She wouldn't stick around.

[margaretcarnes]

Superjoe - I agree with much of what Uncle Tom says. It's horses for courses I know, but as an alleged 'retiree' in the UK, with no-one to leave anything to, I feel quite happy renting these days. No property maintanance worries. I don't even have to pay for the annual boiler service or weedkiller!
I think that rather than quote figures on depreciation/interest on investments/increased property values etc etc there really needs to be a comparison which takes full account of the savings made by renting. It is of course different for expats who have Thai families who will inherit. It is natural for people to want to make some provision. But for retired farang couples the situation can be entirely different.
Just a few days ago some comparative figures were released in the UK which gave the average difference between mortgage and rental costs region by region here. OK down South the differential is greater. But where I am it is only around £40 per month more - on average - to rent. Set that against what is saved, not least simply in buildings insurance for a start. (Which probably isn't an issue in the LOS) and it becomes a serious decision.
There are some beautiful properties available in the HH area now - no doubt about that at all - but I do think buyers need a huge reserve to ensure that they can keep going there. At least in the manner to which they will become accustomed! The initial property cost is only part of the equation, particularly when pension increases can't be guaranteed. Add to that the potential problem of selling a second hand HH property should the expat need to go home and the huge reserve is even more important.