Foriegners not being able to buy land.........

[elef]

Sure, her family will get the land - still a legal lease contract gives the necessary right to stay in the house.

 

Note that a farang can own a condo - but not the land it's built on!

[Old Hippie]

Yeah, as I recall, I WAS TOLD by a realtor, the complex had to be 51% Thai owned or something like that. Wonder if Farangs can vote on the condo board or hold a position on it, as this would be "controlling the land...?"

[whosyourdaddy]

"Yes put your daughter as owner of the land and lease it for 30 years is the safest way to go IMO, but use a good lawyer to make the legal papers and fixing the registration and other formalities"

.....................

 

The only problem with that is selling it. Your daughter would not be able to sell it untill she is 20 years of age or Married ( which makes here the legal age despite her real age) . SO you could be stuck with a property.

 

I really dont know why people think it is a big deal. Many people back home put the house in the wife's name for tax purposes. I had no problems doing the same here. Mortgages are very easy for most farangs to obtain now. Have not heard of anyone getting denied in the past year who went for one.

 

Now the big thing will be if I can tax write off the mortgage interest payments which is in my name. We will see on March 31st.

[Guest]

You misinterpretted me in your rebuttals. You should read the post a few more times.No where does it say owning a company allows you as an individual to buy land.It says own a company and use the company to buy land.

 

BOI---> yes it is about a million dollars, alot for some people.But netherless, a viable avenue for many others to buy 1 rai if they really wanted to.

 

US AMITY ---->I know 3 american's with companies establsihed under the amity treaty.those companies own land.the americans have majority ownership/control of the companies. sure, it is ownership by proxy, not direct individual ownership, but again, a viable working model.

 

NZL---->Likewise a company set up under the NZL/Thai free trade agreement, a NZL entity(person/company) can have 100% equity.

 

The key is the company that you have majority control over owns the land by proxy. US Amity treaty and NZL/Thai FTA were the only models I could think of where the foreigner is allowed majority control via equity holding. A standard thai company (49% shareholding), would not be a viable proxy ownership model, IMHO.

 

I trust my thai wife and her family.And have for 25 years.My wife owns land in thailand and overseas in her own name as do her parents.But I understand everyones situation is different and not everyones in-laws and wife are financially independent.

[gummigut]

alphamale said:

US AMITY ---->I know 3 american's with companies establsihed under the amity treaty.those companies own land.the americans have majority ownership/control of the companies. sure, it is ownership by proxy, not direct individual ownership, but again, a viable working model.

 

Sorry, Gadfly is right here and your information is BLATANTLY false.

 

1) For a company to be registered under the US Amity treaty. American ownership has to be over 50%.

 

2) The Amity treaty specifically states that a company established under the Amity treaty cannot be used to own land.

 

3) "The key is the company that you have majority control over owns the land by proxy."

 

Umm, do you know what you are talking about? If so, please explain what "by proxy" means?

 

I'll take a guess what you are talking about is a tiered stock structure with preferred shares. Thais own 51% of the shares in a company, but the other 49% of the stock are preferred shares with all the voting rights, thus control virtually relies in the 49% of preferred shares.

 

But the fact that Thais own 51% prevents a Company from being registered under the US Treaty of Amity.

 

The only way a company can be registered under the US Treaty of Amity AND own land is through special exemption in very rare cases and involves some extremely serious investment amounts.

 

<<burp>>

[gummigut]

Gadfly1 said:

First, ... Foreigners want property in places such Phuket, Koh Samui and Phuket. Foreign demand therefore probably does increase prices in those places (more about that in a moment), but that is not where middle class Thais buy property.

 

The market for middle class Thais buying property is housing complexes in the suburbs of Bangkok.

 

WRONG. I know a LOT of people who would love to buy property in... You guessed it... Bangkok. Not just moo baans, but they would like to buy several townhouses, or a rai on Sukhumvit Soi 7 to Soi Thong Lo.

 

Gadfly1 said:

Are restrictions on property prices in Thailand justified because price increases on condominiums in London and New York affect prices in Thailand, albeit the affect is infinitesimally and immeasurably small? Of course not.

 

I've been arguing all along that the Thai middle class doesn't have the same opportunities for earnings so they should be protected. London and New York natives have the best opportunties to earn. They need no protection.

 

Gadfly1 said:

and if you believe, freedom to engage in consensual behaior is a good thing (unless it is outwieghed by a negative), than the burden must rest with you to supply the evidence to establish that negative.

 

The negative is that developed countries use it's power in advanced technology and scale to push agreements which are blatently lopsided. Again, see who the worst WTO offenders are: USA and Europe.

 

Gadfly1 said:

If you have credible research showing the link between Phuket home prices and the prices of small housing estates where the Thai middle class actually buy their properties, please provide it. If you cannot, your argument fails even before we get to the next points.

 

I've been arguing my points clearly and concisely. It is you who have been mischaracterizing my argument by extropolating to phuket (which is clearly, on the whole, not in the middle class Thai buying bracket).

 

Gadfly1 said:The second point will be a bit a counterintuitive for some, but a lower price is not necessarily a better price.... A few governments have done this, and it always created serious problems. This is probably obvious to most by now. Owners are unfairly losing value. You bought the house for 100,000, and now the government, on a whim (like handing out wads of cash), decides to end poverty by requiring you sell your property to someone for 50,000.

 

You are REALLY grasping for straws here. NO ONE is suggesting that the gov't set land prices.

 

Market sets land prices with the limitation that Farangs are not eligible. Thus your argument of set land prices is just way out of wack.

 

Gadfly1 said:In addition to the obvious unfairness, there is another problem when this happens. It causes distortions in the market because assets are being sold and bought at values artificially lower than their fair market values. These sorts of distortions ruin economies by sending the wrong sorts of signals in terms of investments.

 

This is a WELL understood distortion. It's not unforseen. It is priced in the market. It's like interest rate yields on January 1st. It's a well understood market distortion. Restrictions on Real Estate ownership does NOT send wrong signals about an economy that could be misconstrued. It just inhibits the economy. Extrapolating this to the Commies in USSR and China is again, way off the deep end. The situation is not even close to the same. Way different economic systems at work.

 

Again, grasping at straws.

 

Gadfly1 said:In Hardly. My views, and the ideas set forth in this second point are in the dead center of economic thought. Among the economically literate, there are very few who would disagree with the reasoning here.

 

Accept for anyone trained in economics.

 

It's not that hard to argue points cogently in economics. Economics is a very arguable subject in general. But give me CREDIBLE arguments with generally accepted economic principles and I can respect that.

 

Trying to extrapolate my arguments to just Phuket and then trying to compare the systems in place here to China and USSR is pure sophistry.

 

Gadfly1 said:Third, ...but the reality is that there are, and never will be, effective restrictions on foreign control of property in Thailand in places that foreigners find desirable, such as Koh Samui, Phuket and Pattaya. In the real world, Thailand has a system that doesn?t prevent foreign ?ownership of property, but instead not only adds to the transaction costs of owning property, but also fuels corruption and fraud in the property market. No one benefits from this system ? except the crooks.

 

AGAIN, the places you cite are NOT where the middle class would be buying.

 

You are citing places with people who have decent amounts of wealth. If Thailand wanted to prosecute the ownership of several rich villas, those people would be pissed off, but their wealth would, in all probably, not be substantially hit.

 

Whereas an investment in middle class property would probably represent a significant proportion of assets from either a farang or thai. Thus all the costs and risks involved it would be much less likely for a moderately wealthy farang to take the real estate risk than a very wealth farang who wouldn't take a huge hit if the money was lost.

 

i.e.: The moderately wealthy farang is much more risk averse than the rich one because the implications of things going sour is much more detrimental to the moderately wealthy farang.

 

<<burp>>

[Old Hippie]

"...I've been arguing all along that the Thai middle class doesn't have the same opportunities for earnings so they should be protected. London and New York natives have the best opportunties to earn. They need no protection..."

 

I have no idea about London, but for a working class family, or a single income Family, it is almost impossibe to buy a Home in a Hot market like New York or San Francisco, and many other places in the USA. It is sort of a cliche, but over all, the middle class is having a harder time maintaining a standard of living.

 

Short of inheriting a ton of money asap (which won't happen, as I have no blood related relatives that I know of, and my adopted family has no money to pass on) or winning the lottery, my chances of owning a home in this area are nill. Simply put, my salary has not kept up with the cost of living, I don't make enough to save a down payment, and I don't make enough to cover a mortgague with a low/no down payment. Interest only loans are not an option.

 

The average home in SFO costs around $800K, on the Penninsula, maybe $600K, Can you imagine what kind of income is needed to afford the down payments and mortgagues? My condo here is $302K on a special deal, to get the mortgague down to what I could afford+ the association fees, I'd need over $200K down payment...can't do it. Keep in mind, while an annual salary of $60K is way above the national average, here, it qualifies you for low income subsidies. I think many working people in the New york area are in the same boat. True, you can move to cheaper areas, but then the salaries drop as well, clearly, the middle income/single income family in the USA is struggling to buy a home...

[Nervous_Dog]

Interesting in regional Thailand, I see a LOT of moo bans being set up, in the oddest areas, ugly as sin, but selling out to the emerging middle class.

 

I think their safe, but agree about bangkok

 

DGO

[Guest]

Sorry, Gadfly is right here and your information is BLATANTLY false.

 

1) For a company to be registered under the US Amity treaty. American ownership has to be over 50%.

 

2) The Amity treaty specifically states that a company established under the Amity treaty cannot be used to own land.

 

3) "The key is the company that you have majority control over owns the land by proxy."

 

Umm, do you know what you are talking about? If so, please explain what "by proxy" means?

 

I'll take a guess what you are talking about is a tiered stock structure with preferred shares. Thais own 51% of the shares in a company, but the other 49% of the stock are preferred shares with all the voting rights, thus control virtually relies in the 49% of preferred shares.

 

But the fact that Thais own 51% prevents a Company from being registered under the US Treaty of Amity.

 

The only way a company can be registered under the US Treaty of Amity AND own land is through special exemption in very rare cases and involves some extremely serious investment amounts.

Ok, this is right. While I disagree with gummigit on the policy issue of whether restrictions on property ownership are sensible, his summary of the law is correct.

 

Underlying all of these posts you will see one common theme: considerable confusion about whether foreigners can own businesses and land directly. OH complained about my "attitude" and, to be fair, he has a point (although anything that stars with "I was told" is fair game for comment IHMO). My annoyance should really be directed at the authorities rather than foreignors who are confused by the absence of transparency here.

 

Thailand depends tremendously on foreign investment, but has either a schizophrenic or disingenuous approach to attracting to such investment (depending upon your point of view). Let me elaborate a bit because it reveals a great deal about Thailand.

 

First, the boring economics, and then the more interesting marketing. The economics: according to the Asian Development Bank, 70% of Thailand's growth from 1993 to 2003 was based on exports, and the machinery and know how for producing those exports was largely provided by foreigners. Another 6-9% of GDP growth is based on tourism - also provided by foreigners. The literature is pretty consistent on these fundamentals, although the exact figures (67% vs. 71%) will vary a bit.

 

Unless your are a Luddite who wants to see Thailand locked in time as some sort of cultural museum that preserves its impoverished past, the benefits of this growth for the average Thai are obvious. Thailand is a much wealthier country and the quality of life is a much better now because of foreign participation in the economy. Let me give a concrete example that even visitors will be familiar with: the SkyTrain. It has increased the quality of life here tremendously. Those trains and the technology to run them were all imported; they weren't made by basket weavers in Roi Et, although the daughters of those basket weavers may use them daily.

 

Now the marketing. Anyone here ever been to one of the road-shows the Thai government puts on about investing in Thailand? I have. I have spoken at several. And I was specifically asked not to mention the Alien Business Law or restrictions on foreign investment by the government officials participating.

 

If you attend one of these seminars within Thailand, and you are a bit astute, you will see something very interesting. If a government official is present, the Thai lawyers on the panel will gloss over these restrictions; if you blink, you'll miss any mention of the restrictions. But if they are confident there no government officials present (say, at a private briefing), they will go into considerable detail. And the detail isn't pleasant.

 

Occassionally, a braver Farang will call the government on its hypocrisy. You'll here questions such as, "If you want foreign investment os much, why do you even have an Alien Business Law and restrictive work permit and land ownership laws?" Or from long term residents: "I have invisted millions here. And I am a permanent resident and therefore I have the right to live her forever, but I can't own land and I have no assurance that I will be allowed to work at my own company since that is considered a "separate matter" of Thai work permit laws, and those laws constantly change; why?"

 

Thais can be very charming, and that charm can used to pull a sleight of hand to change the issue, and that is usually what happens. But I did see a Ministry of Commerce official tell a foreigner who asked one of these embarrassing questions that the Alien Business Law has no affect on foreign investments, and foreigners who live here ?should not tell potential foreign investors anything different.? Those were his exact words. And although he didn?t say it expressly, the implied ?if they know what is good for you? was pretty clear. You have to ask yourself: why?

 

The strategy is one of promoting investment, and then, dissembling and occasionally a employing a bit of intimidation when awkward questions about restrictions on the ability of foreigners to actually own their investments and remit profits out of Thailand are raised. Unfortunately for the vested interests here, that strategy is beginning to fail as Thailand?s neighbors eliminate protectionist restrictions and open up. And there is not a damn think they can do about it, except dissemble faster - a failing strategy.

 

Quite frankly this is why I hammer so hard on this issue and get so annoyed when foreigners get hoodwinked by the intentional confusion created about, and vagueness surrounding, what foreigners can and cannot do here. Foreign confusion about what they can and cannot do here generates tremendous opportunities for fraud and corruption. I have seen it for over 10 years. (And I gave an example of this in a post above.) But it also makes Thailand less competitive.

 

It is time to lift up the rock, take a clear look in the light of day at the restrictions that Thailand actually imposes on foreigners wanting to liver or invest here, and then honestly asses those polices. But, by pulling the wool over the eyes of foreigners, an such an honest assessment is delayed. That is not good for Thailand or anyone who lives. Hence, ?my attitude?.

[Guest]

WRONG. I know a LOT of people who would love to buy property in... You guessed it... Bangkok. Not just moo baans, but they would like to buy several townhouses, or a rai on Sukhumvit Soi 7 to Soi Thong Lo.

First, this has nothing to do with foreign buyers since most of them also cannot afford these properties, but let's take a closer look at your two examples because they are revealing.

 

You refer to middle class Thais wanting to buy "several townhouses" on Soi Thonglor. SEVERAL town homes - this isn't a middle class Thai wanting to buy a home for his family. This is a wealthy Thai wanting to make an investment.

 

And if that wealthy Thai, probably Chinese-Thai, does buy several townhouses, he is probably doing so on speculation (with little risk), and that may be driving up prices. But this is not a problem created by prospective foreign buyers.

 

Speculation does drive up prices, and I do think there is speculative buying in the areas you described. Kudos for that. But the speculation problem is created by connected lending not foreign buyers.

 

A few privileged Thais, generally Thai-Chinese, can buy property using bank loans with little or no risk to themselves. They have connections with bank officers, and they can get loans on terms that make no sense, and there is little or no risk to their own assets. In other words, it makes economic sense for them to buy up properties because it is all upside and no downside.

 

The problem here is corruption; not foreign buyers. Those who live in the US or Europe and perhaps newcomers who didn't go through the 97 crisis may not understand how bad connected lending here is. Loans are made on the basis of connections rather than economic viability, and because there is little or risk to the borrower, the money is spent recklessly. This, in turn, inflates asset prices.

 

Now let's go to your second example: a rai of land between Soi 7 and Soi Thonglor? The current laws, as you correctly observed, do not allow foriegners to own land here. And yet middle class Thais certainly cannot afford a Rai of land in that area now. Nor can middle class Americans. A rai of good land in this area is tremendously expensive for anyone. I'd also like to a rai in this area. But even if they allowed foreigners to own land, I still couldn't afford it.

 

In other words, restrictions on foreign ownership have nothing to do with the examples you cite. Indeed, if Thailand generally opened up to foreign investment (and not just property, but also banking), the cause of this sort of inflationairy speculation - connected lending - could be reduced and eventually eliminated. There is substantial research in this area, it is written in plain English, and if you want to take a look for yourself, I suggest an article in the 3 May 2003 edition of The Economist entitled "Shipbuilding".

I've been arguing all along that the Thai middle class doesn't have the same opportunities for earnings so they should be protected.

When you create such "opportunities" by placing prohibitions on foreigners, sorry, you are a protectionist. And protectionism is not a sensible economic policy. If you disagree, please provide me with a cite to a credible source favoring protectionism. As explained at the very end of this post, the burden is really on you to prove your case.

 

These sorts of protectionist policies, if they actually work (and they don't in Thailand), mean that an asset - property in this case - is not being sold at its market price. You obviously know a bit about economics, so I can't see how you can credibly argue that such restrictions, if they actually work, would would not cause the actual price to vary from the price on an open market.

 

And I also don't see how you could argue that resources are misallocated when their prices vary from market prices.

The market doesn't "price in" these distortions. These prohibitions create fraud and corruption in Thailand; how do price that into the market? By taking precautonary measures that make it more difficult for everyone - including honest buyers - to enter that market. This certainly doesn't do any favors to middle class Thais.

 

This corruption and fraud is the price of protectionism. The Thai middle class is much better off with clearer property laws, real zoning laws, and a stronger rule of law. Ridding Thailand of archaic restrictions on foreign ownership - that don't work anyway and only weaken the rule of law and foster corruption - is the smarter approach. It works, and that is why other countries are taking this approach.

The negative is that developed countries use it's power in advanced technology and scale to push agreements which are blatently lopsided.

I agree that developed countries engage in protectionism and that such protectionism is bad policy, although I am not sure if they are the worst offenders. But I don?t see this as the issue.

 

The problem here is that you are adopting an archaic mercantilist approach to international economics: a model where one group of producers in one country gains at the expese of another group of producers in another country. A "zero-sum" game. And this, I am sad to say, is where you are out of touch with economics.

 

Long ago economists realized that the mercantilist approach you are advocating forgets that all of us are fundamentally consumers (Mills). In other words, eliminating protectionist barriers is not a case of one country losing at the expense of another. When a country increase productivity and lower costs by eliminating protectionist barriers, there is a net gain to everyone. This doesn?t justify the protectionism of wealthier countries; indeed, it damns it, and suggests that all countries would be better off without protectionism. Indeed, a country is better off if it unilaterally eliminates protectionist barriers. But economic illiteracy prevents that from happening.

It is you who have been mischaracterizing my argument by extropolating to phuket (which is clearly, on the whole, not in the middle class Thai buying bracket).

And yet you cite two geographic areas - investing in "several" townhouses on Soi Thonglor and a rai of land in one of Bangkok's most expensive areas - which are also not in the middle class Thai buying bracket. The fact that you are relying on these sorts of examples pretty clearly demonstrates that I am not mischaracterizing your arguments.

NO ONE is suggesting that the gov't set land prices

Nor is anyone suggesting that you are advocating this. I am making a completely different point here, and let me set it out again as clearly as possible to avoid further confusion.

 

We start with the premise that people ? and the word ?people? includes foreigners - should be allowed to engage in consensual behavior. That this freedom, standing by itself and independent of its economic utility, is a good thing. Consequently, a willing buyer and a willing seller should be allowed to engage in a transaction, unless ? and this is important ? there are countervailing negatives that weigh in favor of government regulation or prohibition.

 

In more simple terms, this means that people should be free to do what they want unless there is a good reason for not let them do it. Any disagreement on this?

 

If you accept this simple proposition, then it logically follows that anyone arguing in favor of restricting consensual behavior carries the burden of proving that regulation or prevention is necessary. Here, that means the burden rests with those you and others who advocate restrictions on foreign ownership of property.

 

That is all I was saying, but you mischaracterized this simple point. Why?

 

Well, I have an idea: is it perhaps because you cannot meet that burden?