Real estate firm Knight Frank Thailand has added to its comments reported by Dot Property Group last week regarding Thailand Finance Ministry’s proposal for an amendment to the 1999 Act on the lease of immoveable property for commercial and industrial purposes.
The firm said it believed that if the government approves this amendment bill, which extends the current land leasing period to 99 years, it will encourage more investment into the real estate market.
“The extension of the maximum lease term (for certain property types) to 99 years stands to benefit landlords, tenants, and creditors,” said Marcus Burtenshaw, Executive Director, Head of Commercial Agency, Knight Frank Thailand.
He adding that a lease is the right to occupy and enjoy a property for a set period of time, so the longer it is, the more valuable it is.
Burtenshaw explained that at the commencement of the term, the value of a 99-year lease is a little lower than the value of a freehold title for the same property but the leasehold’s value declines once it starts, and that decline in value accelerates as the expiry date approaches.
He said: “It is not simply the differences in value of the longer terms that are important. Lengthening the maximum lease term also increases their liquidity, opening the door to more financing options and allowing them to be more readily traded.”
Frank Khan, Executive Director, Head of Residential Department for Knight Frank Thailand, said the extension of a land leasing contract up to 99 years, if approved by the cabinet, will have a tremendously good effect on the property sector.
He added that this would make Thailand more competitive, compared to other regional sites such as Singapore and Malaysia whose leasing term lasts 90 years and Laos, which offers 70 years.
Khan pointed out that a 30-year lease period certainly affects foreign investors’ decisions to renew the contract due to their cautions on possible changes in price and leasing procedures. He also said this will help ease foreign investment in the commercial and industrial markets, and noted that if this extension is applied to the residential market, it will be good for Phuket, Pattaya and Hua Hin where investors are looking to invest in villas or resort homes.