Friday, May 06, 2011
The beaches in southeast Asia are stunning…but can you own property here?
Friday, April 06, 2011
Dear Reader,
Sugar white sands meet turquoise waters. Limestone outcrops rise vertically…their flat tops covered with dense vegetation. In the jungles, you’ll find ancient temples. Warm smiling faces are all around. Smells of spicy cooking fill the air in beach villages so chilled out that foreigners who passed through a decade ago never left.
This is south-east Asia. Condos in these beach towns can change hands for as little as $25,000.
The hurdle: foreign ownership is restricted or flat out forbidden.
Let’s take a quick tour.
Thailand is the most established tourism and second-home destination in the region. Foreigners are prohibited from owning title to land. Foreigners are however permitted to lease land and homes. Thirty years is the maximum permitted term of such a lease, with an option to renew for another thirty years. Foreigners are allowed to buy condos so long as foreigners don’t own more than 49% of the building or development. Companies registered in Thailand with a majority Thai ownership are permitted to buy land. Foreigners can legally hold a minority stake in such companies.
Marry a Thai spouse and you are also permitted to buy land (although you may have to make a declaration stating that this is the sole property of the Thai spouse)...and for big investors there are also some dispensations.
So, you can own a condo in Thailand. Or, own a leasehold interest in land/home and lot for 30 years with an option to extend for 30 years.
Lots of folks will tell you ways around these restrictions. Some lawyers even peddle solutions. They establish a local entity on your behalf. You are the minority shareholder but retain an option to buy out the silent appointees (nominated by your lawyer) for a nominal amount at any time in the future. While Thai courts have been slow to nullify such contracts it’s my understanding that they are illegal and the rights you think you have cleverly secured can be taken away. I would not advise doing this.
Next door in Cambodia, land ownership is restricted to locals. Here foreigners can lease land and homes (remember, when you buy a home you also need to control the home the land sits on) for up to 99 years. In recent years the laws have changed to allow foreigners to own condos, but not on the ground-floor of a building.
Laws relating to how a locally-controlled corporation with minority foreigner shareholdings can own land, or if you have a local spouse, are consistent with the laws in Thailand. In Cambodia, though, if you make a donation to the government you can get citizenship and the ownership rights that go with it.
In Vietnam, locals receive land use rights, not ownership. The law doesn’t recognize any private land ownership. The best a Vietnamese can hope for today is a leasehold interest. From 2009, foreigners resident in Vietnam can buy condos in certain developments on a 50-year lease. Interestingly, real estate transactions are handled in gold here.
Laos also only grants its citizens land use rights rather than ownership. Foreigners can lease land for 30 years. Extending the lease is a possibility. Land for business or investment purposes can be leased for 50 years…again with an extension possibility.
(I am neither a lawyer nor an expert in any of these markets. You should use your own lawyer and other advisors if you are considering buying or leasing in any of these countries.)
As you know, I look for the emergence of new middle classes and follow the Path of Progress. Both trends are at play in this region. Take Vietnam, for example.
The U.S. trade embargo was lifted in 1994 and diplomatic relations with the U.S. established. While still under tight one-party rule, Vietnam has been set on a path of liberalization and global integration for the past decade. Membership of the ASEAN Free Trade Area and the WTO (World Trade Organization) has aided reforms and boosted trade.
Vietnam has been dubbed “emerging China”. As costs have risen in China, secondary manufacturing has been relocating to Vietnam. Multinationals have also looked to diversify exposure to potential constraints in China by locating additional facilities in Vietnam. Poverty is falling and the middle class is growing. Infrastructure has been improving, including new bridge and road networks that improve accessibility with China.
Vietnam also holds major tourism potential. The government has ambitious plans to establish resorts. They see what Bali has done and think they can follow its lead. They certainly have the beaches. To date, tourism has been dominated by back packers and boutique hotels. The government plans to change this with high-end mega resorts.
Can we profit? And if the answer is yes… how?
I don’t know….yet. I’m taking an extended scouting trip this July and August that will take in Hong Kong, Macau, Vietnam, Cambodia and Laos. So stay tuned.
Ronan McMahon
Posted Under:
thailand, foreign ownership restrictions, asia, vietnam
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