Why Leasehold Ownership is Safe
First, I want to tell you about Russians in Thailand real estate market. Back in 2014-2016 Russians never agreed to buy leasehold property. All Russian agents were selling freehold only. But later when Russians became developers, they met a problem – they couldn’t sell freehold and started to learn how to sell leasehold.
Today all Russians buy leasehold ONLY. It took about 3 years for buyers to understand why leasehold is good and for all agents and developers to learn how to sell it.
So you should understand first – leasehold is possible and in the market there is enough power and arguments to prove that Leasehold is good.
The plan is long term and I will explain why Chinese will buy leasehold the same as freehold in 2-3 years.
- Now there are a lot of chinese developers who invested in construction and they will meet a problem that Russians met before – if they can not sell leasehold, they will fail. So even those who bought freehold will have a problem with their properties. In this situation Chinese developers will support an idea of selling leasehold and they will learn what we are teaching.
- Chinese agents will meet the same problem as well, they are selling freehold only and don’t know how to sell leasehold, they are missing money, so they will support our teaching about Leasehold is good and will repeat it after us to all their customers.
- Leasehold and freehold are the parts of every single project, they are connected to each other. Freehold quota is only 49% so you should understand even when you’re selling or buying leasehold you are buying Thai property which is 51% lease.
So let’s get closer to the arguments.
Why Leasehold is good:
- Buying for investment (getting investment back and resale)
Even 5% per year income and 5% property capitalization will make 100% back foran investor within 10 years.
Thinking about investment is the right way. Not thinking about owing it forever. When choosing a property investor should think of the time when he will re-sell it and how much income he will make.
* For VIP KATA Condominium we offer a buy-back option which is safe for investors to plan their getting out of investment in 8 years.
- Leasehold is unlimited (what happens to a building after 90 years?)
90 years is not a limit. First, you should think about what will happen to the building after 90 years, will you keep the condo for this term as your own property? Probably not.
Our agreements have no limits on 90 years. When customers re-sell their property, we allow them to have 90 years again. The developers do not plan to catch property after 90 years, but they are limited by the law to register leasehold for the limited terms. Still we wanted and we found a way to make agreements that will not limit investors.
- Leasehold is safe (registered on the same conditions as freehold)
Both ownerships – leasehold and freehold – are registered at Thailand Department of Lands. Both ownerships will get the same documents and they are protected by the law with the same power in Thailand.
You should also understand that 51% of condos in one project are leasehold what means that they have the same power for the whole project. The freehold quota is here just to limit foreigners to own the larger part of a project, this quota protects a project but it is not made for investors.
Unfortunately, most investors understand freehold in a wrong way and they are ready to pay more money for it, that’s why developers make higher prices.
- Leasehold is cheaper (freehold is overpriced)
Higher price for freehold is just because people want it more. The cost to build leasehold and freehold units is the same. So it is just a part of advertising. You may feel that freehold is easier to sell, but this is not true. Even though it is overpriced, the future income can be even more from leasehold. Finally, everyone buys property in Phuket to make money on rental, there is no difference for the customers who rent – is it leasehold or freehold, they only look for a cheaper price to rent. So the rental income from leasehold unit will be larger in the future.
* When you are buying a unit in a condotel with hotel management, the hotel is also interested to make more on rental in the future, so it does not matter whether it is freehold or leasehold.
- Leasehold is less subject to tax (only 1,25% on registration and future)
The taxes for leasehold are much less. Now there is only one tax for the property in Thailand – the registration tax. But it may happen that in the future government will add the tax for foreign freehold units as the amount of them becomes more and more.
- Investment property means getting income from rental. Leasehold is cheaper but renting is for the same price as freehold.
- Leasehold is as safe as freehold, they are parts of one project. Leasehold is registered the same way as freehold, have the same documents and the same law power.
- Leasehold is unlimited in time with the agreements which are made in a correct way. It is renewed every time with a new buyer. There is no limits from a developer side.
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