PROPERTY INSIGHTS

Building an attractive investment platform

NIGEL CORNICK

Thailand's property market has come a long way in the last 10 years, but more needs to be done to build investor confidence, shore up the industry's foundations and further develop Thai real estate's international appeal.

A new government brings with it the opportunity for change, in particular the chance to alter existing policies on the foreign ownership of property. Moves should be made in the opening up of access to local finance for non-Thai buyers, and in creating more flexibility in the current juristic arrangements for condominiums, to ensure longer-term upkeep and maintenance of developments.

If the new coalition seriously addresses these issues, then it will mark the beginning of a far more mature and competitive Thai property market.

All of us involved in the development of condominiums currently face issues with the foreign quota ownership restrictions, currently set at a maximum 49% of saleable area owned by non-Thais in any given development.

We hope the new government realizes the potential in the property sector and changes policy and regulations to help us further expand the business. Increasing the foreign quota for condominium ownership from 49% to a more appealing level would be an excellent way to start the New Year on a positive note.

Offering more flexible leasehold arrangements is another key area where policy can be modified to further enhance investment opportunities. Foreigners can currently secure a lease for a maximum of 30 years, with an option to renew. Any lease longer than three years must be registered with the Land Office to gain legal status. Such restrictions can only engender a short- to medium-term perspective in most international investors' minds.

What we need to see is red tape slashed and 90-year leases made available to foreigners. Longer-term leases can only encourage investment by broadening the range of products available. The added security they provide will encourage longer-term investment in individual properties, broadening the time frame for development.

These steps will create greater access to the market for investors, a move that could be further bolstered by allowing Thai banks to lend money to potential buyers. International investors should be allowed to borrow funds locally in their own names, as the simple fact is that having to invest 100% cash up front is too high a burden for many people.

If the current lending policy doesn't budge, then Thailand will continue to lose out to those markets in the region with a more equitable approach to foreign investors.

Territorial lending areas would make a good first step, opening up specific markets in the Kingdom for the funding of foreign buyers by Thai financial institutions. Creating such demand could complement government-led regional development strategies at the same time.

Without some changes, we could see the emergence of a premium on pricing for the foreign quota in any development, with two-tier pricing introduced to encourage Thais to buy the remaining units. This would not be well received in international markets and may force investors to look at other Asian countries where two-tiered pricing is not prevalent.

That is one of the real dangers on the horizon, and one that could be disastrous for the country's image - Thai real estate getting cheaper, while becoming more expensive for foreigners.

In addition to a more liberal policy approach to the foreign ownership of land, we need to see greater regulation on the building, marketing and selling of properties.

Robust legal controls on what can be developed where and when need to be brought in, in tandem with those that govern design and building quality, and materials used in developments.

Stricter advertising standards, which are monitored and enforced, are essential in building investor confidence. Developers must live up to the claims they make and this includes promises made about off-plan facilities and transport links. Hong Kong and Singapore are solid regional examples of how strictly policed advertising regulations force the industry to make statements that are accurate and true.

Such regulations need to be applied to real estate agents and the sales and marketing tactics and strategies that they use as well. Such a visibly regulated, transparent and ethical approach to every part of the selling process will show clearly that Thailand means business.

A final key factor is to create better access to public land records. Again, Hong Kong and Singapore make these available and it enables buyers and developers to find out what prices are achieved in land and unit sales. If more information like this is available, it would help assist in accelerating investment in the property market in Thailand.

Nigel Cornick is Chief Executive Officer of Raimon Land Public Co Ltd, Thailand's leading international property developer with projects in Bangkok, Phuket and Pattaya. For more information visit :::::::: Thailand Property Awards 2007 ::::::