The property industry is one that many past governments have neglected and left to fend for itself, although it is a crucial element of the economy and forms the basis of many other businesses. A boost in the industry will assist in job creation and stimulate related industries such as tourism, banking, construction, raw materials, etc.
INCREASE DEMAND FOR OFFICE SPACE
Prior to 2004, demand for office space ranged from 200,000 to 300,000 square metres per year. However, in 2005 demand dropped to below 100,000 square metres and reached the bottom in 2009 at 46,000 square metres.The office sector is stagnant and lacks the stimulus to grow, but it is an important sector that directly affects other property sectors and offers jobs for new graduates. The majority of office tenants are multinationals, which create not only job opportunities and transfer of technology, but also rental demand from expatriate tenants for apartments and condominiums.
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SPUR FOREIGN DEMAND FOR THAI PROPERTY
The Thai property market has great potential to draw in foreign investment and appeals to investors in terms of location, price point and lifestyle. Since the 2008 global economic crisis,foreign demand has slumped and has yet to return. There are multiple ways the government can stimulate foreign demand for Thai properties.
The idea of leasehold term extension has been floated time and again, but no government has seriously considered it.
A market such as Phuket is losing its competitiveness to regional rivals such as Cambodia and Malaysia which both offer 99-year lease terms. An extension of the lease term will lift demand for luxury and high-end villa properties,which will then generate additional tourism receipts.
An increase in foreign ownership quota for condominiums can also be applied to selective resort destinations where the majority of property demand is foreign, such as Pattaya and Phuket.
With a 49% foreign freehold ownership quota, many condominiums in a foreign-dominated market face a halt in sales as the quota is filled,while no local demand is generated for the remaining units. An increase in the foreign quota beyond 49% would assist developers in these markets.
A key factor that will facilitate foreign investments is for local banks to offer mortgage facilities to foreign purchasers. Amending the 1991 Condominium Act to relax the requirement for fund transfers from abroad for property purchases by a non-resident will open up the sector to a wider foreign market as this would allow foreigners to obtain and use local funding for their purchases. The laws should be relaxed;local banks should be encouraged to offer foreign purchasers mortgage facilities, albeit at a premium and with stricter repossession rules. This will trigger growth in demand ad prices, and boost the local banking industry.
Published on Bangkok Post dated 3 July 2011 by Aliwassa Pathnadabutr, Managing Director of.