More thoughtful measures needed to boost confidence

CB Richard Ellis monitors fall-out from state-proposed Business Act

Following the government's proposals to amend the Foreign Business Act, which restricts the rights of foreigners to own or operate certain businesses in Thailand, CB Richard Ellis Thailand has been monitoring the residential, resort and office markets to gauge the market's response to the planned changes.

The firm has also carefully looked at the effects caused by the proposals in conjunction with major law firms. It has also assessed the psychological effect on foreigners and their perception of the action.

The biggest danger from these proposals is that they may be seen as a rejection of foreign investment, says the company. The result could amount to large losses for both the real estate and construction sectors.

Overall, there is also the threat that the proposals could harm the Kingdom's standing on the international stage, long perceived to be friendly to overseas investors.

"Our first advice to all clients is that these proposals are not yet law. Secondly, detailed reading of the proposals shows them not to be as harsh as the headlines have presented them," said CB Richard Ellis Thailand managing director Aliwassa Pathnadabutr.

Most businesses that will be redefined as foreign will be largely unaffected and allowed to continue, with time to amend their structure if necessary, she added.

"Therefore, most office tenants should not be affected, although demand from incoming tenants may well be reduced."

There is strong overseas demand for luxury real estate, both condominiums in Bangkok and resort properties priced Bt12.5 million and above, she said.

There is also strong demand in the mid-range market with prices of Bt3.6 million and above for holidaymakers and retirees in destinations such as Pattaya, Hua Hin and Phuket.

It would be a major loss for the Thai economy if investors were blocked

from buying in these sectors, Aliwassa said.

In conjunction with the government proposal to restrict nominee-structured companies from owning landed property, CB Richard Ellis would like to see more positive steps taken to support the real estate industry, such as allowing 90-year leases for villas.

Aliwassa said it would also help if ownership ratios for foreign buyers in condominiums be allowed to rise

from the current 49 per cent to 90 per cent.

Properties offered by Phuket developers, such those by Laguna Properties, have limited local demand, she added. Mainly sought by foreign buyers, their purchase has contributed much to the local economy as well as benefiting local suppliers and industries related to the tourism and real estate sectors.

For any current owner of a house or villa with a nominee structure,

CB Richard Ellis advises owners to

monitor the proposals and seek expert legal advice on how to amend the company's structure and comply with any changes.

The proposals allow a period of one year to amend or change a company's status.

If the government were to move on extending leases to foreigners to 90 years, this would be an obvious route for such villa owners to convert to leasehold, she said.

She advises existing foreign owners and prospective buyers not to panic or abandon their interest in purchase. "They should focus on the foreign condominium quota and leasehold properties developed by well known and established companies."

CB Richard Ellis is proceeding with two overseas sales campaigns with the launch of condominiums at The Cove in Krabi, which will launched in Stockholm this month, and leasehold pool villas from Shangri La Resort & Spa in Phuket next month. Despite recent events, there is still sustained foreign interest in local real estate, Aliwassa said. Christmas and the first week of this month continued to see transactions.

"We hope current uncertainties are quickly and professionally resolved, so foreign investors know how to safely invest in Thai property," she said.

Itthi C Tan

Thailand News
The Nation Thailand
Friday January 26, 2007