Thais scared off by fractional schemes

Fractional ownership of property may not appeal to Thai buyers, due to their unfamiliarity with the concept and the lack of regulation, experts say.

Fractional ownership is common in other countries where property is priced too highly for buyers to own an entire unit, said Phanom Kanjanathiemthao, managing director of property consultant Knight Frank Chartered (Thailand).

But the development of practice in Thailand should be supported by specific laws to regulate the market.

“If a customer or share owner breaks a promise or does not pay a common area expense, the project will be in a mess,” said Mr Phanom.

“Though they [co-owners] can sue and there is a contract controlling every party, the judgement process will take more than a year, quite a long period. With [new] fractional laws, enforcement will be done swiftly.”

It would also be pointless for a share owner who had spent just one million baht to buy a share in a unit to spend up to 500,000 baht on lawyers’ fees to sue over a disagreement, he said.

Restrictions on the foreign ownership of property create difficulties for developers using fractional ownership, who have to apply diverse strategies to attract Thai buyers, said Mr Phanom.

“Many properties in Pattaya and Phuket are not affordable for Thai buyers due to very high prices,” he said. “They cannot even buy with leasehold prices in some projects. Even a discounted price remains unaffordable for them.”

To encourage foreign buyers and prevent problems associated with using Thai nominee companies to purchase property for foreigners, Mr Phanom suggests extending the maximum property leasehold for foreigners to 75 or 90 years, from the current 30 years.

In Vietnam, the government is amending the law to allow foreigners to own residential units, similar to Singapore and Malaysia.

“Today almost every country allows foreigners to buy property but they have a committee to set the conditions on what properties foreigners can own and how many they can hold,” he said.

Creating zones where foreigners could own condominiums outright was another approach, he said.

Extending the maximum leasehold would benefit Thais and the country, said Praphaisith Tankeyura, managing director of Boathouse Hua Hin Co Ltd.

“We have to accept that almost all properties in Phuket and Samui now do not belong to Thai people,” he said.

Boathouse was among many projects that had to adjust their strategies to cope with shrinking foreign demand. The company downsized units to fit Thai buyers’ purchasing power and also sold a big lot to Laguna Club with 77 units worth more than 100 million baht.

The Real Estate Information Center is today holding the “Property Nominee Exit” seminar, where the Lands Department, the Department of Special Investigation, the Joint Foreign Chambers of Commerce in Thailand, the Phuket Real Estate Club and property experts will discuss the topic.