Saturday, 19 December 2015

The Value of Beach Land

Before discussing the value of property and land in Thailand the reader should be reminded that in Thai law a foreigner can own a property but not the land on which it sits. The usual recourse around this legal nonsense is to allow foreigners to take out 30 year leases on land.

Does this mean that after 30 years the foreigner effectively loses the right to use a piece of land on which his or her property resides? Well, many developers put in clauses in their sales contract promising that another 30 year lease will be granted for a small fee. This is dependent on the owner of the land honouring their legal agreement to appear down the land office and register another 30 year lease.

Whether land is located on or next to a beach or in a city or rural location should not make any difference to this legal arrangement. An important proviso is that rural land is off limits to foreigners unless the land is bought in the name of a Thai wife.

However, in terms of tourism beachfront land is the easiest to sell. Tourists want to be as close to the sea as possible. Moreover, beachfront restaurants and resorts on average do much better than similar businesses set back from the beach.

It is possible to find beach land available to rent. Often there is a shell business already on location with the option to carry on this business or to try something else. There is an issue of knocking down structures on a rented piece of land.

From the perspective of global warming, there is the ever-increasing risk of rising water levels removing beach and the subsequent threat of structures getting flooded in the rainy season.

Another issue with beachfront land is that it was traditionally viewed by Thais as less valuable than land inland where the farming possibilities are better. For this reason, beachfront land was often left  in inheritance to second children and daughters. Dealing with Thais with smaller inheritances who might be looking for higher returns to make up for a shortfall in income increases the temptation for double dealing.

Finally, Thai developers are often on the lookout for the next big location in tourism. The strategy is to identify a beach popular with backpackers where land can be had for relatively cheap prices and then to construct luxury hotels that massively increase room rental prices. This is a strategy not open to foreigners unless they are well-connected in Thai society.

Even then possible sites for such a plan such as Bottle Beach on Phangan Island require the acquiescence of land owners. In the case of Bottle Beach they are holding out either because they want to protect their beach or because they are expecting a big pay day in the future.

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