The Phuket property market in 2024 is undergoing significant change, with the Thai government enforcing stricter laws on foreign ownership and proposing legal reforms that could reshape the landscape for both local and foreign investors. The crackdown on nominee structures, coupled with potential changes to leasehold terms and foreign ownership quotas, is making waves in the real estate sector, particularly in Phuket, where international demand remains high.
Stricter Enforcement on Nominee Ownership
In a bold move, the Thai government has ramped up its efforts to target the illegal use of Thai nominees by foreign nationals to circumvent ownership restrictions. Operation Nominee Sweep, launched in 2024, has led to the arrest of 231 people, including 98 foreigners, mostly Russians. Assets worth over 1.5 billion baht have been seized, along with extensive documentation exposing the widespread nature of this practice.
Foreigners, often barred from directly owning land, have long used Thai nominees to hold property on their behalf. This crackdown is designed to close those loopholes and reinforce Thailand’s commitment to upholding its property laws. As a result, many foreign investors are now shifting away from riskier holding structures in favour of leasehold properties and freehold condominiums, which offer more straightforward and legally compliant paths to ownership.
Market Response and Developer Adaptation
In response to these developments, both investors and developers are adjusting their strategies. Leasehold villas, which don’t require company holding structures, are becoming more popular at lower price points. For higher-end investments, some are still opting to use Thai companies to acquire freehold villas, but only when the company is genuinely operated as a business, ensuring compliance with financial regulations and avoiding nominee setups.
Developers, too, are realigning their offerings, focusing more on leasehold and freehold developments that can be marketed without the complexities associated with nominee ownership. This shift is reshaping Phuket’s luxury real estate market, as developers aim to reduce legal risks and attract more cautious foreign investors.
Proposed Legal Reforms: What’s Next for Foreign Investors?
In addition to the crackdown, Thailand is considering new legal reforms that could significantly benefit foreign investors. Two key proposals are on the table:
- Extending Lease Terms to 99 Years: The government is considering extending the maximum lease period for residential properties from 30 years to 99 years. This move would provide long-term security for foreign investors who currently face uncertainty over renewals after the initial 30-year lease term. A 99-year lease would be a major incentive, particularly in markets like Phuket where foreigners are restricted from owning land outright.
- Raising the Foreign Ownership Quota for Condominiums: Currently, foreign nationals can only own up to 49% of a condominium building’s total floor area. The proposed reforms would raise this cap to 75%, significantly increasing the pool of foreign buyers who could legally own property in Thailand. This would likely drive higher demand in resort areas like Phuket, where condominiums are particularly popular among international investors.
Potential Market Impact
If these reforms are enacted, the Phuket property market could see a substantial influx of foreign investment. Extended lease terms would offer greater certainty for long-term investors, while a higher ownership quota for condominiums would broaden opportunities for foreign buyers. Both changes would drive up the prices of property for sale in Phuket and stimulate new development projects, particularly in areas with high international appeal. With regards to increasing the percentage of freehold condominium ownership for foreigners, this would increase the market share open to investors for this property type, and most of the demand for luxury real estate in Phuket is from overseas investors. Extending the leasehold period for land to 99 years would have an even more buoyant effect as it would circumvent the need for complicated and expensive company holding structures for the freehold of villas and houses.
However, the impact of these reforms may also present challenges. There are concerns that increased foreign ownership could drive property prices higher, potentially making housing less affordable for local residents. Balancing foreign investment with local interests will be crucial as the government navigates this transition.
Thailand’s stricter enforcement of property laws and the proposed legal reforms are setting the stage for a transformative year in Phuket’s real estate market. With the government cracking down on nominee structures and pushing for more transparent and secure ownership options for foreigners, the market is already adjusting. While the potential legal changes promise to attract more foreign investment, they also raise questions about the future affordability of Phuket’s real estate. As these developments unfold, both investors and developers will need to remain agile in navigating the shifting legal and economic landscape.