Are leasehold condominiums making a comeback in Bangkok?

May 5, 2015 / By

Leasehold condominiums – residential units where owners do not own a freehold strata title to their space, but rather enter into a long-term lease agreement – are commonplace in markets across East and Southeast Asia, particularly in countries like China, Vietnam, Hong Kong and Singapore. Unlike those markets registered leases for residential property in Thailand typically cannot exceed 30 years, with the short tenure seen as a major impediment both for local and foreign buyers.

With longstanding Thai preferences to own land, or at a minimum, strata-titled space, leasehold condominiums have never accounted for more than a fraction of total stock at any point in time. The first leasehold condos were developed in the early 1990s on prime land owned by Thailand’s Crown Property Bureau (CPB), an entity related to Thailand’s royal family. At the time, most leasehold projects were positioned at the top end of the market and successfully competed against freehold projects of comparable quality and location.

Following the 1997 Asian Financial Crisis, the market retreated and became decidedly conservative, with the condominium market essentially frozen until a series of new launches began around 2005. Since then, nearly all new projects launched across the market and across price points have been on freehold land with strata title units. This period witnessed a decline in pricing for both existing and the few newly launched leasehold projects, relative to freehold competitors.

However in recent years, we have witnessed a renaissance in the leasehold market. In the last five years, nearly a dozen new luxury leasehold projects have launched and/or completed. Many of these projects have taken the form of branded residences, developed in conjunction with luxury hotel brands such as St. Regis and Four Seasons. Leasehold prices for these new projects have matched their freehold brethren, and in some cases, even exceeded the comparables.

While this may come as no surprise to astute observers, the more striking trend now emerging is that leading mass market developers are partnering with large state landowners such as the CPB to build affordable housing targeted at low and middle income demographics, with prices between one-third and one-half of freehold projects in nearby locations. Furthermore, state agencies such as the National Housing Authority are actively looking to partner with developers to provide low-cost housing near suburban mass transit stations. While none of these projects have launched at the time of this writing, the ideas proposed are well-suited to the market and would benefit many people if they successfully take root.

While we would be hard-pressed to predict that leasehold condominiums would become en vogue and take significant market share from freehold alternatives, it is clear that buyer preferences are indeed changing as the market evolves, providing more alternatives for consumers and developers alike.

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