Life And Death's A Beach
For those from the West, Asia's resort market can seem like an alien landscape. The sun, for the most part, has set on the days when you could find an oh-so-friendly local who was happy to sign up to legally own your prized asset. Nowadays, buyers in many Asian resort destinations are usually faced with the two-pronged fork of buying that dream getaway home on either a nominee basis or a long-term lease. Questions, of course, arise when a nominee beats you to the end game and all that's left are your late friend's squabbling children who now want to negotiate a new deal.
Resort property, however, is all too often paid for without finance, and the connection of values between freehold and leasehold can blur. This has become an interesting topic across the tropics, due to the vast amount of holiday properties sold over the past two decades or so. In Bali, for instance, where shorter leases are now coming into their golden years, values remain hazy and those yesteryear smiles and promises of easy renewal have faded. But Thailand – with its conglomerated 90 years-has decades to go.
Or does it? Once those initial three decades are up, will the land department accept the nominal lease premium? This is relatively unknown territory and "could", "would" and "should" are three words that crop up so regularly in conversation that you need a fly swatter to bat the pests away.
As I type this, I'm on a plane flying out of Sri Lanka, where changes last year to land ownership laws have resulted in the previous two-company structures for a foreigner owning land being thrown out in favour of a new long leasehold era. Yet no matter what legal advisor you speak to, or the type of property you're interested in, the term "in theory" crops up far too much. I'm convinced every law school has a secret fraternity tagged, 'yes', 'no', 'maybe'.
For buyers, the only certainty is death. Sorry but there is no way around this. Resort real estate remains a lifestyle purchase, with an emphasis on life. Conceptually, the heirs, spouses and others come into play on a longer-term horizon, but for the most part, purchasers believe they can sort that out when the time comes. Either that or wait for global warming to kick in and find a guy named Noah.
Leasehold tenure in much of Asia simply does not have the historical paradigm of London or other legacy markets. It is a journey into the unknown, and yes, government policies remain volatile. But for now, the fact remains that it's simply the best way forward for most investors.