Leasehold vs. Freehold: What’s the Best Option for Expats in Southeast Asia?

So, you’re thinking about buying property in Southeast Asia. You’ve probably heard the terms “leasehold” and “freehold” thrown around a lot, but what do they really mean? More importantly, what’s the best option for expats like you looking to invest in a slice of paradise?

Let’s dive into the nitty-gritty of leasehold vs. freehold property ownership, break down the pros and cons of each, and give you a clear picture of what to expect when investing in countries like Thailand, Cambodia, Malaysia, and more.

Leasehold vs. Freehold: What’s the Deal?

First up, let’s define the basics:

• Freehold: This is the holy grail of property ownership. When you own a property freehold, it’s 100% yours. You own the land and the property built on it, giving you full control without any time limits. You can sell it, rent it out, or pass it on to your heirs.
• Leasehold: With leasehold, you don’t actually own the land. Instead, you’re leasing it for a set period (usually 30, 60, or 99 years). After the lease is up, the ownership returns to the original landowner, unless you renew the lease. Leaseholds often come with certain conditions, like restrictions on making major changes to the property.

Simple enough, right? Now, let’s break down how these concepts play out in different Southeast Asian countries.

Thailand: Leasehold Rules the Roost (For Foreigners, At Least)

Thailand is a favorite among expats looking for a tropical lifestyle, but here’s the catch: foreigners can’t outright own land. That’s where leasehold comes in. You can lease land for up to 30 years, with the option to renew. So if you’re eyeing a villa or house, leasehold is your best bet.

But there’s good news for condo lovers. Foreigners can own up to 49% of the units in a condominium development under freehold. That means you can snag your own piece of paradise without worrying about expiring leases.

What to watch out for: When going the leasehold route, make sure the contract clearly states your renewal terms. And remember, while you may get a 30-year lease, there’s no guarantee you’ll be able to renew it forever.

But what about setting up a Thailand company to own the land? I hear you say! Well yes its possible, however it requires more than you might think. We added a little note at the bottom of this article.

Cambodia: Freehold? No Problem!

Cambodia is one of the rare gems in Southeast Asia where foreigners can own property freehold—but there’s a twist. You can own buildings (like condos or apartments), but not the land they sit on. So, if you’re looking to buy a fancy penthouse in Phnom Penh, you’re in luck. But if it’s a beachfront villa in Sihanoukville you’re after, that’ll need to be on a leasehold basis or through a locally-owned company.

What to watch out for: Always double-check that the condo development you’re eyeing complies with Cambodia’s foreign ownership laws, and make sure the building is registered under the strata title system, which allows for freehold ownership of individual units.

Malaysia: Freehold Friendly

If you’re looking for straightforward freehold property ownership as an expat, Malaysia should be on your radar. Foreigners can buy freehold property in Malaysia with relatively few restrictions. Cities like Kuala Lumpur, Penang, and Johor Bahru offer excellent options for expats looking to own condos or houses outright.

However, be mindful that there are minimum price thresholds for foreign buyers, meaning you’ll need to invest in higher-value properties to qualify for ownership.

What to watch out for: The minimum investment requirement varies by state, so check the local rules before diving into the market. And remember, while freehold gives you full ownership, it’s always wise to review your property rights, especially in gated communities or developments.

Indonesia: Leasehold for Expats

Indonesia, with its stunning islands and vibrant culture, is another hotspot for expat investors. However, freehold ownership is reserved for Indonesian citizens. Foreigners can only buy land or property under leasehold agreements.

Leasehold terms in Indonesia can go up to 80 years, which is pretty generous compared to other countries. If you’re set on Bali, you’ll likely end up with a leasehold villa, but don’t worry—80 years is a long time to enjoy the surf and sunsets!

What to watch out for: Make sure you understand the renewal terms, and work with a reputable local lawyer to ensure your leasehold contract is rock-solid.

The Philippines: Freehold for Condos, Leasehold for Land

In the Philippines, foreigners can own condos freehold, just like in Thailand. You can own up to 40% of the units in a condo building, giving you plenty of options in cities like Manila or Cebu. However, owning land is off-limits for non-Filipinos. For land, leasehold is the way to go, with leases typically lasting 50 years, renewable for another 25 years.

What to watch out for: If you’re buying a condo, check whether the building has hit the 40% foreign ownership cap. If it has, you’ll need to look elsewhere.

So, Which Is Best for Expats?

The answer depends on what you’re looking for.

• If you want full control and long-term security: Freehold is the way to go, but your options are limited to condos in most Southeast Asian countries. Malaysia and Cambodia offer the most flexibility for freehold ownership.
• If you’re okay with a long-term lease: Leasehold can be a great option, especially in Thailand and Indonesia, where expats can enjoy fantastic properties on long-term leases. Just make sure you’re comfortable with the renewal process.

Key Takeaways for Expats:

1. Know your rights: Every country has different rules, so make sure you fully understand the regulations where you’re buying.
2. Hire a lawyer: Don’t skimp on legal advice. A local lawyer can help ensure that your leasehold or freehold contract is airtight.
3. Think long-term: Whether it’s a lease or freehold, think about your long-term goals. Do you plan to sell the property later or pass it on to your kids?

At the end of the day, both leasehold and freehold have their perks. It’s all about finding the right fit for your investment goals and lifestyle. Happy property hunting!

But what about setting Up a Thai Company to Own Land and Villas?

For expats who are determined to own land or a villa in Thailand, there’s another route: setting up a Thai company. This method allows you to bypass the foreign ownership restrictions on land, as the company—registered in Thailand—can own the property. However, there are some important things to note:

1. Thai Majority Ownership: The company must be majority-owned by Thai nationals (at least 51%), while the foreign owner can hold up to 49%.
2. Directors and Voting Rights: Although you might hold less than 50% of the shares, you can still control the company by setting up special voting rights or appointing yourself as the company’s director.
3. Compliance and Legal Advice: This method is heavily scrutinized to prevent foreigners from using shell companies to circumvent the law, so it’s crucial to work with a trusted lawyer and follow all legal requirements to the letter.

While this setup can work, it’s not a quick-fix solution. If you’re serious about taking this route, it’s essential to get professional legal advice to ensure everything is legit and above board.