Koh Samui Real Estate – The Rise of Leasehold Villas

Famous for its world-class, palm-fringed beaches, in the last decade, Koh Samui has evolved into a leading resort destination, sought after by both tourists and real estate investors. Located in the Gulf of Thailand, the island is just a 45-minute flight from Bangkok and easily accessible from other major Asian hubs such as Singapore and Hong Kong. The island’s high-end resorts, quality infrastructure, and broad range of amenities, including private hospitals, international schools, and shopping centres, have attracted millions of visitors each year and transformed it into a luxury resort destination. As the island has gentrified, its residential property market, especially pool villas, has risen in value, aligning more with prices seen in Phuket. However, the stricter enforcement of existing laws is leading to notable shifts in the ownership structure of villas being offered for sale on the island.

Current Ownership Regulations for Foreigners in Thailand

Foreign investors wishing to purchase land or property in Thailand, including Koh Samui, must navigate a somewhat complex regulatory landscape. Foreigners cannot directly own land in Thailand. However, they are allowed to own the building(s) on the land, which has led to two primary legal structures for land acquisition by overseas investors:

1. Leasehold Ownership: One option for foreign buyers of villas and houses is to lease the land. The maximum residential lease term in Thailand is 30 years. Even though some projects are marketed as offering renewable 30-year leases, the possibility of renewing the lease is entirely dependent on the landowner, and such renewals are not typically offered for villa projects. Additionally, the enforcement of lease renewals is a grey area with little precedent in Thai courts, making it uncertain for investors to rely on lease extensions. Because of this, the most transparent form of leasehold ownership is a straightforward 30-year tenure, where the terms are clearly defined without promises of renewal. Especially at entry-level price points, this ownership structure is becoming more prevalent in the Koh Samui property market, offering foreign buyers a more secure, albeit shorter, investment horizon without the complexities and uncertainties of lease renewals.
2. Thai Limited Company Ownership: Historically, a vast majority of foreign investors buying villas or houses in Samui opted to set up a Thai limited company to purchase the freehold of the land. This model requires the company to have a majority Thai ownership (at least 51%) and operate as a legitimate business, with genuine Thai shareholders who are not mere nominees.

The Government Crackdown on Thai Nominee Structures

In recent years, the Thai government has become more aggressive in enforcing laws prohibiting foreigners from using Thai nominees to hold land on their behalf. A well-known crackdown in Phuket, dubbed Operation Nominee Sweep, was launched in 2024, targeting foreign nationals who used Thai nationals as nominees to bypass property ownership restrictions. This high-profile operation led to the arrest of 231 individuals, including 98 foreigners, primarily Russians, and the seizure of assets worth over 1.5 billion baht. The crackdown aimed to close legal loopholes and ensure that property ownership laws were upheld across Thailand.

As a result of stricter enforcement, many foreign investors have shifted away from corporate holding structures that were previously used to circumvent land ownership laws. While using a corporate holding structure to own freehold land is still legally permissible, it must be done correctly. The company must operate as a legitimate business, generating income and having genuine shareholders, rather than just being a vehicle for land ownership with Thai nominees. This makes the corporate structure more complex and expensive compared to other ownership options. Especially at lower price points, investors are now seeking simpler alternatives, such as villas acquired via leasehold arrangements or switching property types to freehold condominiums.

Market Response: The Shift Towards Leasehold Villas

In response to the stricter enforcement of ownership regulations, Koh Samui developers have adapted by offering more villas on a 30-year leasehold basis, particularly at lower price points. Leasehold villas provide a simpler solution for foreign buyers, eliminating the need for complicated corporate setups. They also significantly reduce property acquisition costs because no company set-up fees are involved, nor are there transfer fees where land is moved in and out of a company.

As noted by long-established local agents, Real Samui Properties, who have been operating on the island for 20 years, a few years ago, there were only a handful of leasehold villa projects for sale. Now, these account for a substantial percentage of the portfolio of Koh Samui property for sale at the low to mid-end of the market, as developers aim to meet increasing demand from foreign investors seeking legally compliant and less complex ownership options.

This shift is especially noticeable in properties priced up to 10 million THB, where the shorter ownership tenure is offset by more competitive pricing to attract foreign buyers. At the higher end of the market, there is still demand for freehold villas, but these must be structured within legally compliant Thai companies that genuinely operate as businesses. For example, these companies may use their villas as rental properties, generating income and paying dividends to legitimate Thai shareholders. This approach allows foreign investors to maintain compliance with Thai law while still acquiring freehold property, though it is more costly and complex to establish.

The Future of Koh Samui’s Real Estate Market

As the Thai government continues to tighten regulations, the trend towards leasehold properties is expected to grow. Developers will likely continue to focus on offering leasehold options, particularly for foreign investors who are looking for hassle-free ownership with minimal legal complexities. For non-Thai nationals seeking freehold villas, the only legal route remains through genuine, operating businesses that use Thai company structures in a compliant manner.

It should be noted that, Thailand is now considering legal reforms that could significantly benefit foreign investors. Two key proposals are currently being discussed:

1. Extending Lease Terms to 99 Years: The government is contemplating extending the maximum lease period for residential properties from 30 years to 99 years. This move would provide long-term security for foreign property investors. A 99-year lease would make the leasehold option far more attractive and provide a major incentive for those looking to invest in the island’s real estate.
2. Raising the Foreign Ownership Quota for Condominiums: Another proposed change is to raise the current allowable foreign ownership quota in condominium developments from 49% to 75%. If implemented, this would increase the pool of foreign buyers who could own freehold property in Thailand and increase the supply of condominiums in resort destinations like Koh Samui and Phuket.

These potential reforms, if passed, would significantly reshape the real estate market by offering more flexible ownership options to foreign investors, making the landscape even more appealing for those seeking property in Thailand.