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Changes in Property Ownership Laws Affect the Real Estate Market
June 29th, 2016 | 12:48 PM | 8704 views
As a result of a 2012 law that restricts property ownership in the Sultanate to citizens, as well as plans to institute Syariah Law in the country, Brunei Darussalam has become a profitable market in which to sell overseas property. Indeed, investment opportunities in Brunei Darussalam's property market have proved to be unattractive for Permanent Residents (PR) and foreigners living in the Sultanate since the 2012 law took effect.
During the eighth Legislative Council (LegCo) in 2012, the Minister of Development at the time, Yang Berhormat Pehin Orang Kaya Indera Pahlawan Dato Seri Setia Awang Haji Suyoi bin Haji Osman, tabled legislation that effectively banned the purchase of property through a power of attorney (PoA) or trust deed. This was the system by which PRs and non-citizens had previously been able to buy property in the Sultanate.
The minister also announced that the more than 47,000 deeds previously issued through PoA would be converted into 60-year leases. The reasoning behind this legislation was to safeguard the interests of Bruneians and to ensure that the Sultanate's land belongs to those who have the right to own it, the minister explained. "We did not do this to discourage investment in the country or restrict non-Bruneians from staying in the country or engaging in economic activities in Brunei. That is not the purpose," he said. Yet, during the 11th LegCo session in March 2015, Yang Berhormat Pehin Orang Kaya Indera Pahlawan Dato Seri Setia Awang Haji Suyoi bin Haji Osman, who now serves as the Minister of Education, announced that the Ministry of Development was still refining the legislation.
MONEY GOES OVERSEAS: Many international property developers are now initiating partnerships with Bruneian agents. This is in order to market overseas properties - from neighboring countries such as Malaysia and Singapore to countries as distant as Australia and the UK - to Bruneian property buyers, according to comments made in 2015 to local media by real estate agent Amy Liew of BruWorld Real Estate and Property Management.
"We have seen a marked increase in the number of overseas property purchases made from Brunei, especially for the purpose of investment," Liew said. "If you look into the converted 60-year lease lands today, they are no longer highly valued because of the short lease tenure. After 10 years, the value of the land will drop significantly." The possibility of this type of situation occuring was considered when the 2012 legislation was announced. A LegCo member warned at the time that the Sultanate could fail to benefit from investment if buyers decided to withdraw their money from Brunei Darussalam due to uncertainty about property ownership rules.
CLARITY NEEDED: The result has been general confusion for both PRs and foreign property owners. As of 2016, the rules for PRs stated that they were allowed to buy land, houses and commercial shops but not freehold property. However, ownership of these types of property would last for only 60 years. PRs are also allowed to purchase apartments, for which ownership will last 99 years.
Yet a number of questions remain. PRs do not know if they will be able to retain their property for the use of future generations after the 60-year-period expires. Nor do they know whether the clock on the new 60-year lease period started in 2012, the year the property was originally purchased or when the new legislation is completed; or even when that might be. The situation has been particularly difficult for foreigners who have for many years earned their livelihoods in the Sultanate, residing there with their families and considering it home.
Some clarity was provided in March 2015, when statements made by Osman were interpreted as meaning that foreigners are allowed to own properties under the Land Strata Act title for 99 years without the need for a PoA. Under the Land Strata Act, property owners are allowed to develop land without constraints, offering a means to encourage continued investment in the Sultanate's real estate market. (Adapted from The Report Brunei Darussalam 2016, Oxford Business Group)
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