Considerations for buying or renting a condo in central BKK?

[doxx]

Hi guys,

I was hoping for some wise input on this and I know this is the right place.

 

I am looking to either buy or rent a condo with the wife in BKK. I have been renting all my life so I am leaning towards buying but I have some concerns.

 

1.) Is buying a condo/ house in Thailand an investment as it would be in other countries? I am concerned with Thai culture in the sense that Thais don't like to buy old homes for hears of ghosts or what not. Will the condo then appreciate or depreciate in value? I would hate to buy if I can't sell it in 20 years.

 

2.) Not being in Thailand at the moment, I have little insight to the market. Considering we are in a global recession, how are the prices on units affected in Thailand (BKK) and what would be the best approach to negotiating prices: have my wife do it or get a lawyer to work them? I only have access to developers own online pricing but I suspect it's a bit different onsite.

 

Thanks a lot guys!

[unit731]

Welcome.

 

I don't have a clue about current real estate in Thailand.

 

I do have friends who have purchased in Thailand - with a Thai national.

 

Make sure you have an exit plan if things turn sour. You have been warned. Enough said.

 

I have purchased and sold real estate. I have never purchased real estate with the intentions of making a profit. But there was a profit in every transaction.

 

Every rule of thumb in your home country applies to real estate in Thailand.

 

The first rule is to obtain the services of a good solicitor or lawyer. Know what you are signing and have a professional explain all to you.

 

Location is still king. Location helps if ever you plan or unplan to sell. When I build a house or rehab a house, I always use materials, technology, and colors that will make it easy to sell when the time comes.

 

Others can chime in on Thai culture. But the little I know - new v/s used, position of doors, spirit houses, etc. can and do make a difference to some/many in Thailand.

 

One note. You are better off with the cheapest home in an expensive neighborhood than the most expensive home in the cheapest neighborhood.

 

Many, many other factors play in. Size, closeness to public transportation - shopping, parking, security, etc.

 

If this is new construction, look at security features. Look at integrated home technology such as home theatre pre-wire.

 

Do your homework. You have already started by asking this question.

 

Good Luck.

[cavanami]

1. Buying a condo in LOS is a risky investment, because,

a. LOS is a foreign country, somewhat politically unstable, is still somewhat a third world country, the legal system is not as efficient as in the west, you do not have the same protections as in the west...to name a few things to ponder.

 

2. Prices, I have not seen them come down. They are still building and I would expect the supply/demand to start to lower prices, not yet.

 

Search thru Stickman's site as this topic has been gone thru before and the conclusion...rent, don't buy.

[samak]

prices for high end condos have doubled to tripled during last 5-7 years. Many people are buying as a investment without renting out, as probably there are not as many tenants on the market, who can afford the high rental fee.

everybody is waiting for the real estate bubble to blow up and prices going down. But as legal foreclosure system in Thailand is not as efficient as in western countries, there will not be as many condos on foreclosure sales; so prices will only slightly drop.

[Stickman]

I wrote an article titled "Why I will never buy a condo in Bangkok" a few months back.

 

Why I Will Never Buy A Condo

 

â??You pay how much in rentâ?Â, they exclaim without fail.

 

To the average foreigner in Bangkok, perhaps retirees on a budget and new teachers aside, 20,000 baht is not really that much. We long ago reached the point where we were comfortable paying a little more for a place that is genuinely nice, well located and comfortable rather than something that could best be described as barely adequate. But to most Thais, paying 20,000 baht for rent is unthinkable. It is, we must remember, much more than the average Thai earns a month - and in fact more than many families live on per month.

 

The next question is inevitable. â??Why donâ??t you buy a place?â? Their head is shaking and they are looking at me like I am some sort of idiot. 20,000 baht, a small fortune they are thinking!

 

I will never buy in Thailand. NEVER. They say you should never say never but in this case it really is NEVER. Never truly means never!

 

As a foreigner we cannot buy land and a dwelling and have it listed in our name. It can only be registered in a Thaiâ??s name. I simply am not prepared to make the largest purchase of my life and have it all in someone elseâ??s name. I believe that doing so is madness.

 

That leaves condos. Despite a few restrictions (limited percentage of foreigners in the building, money for the purchase must be transferred into Thailand from abroad etc.), foreigners can buy a condo in Thailand. Many have and many are very happy with their purchase. Many are also not quite so happy...

 

There are many reasons why I will not buy a condo in Thailand.

 

The first and perhaps most relevant is that it is cheaper to rent, especially if you have money already. Donâ??t believe me? Let me do the sums for you.

 

Some time ago I entertained the idea of buying a condo. There was a unit available in the building weâ??re in and we checked it out. It was ideal. A little over 90 square metres with two bedrooms and one bathroom (I have always thought two bedrooms in a modestly sized condo is such a waste of space), it was well-laid out with a large living area and best of all, being on the corner of the building it was bright with heaps of natural light. The building itself is a little under ten years old and while things are still in good condition, you just know they wonâ??t stay that way. More on that later.

 

The cost of the condo was 4,500,000 baht. I donâ??t like borrowing money and paying back with high interest rates for the rest of my life so if I was to buy it I would have pulled the money over from Farangland and bought it outright. And that is where the problems started. My money is invested and currently earning 9.09%. Thatâ??s a term investment in the bank - with a guaranteed return of 409,050 baht per year. There is tax deducted on that figure of 10%, 40,905 baht, meaning a return of 368,145 or, to make things simple 30,678 baht per month.

 

Now where this gets interesting is that this apartment is available for rent. The rent is 24,000 baht a month. You could rent it for less than the return you are getting on the cost of buying it! With these figures, one would be 6,000 baht per month better off RENTING.

 

The counter argument is always that the unit would increase in value over time, perhaps 10% a year or so and in a few years it would be worth perhaps 6,000,000 baht or so. Unfortunately this argument doesnâ??t really stand up in Thailand. Condo prices did shoot up between 2002 and 2006 but they have stabilized since then and few are predicting them to go much higher, at least for existing dwellings. Quite simply, the historical 10% increase in value that is the rule of thumb used in many Western countries isn't applicable here.

 

The next issue is actually selling a condo for what it is worth. Thais much prefer to buy new and buying second hand is not at all desirable to them. Thais generally will not pay a premium price for a second hand unit. They will pick up a second hand unit if the price is right and then perhaps try and on-sell it or rent it out. Essentially this means that the market you are selling to is much smaller. Further, while a 4.5 million baht unit might not represent a huge amount of money in the mind of a Westerner, it is out of reach of 90% + of the Thai market. The bottom line is that selling a condo is not that easy in Bangkok. The more expensive the unit, the smaller the market is.

 

You then have the issue of condos being ridiculously overpriced. It has been said that when 50% of a new development is sold, the break even point has been reached. True or not, I do not know, but I have heard it a few times. You also have the issue of "artificial pricing" whereby the developer sells, or at least transfers ownership, of many of the units to friends and family members who then sell the units once the building is completed at prices even higher than what they were originally offered at. Is this the closest thing to money for free?

 

Condos in Bangkok are not like a fine wine. They age miserably. Donâ??t go thinking that the building you are looking at buying into will have the same charm as a 50 or 60 year old condo block back in your homeland. I doubt there is a condo building that old in Thailand...and some would say that they doubt there ever will be with the local construction standards!

 

Some condos are badly managed. The money for the maintenance is squandered, spent on silly things or simply isnâ??t collected. One of the big problems faced by MANY condo buildings is that the owners of condo units go bust or simply donâ??t pay the â??kar suan-glarngâ? (maintenance fees). I remember years ago when I used to take long walks all the way along Jomtien Beach, from one end of the beach to the other, and all of the recently built condos that were already in a state of complete disarray amazed me. The problem most likely was that there were no tenants and that the building was not getting the required money coming in for maintenance to be carried out. Maintenance fees on Bangkok condos donâ??t tend to be that expensive (figure between 15 and 50 baht a square metre per month) but they are often not paid - and there is not always a lot that happens about it! Fees collected are barely adequate to pay for such things as security guards, power for the all the lifts, lights in the corridors, swimming pool cleaning etc. With a lack of funds for these basic services, building maintenance just doesn't happen - and value of all units in the building goes down!

 

From time to time you hear of problems foreigners have at their residence in Bangkok. Occasionally it is with noisy neighbours, or noise from outside, factors that are easily solved in the West, but can be very, very hard to fix in Thailand. Generally the better the building, the better the neighbours and the less likely you will have problems but as crazy as it sounds, when you do have a problem, it is not always easily solved. In fact even trying to solve it can see things escalate to another level and often the best way to fix it is, dare I say it, to move. This is of course horribly defeatist but I truly believe it.

 

Of course there are those who have done well from buying property in Thailand. For them it was probably a combination of good research, taking a risk and luck. Luck. When it comes to investments or major purchases, â??luckâ? is a swear word.

 

Buy a unit off the plans when it is first offered and you could do mighty well. I looked at North Shore in Pattaya when it was going up and while I canâ??t say I am kicking myself for not getting in for it would have returned a cool few million in no time, it would have been nice to get something in the early days. Prices in that particular building have just got ridiculous â?? and some people must be rubbing their hands all the way to the bank.

 

Buying off the plans in a less developed country is fraught with problems and there are countless developments that havenâ??t been completed, have been completed slowly or perhaps have been completed but not to the standard that the buyers expected.

 

A Thai friend who is in the construction industry insists that every single condo building in Bangkok â?? EVERY single one â?? is not built to the original specs. The building is designed, is put to the engineers and what not who approve it and from then on corners are cut wherever possible. Cutting corners on these sorts of large projects can set a family up for life. What was given the ok by engineers often doesn't resemble the finished product. She insists she would never buy a condo anywhere in Thailand and like many Thais, she oversaw the construction of her home maintaining that that is the only way you can be sure of what you will get.

 

Thais have all sorts of stories about the building of their homes and how they have had to be on site the whole time, from dawn until dusk for a couple of months, while the place is being built. Failure to do so can result in all sorts of mistakes, corner cutting, pilfering of items and general mischief and malpractice.

 

I very much err on the conservative side. If I feel there is any chance that something may become a bad investment I just donâ??t get involved. There are plenty of places to put oneâ??s money but I donâ??t think condos in Thailand is the way to go unless you are CERTAIN that you are going to be living in that unit for a long time â?? and even then there are no guarantees.

 

It probably helps to remember that classic mantra. "Only invest in Thailand what you are willing to or can afford to lose." And of course, owning a condo is no guarantee that your visa will be renewed! The days of buying a condo at 3,000,000+ baht qualifying for an investment visa are long gone (although those who were already in the system prior to the law change DO get a visa based on the original purchase.)

 

Whatever way I look at it, whatever way I do the numbers, buying in Thailand just does not make any sense to me.

 

As a final word of caution, I ran this article by someone who had been in the industry in Thailand and this is what he had to say. These are his unedited words. â??I wouldn't buy ANY property in Thailand. Of course, I could never say that when I was in the realty business!â? Can you ask for any more vindication than that?!

[WorldFun]

I saw this article before buying myself I believe & I partly side with it on the 'simplistic' 9% fixed ROI (which anyway I believe no longer hold in these low interest rate recession times doe it?) vs. rental vs. potential ROI of a property purchase.

 

While personally I don't have anywhere near 'guarenteed' ROI of 9% while of course most investment bankers would be happy to cut me an even better deal say 20%, but then again it could be -50% easily.

 

So with ROI being rather uncertain & 'fixed interest' in my world no higher than ~5% or so net over time I'd say a property in LOS might be as good or better especially with some 'luck' & over say 10years if starting with a new property in a good location with reputable builder

[cavanami]

Soooo, you buy a condo, knowing that a used condo will be difficult to sell?

No one likes used anything here in LOS.

[dahmer]

Stickmen, I am so glad I came upon your article.

 

This makes it easy. It was an idea I was pondering. Buying a condo or just plain renting. I remember the last time I was in Pattaya, I Chinese bar owner told me the same thing. DO NOT buy, just rent. The rent on any of these places is so low compared to US standards, that it is no big deal.

[WorldFun]

well I bought land+house where the calculation would look slightly different than the condo example also with the rent/buy ratio, but yeah otherwise you're right

[cheekyboy]

both have their problems, renting- you have trouble getting your deposit back ,as they will say you caused damage which you didnt .bad and crazy neighbours can be another problem .and if you buy ,serious management problems of the buildings repairs and maintenance can go pear shaped although you pay a annual fee. again bad and crazy neighbours a possible problem .

 

the mantra is = YOU ONLY INVEST IN LOS WHAT YOU CAN AFFORD TO WALK AWAY FROM ..