More about buying condos in Bangkok

by Property Soul

I received some questions from you after posting my latest podcast “Buying Condos in Bangkok” on my youtube channel. Let me try to address them in this blog post so other followers can read them too.

How could people buy without doing their homework?

I am not against anyone buying condos in Bangkok. If you love the city, like the project, and have the financial means to buy a holiday home there, why not?

But it is surprising to see so many buyers who don’t bother to do their research before acquiring properties, whether it is in Singapore or overseas.

I suppose any car buyer would want to know more about the car model he is going to purchase before making the decision. He would at least go to the website to browse the specifications, check online reviews and make some comparisons. Then head to the showroom for more information, before arranging for a test drive.

What is the chance of a car buyer placing the order on the spot, the first time he sees the display of a car model at a car show in the shopping mall?

No matter how affordable high-end condos in Bangkok are compared with the ones in Singapore, a decent unit still costs above S$300,000. Even if the amount is peanuts to you, would you buy a property without doing your homework, especially when it is in another country?

What are the stock level and supply for condos in Bangkok?

A February article in Bangkok Post titled “Condo market on a rollercoaster” describes the property scene in Thailand as follows:

“If one digs deeper they will notice that the demand for property in Thailand, especially in Bangkok, has been witnessing a phase of slowdown over the past couple of years, although most developers would not admit to it.”

As a developer said, “The days of selling out in a single day don’t seem to be there now, and we never had those days anyway because we do not expect to sell out our project in a day or two, instead we would be happy to see 30% of our project being sold over a period of two to three months.”

The high-end condo project M Silom was marketed in Singapore after the introduction of Total Debt Servicing Ratio. The project was launched in 2011 and completed in 2014. As of now, 14 out of 161 units are still unsold.

According to the REIC (Real Estate Information Center), as of mid-2017, there are some 64,630 unsold condo units in Bangkok.

But supply in Bangkok’s condominium market continues to rise every year. As many as 117,100 residential units are expected to be launched by developers in Greater Bangkok this year. Half of them are from middle to upper segment of the condo market.

As for this year’s new residential supply (based on the number of building construction licences for condominiums), there will be a total of 79,900 condo units.


How are condos in Bangkok sold to foreign buyers?

In the past, there were more buyers from Europe and North America who would spend time in their Thailand holiday homes during the cold winters.

In the last few years, there are more buyers from Asian countries, including Singapore, Hong Kong and China. Hong Kong people are buying for own stay or holiday homes while the Chinese are buying for investment.

Many buy on impulse at property tradeshows held in their countries. They have never been to the actual site to see the project they are buying.

Since foreigners can buy a maximum of 49 percent of total sellable area in freehold condominiums, it is no brainer to sell these projects to foreign buyers in affluent countries – those who have visited Bangkok, with spare cash on hand, but have limited information about the local property market.

There are also Bangkok sightseeing tours bringing China tourists to the Grand Palace, floating market, Thai boxing match and sumptuous seafood dinner, before showing them the high-end condominiums on the last day.

Seeing one by one in their tour group putting down a small deposit to book a unit, it is difficult to resist the temptation not to buy one as a last “souvenir” before leaving Bangkok.

What happens when you bought the wrong thing?

If you trust an advertisement wrongly and bought a lousy car, you could drive it for a while and dump it in the second hand market.

If you trust a property agent wrongly and purchase a bad property, you could be stuck with it for a long time if not forever.

Have you ever wonder why the developer and marketing agent have to go overseas to market the high-end condo project to you, if the local take-up rate is so good?

What the developers and local marketing agents told you are not entirely wrong:

1) The gross rental return of condo units is 4 to 5 percent. After the high maintenance fee, you still get a rental yield of 3 to 4 percent.

2) Condo prices have picked up since the bad days in 2012. There is an average of 5 to 8 percent increase in property prices every year. After deduction of personal income tax and property gain tax, there may still be some profit after holding for a few years.

But there are two critical things that the property agents forgot to tell you:

1) There are far more condo units available for rent compared with the size of the tenant market.

Your unit may be luxurious, next to the BTS station and located in the shopping area or the centre of Central Business District. But so do all the other units available for rent.

2) There is a limited resale market for second-hand condos in Thailand.

For foreigners, they don’t have to buy from the resale market. There are plenty of choices for new projects.

For expatriates, they use company housing allowance to rent while working in Bangkok. But after they retire, they build houses outside Bangkok to live with their Thai wives.

For Thais, they are superstitious and usually won’t buy second-hand properties with someone else stayed there before.

For well-to-do locals, they prefer to stay in houses at the city fringe of Bangkok as their residence.

For average locals, they pay THB 2.1 million (S$87,000) for a new 400 sq ft home in the city centre, with no downpayment and under $$350 for monthly mortgage (watch story of the girl who married a Thai husband in my podcast).

In 2016, the transaction rate of resale condos (those were successfully sold) is only 1.3% for the whole year.

Who profits from the 5 to 8 percent increase in property prices every year? The developers and their marketing agents.

How do you trust a property agent marketing condos in Bangkok?

Not all middlemen and property agents are dishonest. When in doubt, check with the locals.

Remember in my video the Bangkok property agent who was originally from Hong Kong with a Thai wife? He said there is no problem buying for own stay. But he warned others “not to come here to buy properties if you want to speculate” because “Thailand has lots of land but the population is low” and “property prices increase very slowly”.

Which property agent doesn’t want more business? But he is not the type who make a commission from you and disappear.

Remember I mentioned in the podcast another Hong Kong guy who made Bangkok his home since 2002? Roger Wu has converted to be a Thai. He can speak and read Thai, has a Thai name, a Thai haircut and a Thai tattoo too.

For his efforts in promoting travel in Thailand, the Tourism Authority of Thailand awarded him one of the “Friends of Thailand” in 2000 and the “Ambassador of Thailand Tourism” in 2012.

When asked why he didn’t buy any property in Bangkok. He admitted that “there is not much potential for capital appreciation and it is difficult to resell it in the open market”. He is renting a high-floor double-storey apartment with a fantastic city view for THB 35,000 (S$1,450) per month.

When asked whether foreigners should buy properties in Bangkok. He said he had friends who bought properties before and made a bit of money.

But he added, “If you think you have the luck to rent out your property, and you also have the luck to re-sell it later in the open market, then buy.”

I have said this in my blog post “5 property buying mistakes buyers can’t stop making”,

“A good adviser never shows you only the head or the tail of a coin. Instead, he shows you both sides of the coin and ensures that you are standing on the edge of the coin to see the full picture.”

If your property agent didn’t show you both sides of the coin, either he fails to show you the full picture, or he doesn’t know enough about the market he is operating in.

And don’t tell me that you are so naïve to believe that Donald Trump’s objective of signing an agreement at the Trump-Kim Summit is to denuclearize the Korean peninsula, or Kim Jong Un will eliminate all signs of nuclear weapons now and forever.

While Kim managed to strengthen his ruling power with US backing, Trump succeeded in alienating his biggest enemy China. Before Trump unpacked his luggage from the Singapore trip, he already announced new tariffs on Chinese imports. Singapore is only used as the venue to stage the play.

Who suggests to nominate Trump for the Nobel Peace Prize again?

This post was first published at Propertysoul.com and reproduced with permission

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