Buyers beware: Misleading message on overseas properties

By Property Soul

If you have been following my youtube channel and have watched my last podcast “The Truth Behind The New Curbs”, you might remember what I said at the end of the video:

“Good or bad days, property agents still need to make a living … Very soon you will see companies selling alternative investment and agents marketing overseas properties again. The latter will claim to have no ABSD and seller stamp duty, easy to obtain mortgages and attractive returns.”

In fact, this came faster than you could ever imagine.

It’s only half of the full picture

On the same weekend of the announcement of additional cooling measures, I received a forwarded message about buying properties in Bangkok.

The property agent behind the message was working for Singapore’s largest property agency. The agent asked Singapore buyers to look beyond their country if they want to buy a second property – because Bangkok properties has no ABSD regardless of how many you buy.

Many agents selling overseas properties are presenting potential buyers only half of the full picture – the half with all the positive factors, with everything showing the bright side of the story.

Here’s how the marketing email exaggerates potential returns and perks while hiding all the risks and restrictions:

1. There is no restriction on buying and selling by foreigners.
2. The Thai property market is “easy to enter and exit”.
3. The rental yield is 5 to 6 percent.
4. Mortgages are available from Singapore and local banks.

A righteous article to defend the truth

The person who alerted me about this deceiving marketing email is Andrew Batt, Editor of ThailandProperty.News – a leading independent English real estate news portal in Thailand.

ThailandProperty.News doesn’t accept any paid advertising or paid-for advertorials. It only writes articles with news value and only reports the real facts. We share the same principles here in PropertySoul.com.

If you remember Andrew, he is the former International Group Editor of PropertyGuru.com when the company was still under CEO Steve Melhuish. With editorial totally independent from advertising, Andrew’s articles were always unbiased and provided lots of good insights. I was a loyal follower back then.

(Those were the good old days. Now you can hardly find any property portal and property section in papers not being encroached by paid coverage or sponsored features.)

Andrew read my blog post “More about buying condos in Bangkok”. That’s why he wrote to me, thinking that I would be interested to know what is really happening in the local property scene.

Andrew was afraid that gullible Singapore buyers might fail to do their own research and end up buying the wrong thing. He was kind enough to specially write an article on “Singapore buyers: know the facts about buying Bangkok property” to give us a more balanced picture.

Below is a summary from Andrew’s article that clarifies the ambiguous claims and misleading promises in the marketing message:

1. There are definitely restrictions on foreign buyers of properties in Thailand. It is limited to 49 percent of shares in any condo.
2. The Thai property market is “easy to enter’ but not easy to exit, especially in the current market situation and for the suburban location of the projects. Buyers must have a medium to long-term outlook.
3. Some projects marketed to Singapore buyers are outside central Bangkok. These locations are not popular with expatriate tenants. Yet they are overpriced compared with market prices of projects in the same location.
4. The average rental yield in Bangkok is around 4 percent, not the suggested 5 to 6 percent.
5. Thai banks usually don’t lend to foreign buyers and the high interest rates for foreigners will wipe out any rental yield. (Note: If buyers borrow from banks in Singapore, it will affect the calculation of their TDSR.)

If you are looking to buy properties in Bangkok, do take note of the seven advices from Andrew:

1. Define expectations and goals for your Bangkok property investment.
2. Plan a short trip to see what is available. Get a feel for the city and where you want to own our investment property.
3. Do your research about Thailand’s property laws and how the market is performing.
4. Do our research about developers in your chosen area.
5. Do your research about planned infrastructure developments in your chosen area.
6. Talk to different agents in Singapore and Bangkok who focus on your chosen area. Unlike Singapore there is no regulation of real estate agents in Thailand so try to get recommendations from other Thai property buyers.
7. Engage an experienced Thailand property law firm.

Is it a good time to buy in Bangkok?

In a separate email, Andrew also mentioned that prices of condos at the high-end, in the CBD and fringe CBD areas were down from Q4 last year to Q1 this year. It is likely that prices will continue to drop.

Do you want to buy these uncompleted new projects that Thai developers are selling at “forward” prices to cover the cost of the land plots acquired at record highs? It seems the over-pricing and oversupply situation is not just in Singapore alone.

Singapore buyers are the type of customers ready to trust the marketers or agents. In Singapore, buyers are protected by all the rules and regulations from the government. So they assume that the same applies for developers and projects in other countries.

I enjoy reading messages from my readers. But it is really sad when I read stories about how naïve buyers end up losing their hard-earned money in bad property investments.

It is definitely not worth it to save money from paying high ABSD and lower loan-to-value, but end up burning a bigger hole in your pocket by buying an alternative that you don’t know better.

Allow me to re-emphasize the “four key questions to ask yourself” before you buy any foreign property:

1. Who are the other buyers (savvy investors or average joe)?

2. Can you trust them (the developers and marketing agents)?

3. Why are the locals not buying?

4. Where is the secondary market (for foreigners in high-end market)?

– Property Soul, “Ask 4 questions before you buy that overseas property“

I am not saying all overseas projects marketed by agents are craps, or all overseas properties don’t have decent rental yield. You just have to be extra cautious and more hardworking in doing your research and walking the ground.

Remember: It is only justified to put your money overseas when the cashflow and profit are much better than what you can find at home. Otherwise, why bother?

This was first published at Soul Property’s website, “Buyers beware: Misleading message on overseas properties“.