Housing Valuation

[Valjean]

As noted in my other post this evening I'm in the hunt for a home. Wanted a different topic for a specific question: Valuation. One of the challenges is trying to get a good idea of relative values. One way I wanted to start was thinking about things is by square meter.

I looked at one townhouse tonight that was about 54,000 THB per square meter. It was decent and in a good area (Aree or Saphan Khwai - not sure where Phaholyothin 11 is considered exactly)

I assume that cost per square meter is decent starting point and that clearly the quality of property, size of land, age, neighborhood etc. are factors not to mention location, location, location.

What are some good ball park numbers for cost per square foot for a house, townhouse or condo in Bangkok - particularly the areas I'm interested in. Does this seem to everyone to be a decent starting point on value?

Thanks for the help

[londonthai]

I would visit a local estate agent in the area you are interested in and check the prices for the properties on offer and those sold within the last few years.

Some of those agents might even have a map of locality with all properties available marked on them and they will even drive you around to show. On the lower scale I have seen land plots in Bangkok from 10k/talang wah and lower on small sois without car access. Brand new houses from 15k/m2 down to 7k/m2 with a need of renovation.

[quiksilva]

Yes it will serve I think for your purposes, its always useful to have a base form of comparison and a rate per sqm is as good a place to start as any.

The basis of all good valuations is fair comparison. So be ruthless in your assessment of its comparative nature, location is key, but do not neglect to consider build quality, age, condition, access, facilities, and its surrounding environment. There are plenty of others to consider too but this should be enough to give you some very rough indicative figures.

Or of course, you could just pay for a valuation who will go into detail and look at a whole host of other important factors that have an effect on value, such as current and proposed regulations with respect to planning, infrastructure, building regulations to name a but a few.

[ProThaiExpat]

In residential real estate, the most common method of valuation is "comparison" whether you do it by comparing prices within a neighborhood, more accurate than citywide do the principle of "location".

However, you are assuming that "market forces" are at work in the pricing. It seems to many that Thailand is immune to a great extent to market forces as there is not much motivation to sell when there are few recurring costs involved in ownership.

Likewise, "amenities" often inflate asking prices due to non-professional owners attraction to these poor value indicators and listing agents inability to talk down asking prices of their clients.

Comparing condo sq. meter asking prices with private residences is like comparing apples and oranges. The closer you can get one "comp" to another in "like kind" the better your "comp" will be.

An appraiser using the comparison method of valuing a property for a lender has a long sheet of factors arranged vertically that are compared with the compared units horizontally, ie. In a condo comparison, one of the comparison factor is what floor the unit is on. Since exact floor comparisons are not often available, a plus or minus price adjustment is made if the floor is higher or lower in the building.

One of your difficulties is going to be obtaining accurate sales prices in the units you are comparing. I was unaware that there is a central reporting agency or mechanism that makes sales statistics available to the public or to agents for that matter.

[quiksilva]

All good advice from ProThaiExpat and he is correct that there is not any central reporting system, the land registry is the closest Thailand gets to that but professional valuers (such as my firm) do always not rely on the numbers reported there as they are often fudged for tax evasion purposes.

Comparable evidence is the reason why there is so much synergy between valuation and agency practices. You may be interested to learn that a valuer is prohibited to advise on property that has been sold by the same or will be sold by the same firm within the last/next two years and vice versa with agents. Valuers (both here and in the UK) will very often call competing firms to source good 'comps'.

There are however several other forms of valuation, such as the residual method, depreciated replacement cost, and income based approach appraisals that may be used to determine Open Market Value in the absence of good comparable evidence, and these are all recogonised approaches by well known international professional bodies.

It is also worth bearing in mind that professional valuer never study any single method to determine their opinion of value, unless instructed otherwise by the client.

[Phrakhanong]

All good advice from ProThaiExpat and he is correct that there is not any central reporting system, the land registry is the closest Thailand gets to that but professional valuers (such as my firm) do always not rely on the numbers reported there as they are often fudged for tax evasion purposes.

Comparable evidence is the reason why there is so much synergy between valuation and agency practices. You may be interested to learn that a valuer is prohibited to advise on property that has been sold by the same or will be sold by the same firm within the last/next two years and vice versa with agents. Valuers (both here and in the UK) will very often call competing firms to source good 'comps'.

There are however several other forms of valuation, such as the residual method, depreciated replacement cost, and income based approach appraisals that may be used to determine Open Market Value in the absence of good comparable evidence, and these are all recogonised approaches by well known international professional bodies.

It is also worth bearing in mind that professional valuer never study any single method to determine their opinion of value, unless instructed otherwise by the client.

I'm also looking to buy some property in Bangkok and have been quite frustrated at the large divergence in pricing. Are you able to provide me with a bit more information on how these alternative valuation methods (residual, depreciated replacement and income based) work/how they calculate value. I'm looking for some mechanism of working out what a reasonable price should be for particular areas. I've trolled through a lot of agents sites/classified sections/bangkok bank property site etc to try and obtain average prices and found a huge range with lots of inconsistencies. Some sellers obviously don't care about market prices and seem to ask for whatever suits them, hoping someone will eventually pay that much. btw, if anyone wants the results of my research so far, send me a message. I'm more than happy to share.

[ProThaiExpat]

Phrakhanong: quicksilvas mention of alternative methods of evaluation are not really appropriate for the retail real estate market. For example, income approach to value is good for buying commercial properties and apartment houses. Replacement value is good if your loaning money on property and need to know the cost of re-building if it is destroyed, etc.

You really have a tough job to reach a realistic value for all the reasons stated. Since location is really the most important factor in price analysis, pick your neighborhood first, then start your comparison shopping. Per sq. meter for condos with adjustments for floor is really the meaningful way to go, keeping in mind the factors against even considering a building that has not been well managed for at least two years and all the units in buyers hands.

In the last analysis, when buying for your own residence, don't buy unless the unit excites you and will be a joy to live in. Living in a dwelling that doesn't bring you joy, regardless of how good an "investment" it is, is foolish. Many do not believe that residential real estate should ever be considered for any other purpose than living. Invest, if you wish, but the two rarely mix. Sure, a residence bought at a favorable price may in time be sold for a profit, but that should not be the overriding consideration.

Investing in real estate is the province of professionals, like quicksilva and consulting a firm such as his for real estate investment is really the way to go, not "investment" in your own abode. There is nothing more depressing than encountering people who live in houses that are a drudge to them but were bought at a cheap price and is being held for the profit to be made upon sale, meanwhile life goes on without the joy your dream home can bring you.

[cmsally]

My advice (I'm only an amateur ) would be comparison. Go through all the websites making notes of fairly standard prices for area/project etc. Bear in mind the english only websites might be more expensive in general and try to get someone to go through some of the Thai websites for you. Cover the area you are interested in by foot to see what locations are really like and what is for sale on the ground. I found it took about 1 month of comparing properties on the web for me to get a general feel for what was cheap or not.

Final piece of advice would be if you particularly like a certain condo block that is coming up for completion (ie transfer), find out what was the original per square metre price go to the developer and ask what they have in that building for sale. Make them an offer only just over original price and let them know if you are paying cash. The worst they can do is to tell you to go away because you are wasting their time.

[quiksilva]

Yup I only mentioned the others as an aside really. Focus on getting comparable evidence. If all else fails and you really can't find any information you can refer to the government's appraised values. These can be checked online here.

PS I happen to be one of those many that ProThaiExpat mentions, I believe that you buy a home to live in, buy something you will love to reside in for the long term, so get the best place you can afford.

Anyway, chances are if you truly love it, others will too.

[billaaa777]

Some pretty good advice given here. I am a CPA and a successful real estate investor in Pattaya and I will tell you what I do when attempting to evaluate a purchase of a condo. I only invest in condos where the building is completed and I can renovate it fast and hopefully sell it quickly with a minimum of 20% ROI.

First, one of the other posters mentioned that price per square meter is not a very good way of evaluating a unit and I agree with that 100%. Some condos sold in Pattaya the developers increase the price 25,000 to 50,000 per floor. In a 20 story building that is a big difference in the initial selling price of a condo having the same SM.

Another poster stated you should enjoy where you live and not worry about the ROI. I agree you should enjoy what you buying, but I believe you can also accomplish both task simultaneously.

When I am considering buying a condo the first thing I ask myself is what is the “fair market value” of that unit after renovation. Then I deduct 100,000 to 200,000 depending on the cost of the unit off that price since I want to sell it fast and have my selling price below the present market value.

How do I know the “fair market value” of a condo? Research and continued research staying up to date on the market. I review certain real estate agent’s web sites weekly looking at the condos that have recently come on the market. Since it is very difficult to have access to the actual selling prices of these units I downward adjust the asking price by between 5% and 10% to calculate the actual selling price.

One poster mentioned he saw some outrageous asking prices for condos; I just throw those out as these condos are very rarely sold. A friend of mine called me the other day and told me about a condo where the buyer was asking for 3.9 in a building where units sell for 2.9 at the most. The seller will sell this condos in a three or four years from now for his asking price, due to market appreciation, and then go around telling everybody “I told you so” that was what it was worth. These type of people live in fantasy land and should be avoided.

Some of the factors I use in determining “fair market value” are the following; location of the building, quality of the building, maintenance of the building, amenities offered in the building, ease of transportation to and fro from the building, floor the unit is on, the view from the unit, the side of the building the unit is on, and the sound heard from the outside world while in the building. Then I need to take these factors and make a comparison to what other similar properties are selling for.

I also need to know the renovation cost of that particular unit. This will require some work on your part as I am now able to instantly look at a unit and determine the renovation cost within a few thousand Baht one way or another. You should be able to contact some quality builders and tell them your expectations and get some quick estimates.

After you have completed the research mentioned above and then are able to buy a unit at 20% to 25% below what you consider the “fair market value” of that unit you will have know you received a good buy, that you will enjoy and hopefully appreciate in value during the time you are living there. Remember buying a property is usually the largest single investment most people make during there life and should not be done on a whim but requires a little work.

Best of luck with your search.

[Valjean]

Thanks everyone for the good advice. By the way if anyone has links to good real estate web sites can you snd them my way. Thai or English. OK to PM if not OK to post here.

Thanks

[Khun Bob]

Could you also PM myself? Thanks in advance...

Thanks everyone for the good advice. By the way if anyone has links to good real estate web sites can you snd them my way. Thai or English. OK to PM if not OK to post here.

Thanks

[Phrakhanong]

Ditto for me too. I can always use a good online real estate web site. Cheers.