Two Tier Pricing For Condos Introduced

[quiksilva]

The Bangkok Post today reported that CBRE has introduced two tier pricing for condominiums (see below)

In some buildings, foreign ownership already reached 49% which means foreigners are no longer able to purchase units unless they buy from a foreign owner. This makes units owned by foreigners more valuable so the company is now instituting two-tier pricing for Thais and foreigners in projects where the foreign quota has been reached.

Source http://www.bangkokpost.com/Business/28Feb2008_biz39.php

I can't help but wonder how this will go down in the market, presumably if there is sufficient demand then the market will support it, but two tier pricing is rarely a popular policy.

However, I suspect that this will only be for certain buildings, or perhaps certain areas where foreign demand for condo's outstrips local demand eg markets such as Pattaya.

I'd be interested to hear your views on this.

[backflip]

My view is "it doesn't make sense", at least the way it has been translated to English. If the foreign quota has already been sold, to whom are you going to sell the more expensive units meant for other foreigners?

[quiksilva]

Good point, I can only suspect that it refers to the situation where sales agents are asked to help flip units on for buyers before completion.

[PattayaParent]

It's not new. It's been happening for years.

[Jingthing]

Indeed, it is not new for RESALES. I would like to see the premium more standardized though. In other words, a rule of thumb, the same condo should be for example 20 percent more expensive if foreign owned.

Edited February 28, 2008 by Jingthing

[pkrv]

Some time ago I did consider the implications of the 49% rule on Condominiums. Such a distortion was always going to be open to abuse. In terms of social cohesion and integration this is very, very bad news.

http://www.thaivisa.com/forum/index.php?sh...0&p=1280034&

[thaigene2]

Yes it seems to refer to re-sale. It's not very clear.

I guess it's not that different though from the way airlines discount seats for some, but when that allotment is used up the identical seat you get next to cheap-charlie is twice the price? Same seat higher price.

Still I don't see how sustainable that would be in a condo building- won't the market just dictate the price in any event - farang quota or not? I mean, would you pay a premium for the last remaining one or two units when there are another 35 units available above the quota - but listed at 25% below the price you're being offered?

Rather than increasing re-sale value for the foreigner within the quota, it would limit his/her market..Cause a Thai buyer would laugh and walk away from the higher price, no? It affects you selling as well buying..and negatively both ways - not just one way?

[PattayaParent]

Indeed, it is not new for RESALES. I would like to see the premium more standardized though. In other words, a rule of thumb, the same condo should be for example 20 percent more expensive if foreign owned.

New build too. It's always cheaper to buy a condo in a Thai or company name direct from the developer than in a Farang name.

[jonniebkk]

Yes, the article is not very clear what they mean. Whatever the market is...that is what the price will be regardless of any quota.

Would be curious, however, if anyone has any information of price differences for a new development once the foreign quota has been sold...do the official developer's or whisper prices generally drop after that point because the remaining units can only be sold to Thais?

What about resales in a full building? Are there price differentials for similar units? If so, how much?

[jbaldwin]

Yes, the article is not very clear what they mean. Whatever the market is...that is what the price will be regardless of any quota.

Would be curious, however, if anyone has any information of price differences for a new development once the foreign quota has been sold...do the official developer's or whisper prices generally drop after that point because the remaining units can only be sold to Thais?

What about resales in a full building? Are there price differentials for similar units? If so, how much?

As an example, the development I live in in Pattaya:

Resale of foreign owned units fetch about 55,000 baht/sqm

No thai owned (including companies) units have been resold for at least a year

The developer still has a number of unsold units (not foreign quota) on offer at 45,000 baht/sqm

[MJo]

Yes, the article is not very clear what they mean. Whatever the market is...that is what the price will be regardless of any quota.

Would be curious, however, if anyone has any information of price differences for a new development once the foreign quota has been sold...do the official developer's or whisper prices generally drop after that point because the remaining units can only be sold to Thais?

What about resales in a full building? Are there price differentials for similar units? If so, how much?

For resales CBRE usually has around 10 - 20% premium compared to other agencies regardless of quota. Maybe they think it adds to the value or the unit if you buy from them

Been offered same unit from different agencies with 20% price difference time to time. CBRE being off the scale always...

[jonniebkk]

Resale of foreign owned units fetch about 55,000 baht/sqm

The developer still has a number of unsold units (not foreign quota) on offer at 45,000 baht/sqm

Interesting...so about a 20% differential between the Thai and Foreign quotas [for your building].

[backflip]

"Yes it seems to refer to re-sale. It's not very clear."

Ah, that would explain it. But "resales costing more than original sales" is not news, and is hardly worth an article in a newspaper.

[sweetchariot]

All new builds and resales have been doing this for years in Pattaya. As to the %age premium, that depends on the desirability of the condo, and what they think they can get away with.

It might stop soon though due to oversupply, but we shall have to wait and see.

[pkrv]

How 'Quaint'....

[sweetchariot]

How 'Quaint'....

Qui?

[LivinLOS]

While I am one of those that gets annoyed at dual pricing in most items, I actually dont see the issue here.

Dual pricing would be a different price in a like for like item.. Eg two prices for the same item depending on the nationality of the buyer.. These are not the same item, one is defined as being legally ownable for a farang, the other is not, if you want to put it in a company name and not be able to sell it then you too can buy the Thai only ownership one.

[PattayaParent]

While I am one of those that gets annoyed at dual pricing in most items, I actually dont see the issue here.

Dual pricing would be a different price in a like for like item.. Eg two prices for the same item depending on the nationality of the buyer.. These are not the same item, one is defined as being legally ownable for a farang, the other is not, if you want to put it in a company name and not be able to sell it then you too can buy the Thai only ownership one.

But IT IS duel pricing i.e.two prices for the same item. What the developer is doing is trying to recover the whole costs (and profits) of the development from the sale of the Farang 51% knowing full well that he won't be able to sell the Thai 49% at all, unless some stupid Farang puts it in a company name.

[quiksilva]

I don't know if its quite the case that they are trying recover the full amount from buyers in the farang quota.

The article can be read in any number of ways. For instance, one could look at this and say, that based on the performance of historical resale values, they have determined that condo's in the foreign quota are inherently more valuable, and so therefore so they will set a higher price for foreigners than for locals, even when the physical property itself is the same, but the right to acquire it is not.

As others have mentioned the original article was deals with this subject in far too vague a manner. It does not fully describe the practice of this so called 'two tiered " system that has been introduced. So more details are needed for further discussion really.

[trajan]

the MD of CBRE might be referring (for example) to The Sukhothai Residences.....the foreign quota already sold out (even before formal sales launch)...(the buying interest is so strong that there is already a secondary market for the foreign quota)...... they are now only offering long-term leaseholds to any additional foriegners wanting to buy direct from the owner/developer... she might be saying that for projects which are likely to draw very strong foreign interest, they might consider instituting two-tiered pricing (because of the 49% limit on supply)...

Although Im not sure if CBRE will handle them, I would imagine that upcoming projects like 185 Rajadamri (freehold) and St. Regis (even if leasehold) might be candidate projects with very strong foreign interest... I wouldnt be too surprised if two-tiered pricing came up with respect to those projects....

[steveromagnino]

But IT IS duel pricing i.e.two prices for the same item. What the developer is doing is trying to recover the whole costs (and profits) of the development from the sale of the Farang 51% knowing full well that he won't be able to sell the Thai 49% at all, unless some stupid Farang puts it in a company name.

no they are not the same. The end product (the condo) is the same, but the ownership structure is different.

You say it yourself, the inferior item requires that 'some stupid Farang puts it in a company name'

QED

[A_Traveller]

Piggy back for a moment, I've been advised, in a general conversation, {they'd been advised by their management team whilst discussing those who are delinquent in paying their fees etc.} that some amendments to the Condominium Act came into force possibly today. Anyone advise if this is the case?

Regards

PS Some chatter about proposed amendments

Edited March 3, 2008 by A_Traveller

[quiksilva]

These proposed and sorely needed amendments have been known about for quite some time now, most professional managers are already incorporating these requirements into their management practices today.

However, I don't think that its been officially ratified yet. I heard that the ratification of the proposed act is expected to be published in the Royal Gazette at the end of October this year.

[LivinLOS]

But IT IS duel pricing i.e.two prices for the same item. What the developer is doing is trying to recover the whole costs (and profits) of the development from the sale of the Farang 51% knowing full well that he won't be able to sell the Thai 49% at all, unless some stupid Farang puts it in a company name.

no they are not the same. The end product (the condo) is the same, but the ownership structure is different.

You say it yourself, the inferior item requires that 'some stupid Farang puts it in a company name'

QED

Exactly.. The farang is quite welcome to buy a 51% condo at the 51% 'Thai' price.. He just cannot legally own it.. Similarl a Thai can speculate on the 51% 'farang' quota property if he felt it was a resale to a farang..

The condo may be the same in physical properties but the legal structure of one is far more valuable than another.. I dont see that as a dual price thing in the same way that entrance to a park is 20 baht to a Thai and 400 to me, or a plate of rice is 40 baht v 20..

[ray08]

I think it is 100% two tier pricing , in the sense that being a ferang you are not entitled to purchase as a Thai so you must pay more ,forget the company option as illegal and not a good idea,

Funny thing is that the proportion of Ferang is much smaller that Thais, so you would think there would be a greater demand by Thais as there are more of them available to buy compared to Ferang thereby increasing competion for the units and a higher price, but as we all know , not the case , says a lot about real value of the market

[A_Traveller]

... However, I don't think that its been officially ratified yet. I heard that the ratification of the proposed act is expected to be published in the Royal Gazette at the end of October this year.

Thanks, I was also under that impression, though had no specifics about eventual Gazetting.

Regards

[Gary A]

It's a simple thing. Just face the facts. MOST astute farang buyers would not consider buying a condo that they can't own in their own name. That means farang owned units are going to sell at a premium. Just a question of supply and demand.