Can Investors Still Make Money In The Jomtien/pattaya Real Estate Market Even During A Downturn ?

[KhunTao]

(I will also post this in the Pattaya Forum)

This is the theory behind bargaining just before completion:

a) Gradual price increases during the life cycle of the project

Typically, the developer will raise prices during the development cycle to the tune of approximately 50%. Each important stage in the development cycle, such as launch of the project, construction of show rooms, approval of building license, breaking ground, last floor completed, fully finished product, etc… usually will be accompanied by a price increase.

Unsold units ?

Still, in certain cases a limited number of units will remain unsold (under the 49% foreigners´ quota and/or the 51% Thai quota), at some stage nearing completion, the developer may be willing to let go one or more of such remaining units at prices well lower than their listed prices, i.e. effectively reducing their premium pricing.

c) Discounting by the developer ?

In certain extreme cases, the developer may be willing to accept pricing close to the 1^st pre-construction price list, for example in cases whereby the developer faces the choice between selling a unit at a discounted price and receiving working capital or, alternatively, dip into its expensive bank credit line, or, alternatively, dip into its own capital/equity funds. No developer wants to be stuck with unsold units at the time of completion of the project and this can lead to attractive buying opportunities during the months immediately prior to transfer of the project.

d) Discounting by resale investors ?

Once the resale investors realize that transfers are only months away, they suddenly face the prospect of having to cough up the remaining amount due to the developer. In certain cases, that can be as high as 70% of the contract amount. Now, these resale investors never planned on taking possession, instead they purchased the unit in the expectation of being able to flip at a higher price to a true end-user. What could happen therefore is a situation whereby numerous resale investors seek to offload their unit al at (approximately) the same time, i.e. an ideal opportunity to aggressively negotiate prices. This is currently happening with the La Royale project, where transfers should be completed by December/January.

e) Pick-up in value after transfer

These negotiating opportunities, in as far as they can be sourced, could be further enhanced by the fact that the unit prices typically rise after completion of transfers, i.e. during the 6 months or 1^st year that a new building is actually being lived in, as only by then the project will reveal its true living potential to would-be buyers. All construction materials will have been cleaned up, the workers have disappeared, people are lounging around the pool etc…

A clear advantage of bargaining just before completion is the absence of project completion risk. Question is whether this theory can be translated into reality ….

Please let me have your views ….