Buying "used" Property..?

[ChrisP]

I have several questions about buying "used" / previously owned real-estate property in LOS.

1. I hear that many Thai's generally don't like to buy previously owned property.. because of the "residual spirit problem". They prefer newly built.... Is this true?

If it is, that seems to indicate that if you buy a property, you'd better be ready to be stuck with it for the rest of your natural...??

2. So, is there a market out there for "used " property.. both condos and houses..? Is it mainly farang who are buying..?

3. Are property prices appreciating in LOS..? If so, by how much on average..?

As you'll notice from a prior post, I'm trying to decide about renting vs buying next year...

ChrisP

[pedro01]

I have several questions about buying "used" / previously owned real-estate property in LOS.

1. I hear that many Thai's generally don't like to buy previously owned property.. because of the "residual spirit problem".    They prefer newly built.... Is this true?

If it is, that seems to indicate that if you buy a property, you'd better be ready to be stuck with it for the rest of your natural...??

2. So, is there a market out there for "used " property.. both condos and houses..?  Is it mainly farang who are buying..?

3. Are property prices appreciating in LOS..?  If so, by how much on average..?

As you'll notice from a prior post, I'm trying to decide about renting vs buying next year...

ChrisP

<{POST_SNAPBACK}>

I know plenty of Thais that have purchased used houses - mostly young couples.

A lot of the new ones going up are out of their price range.

Not many have brought used condos though.

[ZOVOX]

Generally speaking, Thais like to buy new houses. This is not to say you cannot sell an old house, but it has to be at a good price. My wife and her friends refer to old houses as 'second hand', and like all second hand goods, they expect to get a good discount. Also, many people bought property during the property boom, and still trying to off-load the property at the same price as they bought it. If you look in Bangkok, many old houses are the same price as new ones, so why buy an old house ! For these reasons, the property market in LOS is slow - with a few exceptions in touristy areas - and it is imposible to find a good estate agent. So my advice to you is to rent, unless you plan to live in Thailand for a long time in the same property !

[Guest Unregistered: sumitr man_*]

Chris:

It really rather depends on who you listen to. Many seem to forget that the idea/concept of being a home-owner in Thailand is relatively new. By that, I don't mean that people didn't own homes, obviously they did, but, prior to the generation we are in, not many actively went out looking for property - they stayed at home with mum and dad, eventually taking over the home. Many still do this.

However, with a growing middle class in Thailand has come a rise in home ownership. In conjunction with this has been a rise in mortgage home ownership (something that was almost non existent in Thailand 20 years ago), and it here that the issue of "second-hand" homes comes into play. Many banks are simply unwilling to lend mortgages on second-hand homes unless there is a substantial down payment (40%++), because they have no vested interest in the project and so are taking on a liability. On the other hand, buy a new home, in a project they have projected financed the development company for, and suddenly you have a different kettle of fish - banks are now willing to lend at 10%. Why? Because they're already exposed.

Combine the two social issues together, and you start to see why second-hand home are not sought after. Which is not to say second-hand homes don't sell, just that those buying second-hand homes tend to be playing with their own money. This causes them to be more aggressive when negotiating the price (as cash buyer usually are, hence the "discount" comments).

As to whether or not house prices in Thailand will increase - I honestly believe that hinges on two important aspects: (1) that there continues to be an emerging middle class not willing to shack up with mum and dad (especially if they're not the oldest son); and (2) far more remote (further off), that foreigner can start to buy land in Thailand.

SM

[Sumitr Man]

^ the post above is mine. God himself only knows how I managed to do that

[chingy_]

there is no more new property(home) in central Bangkok, either you buy the land from some one, and built your own house, all land in Bangkok are belong to somebody, out skirt of Bangkok there are plenty of new development.

[ChrisP]

Thanks for the replies on Property so far..

Esp Sumitra Man for the cultural ramifications.. very clearly explained!

ChrisP

[ChrisP]

I thought more about this...

So, Banks's will now lend Thai's money for a Mortgage only on a new house. Let's follow this through...

Now, after a few years when you come to sell the house you want to see some appreciation.... BUT, now the house is considered "used"... and the buyer expects a steep "discount"..

So you can be left with no appreciation, AND maybe a price that doesn't even cover the original mortgage loan.. yes??

ChrisP

[pedro01]

I thought more about this...

So, Banks's will now lend Thai's money for a Mortgage only on a new house.  Let's follow this through...

Now, after a few years when you come to sell the house you want to see some appreciation....  BUT, now the house is considered "used"... and the buyer expects a steep "discount"..

So you can be left with no appreciation, AND maybe a price that doesn't even cover the original mortgage loan.. yes??

ChrisP

<{POST_SNAPBACK}>

Banks do lend money on a used house - no problems at all.

But they do offer sweeter deals on used houses. As has been explained here - one of those sweeteners is less deposit & cheaper starting rates.

Thanachart Bank gave me (well, the wife) a 15 year mortgage, 90% of value of property with a starting rate of 2.5% - on a used property. At the time, I also had an offer from Bangkok bank but the deal wasn't so sweet.

I am also discussing a mortgage on the next house with Bangkok Bank - no problems so far. Thanachart wouldn't do a mortgage for a second property but Bangkok Bank will. Go figure.

Go and see the banks.... lots of them...

[Sumitr Man]

Chris:

My post may have been a little blurred. What I meant was not that banks don't lend to people wanting to buy "used" houses, but that they are far less willing to do so - and then only if you put down a substantial deposit (minimum I've seen so far is 30% - although Pedro says he put down 10%).

Two things can be drawn from this.

Firstly, newly affluent young urban professionals (the, so-called, "Yuppies") of Thailand, looking to buy a house, are more inclined to purchase new housing as banks (generally) require less of a deposit. This then means they have more available money to decorate their "new" home. It also (again generally) means they can get on the housing ladder earlier.

Secondly, those who already own a home and are now looking to upgrade. IME this is a fairly new phenomenon in Thailand. Previously people would just buy and new house and let another member of their family stay in the "old" house. However, now they're starting to look to sell. Problem is, they need to find a buyer willing to sink a lot more money into the purchase than those outlined in the paragraph above. As such, they tend to have to give a little carrot. This by no means means they cannot get a return on built in appreciation, but at the same time they cannot walk around saying their home is worth 10 million baht just because that is a notional value a valuer has put on it - at least, in the same way as it works in the West. In Thailand, IME, your home is only worth what the next person is willing to pay. In short, that means you can buy a house for 3m, hear the govt. reckons housing value has increased 20% in the last year, put it on the market at 4m - but, the fact that the govt. (or anyone else) reckons housing has gone up 20% will not enter the equation - OTH, what will is finding a person who has 1.2m in cash and who is willing to spend that buying your place!

SM

EDIT:

also, a factor that outlines the above is banks' attitudes towards Home Loans (such as second mortgages, home improvements loans, etc.). An example here, in the West a bank will lend you a home improvement loan based on the value of the property AFTER you have done the home improvements. In Thailand the home improvement loan is based on the value BEFORE the home improvements are made. The difference in attitude: in the West they believe doing home improvements will assist in its resale price. In Thailand they tend to think it'll make little or no difference in the resale value (although it may well make a difference in marketability)

Edited February 3, 2005 by Sumitr Man

[ZOVOX]

Sumitr man is right: Many thais just live in their house for a long time and then pass it on to the family. They do not see their house as a sellable asset. Just go to any old housing estate and you see that nearly all the houses are not very well maintained. Renovation is not a common concept in Thailand !

[chuchok]

All I can give you is my wifes experience. she who must be obeyed wanted to buy a house, I did not. So she toddled off to the bank with a house in mind.

She showed that bank that she had a salary of 50K per month comming in.The House she wanted to buy was 1 mill and needed renovations that would have been about 400k.

The bank would have given her 1.4 mill on a 10% deposit. I can't remember exactly the interest rates, but repayment was around 12K per month on a 25 year loan.

I stopped her doing it because the house was in a bad area and even after renovations we would have been extreamly lucky to get our money back.

She also bullshitted her salary to the bank by 50%. When I asked her about this she said "everybody does this" Go figure!!

[ChrisP]

go to any old housing estate and you see that nearly all the houses are not very well maintained. Renovation is not a common concept in Thailand

Not just the houses. I have to say that I've noticed that Thai's don't seem to appreciate the concept of maintaining the "common areas" of a housing estate in good condition at all. I saw a couple of newish estates in CM that were already getting kinda run-down.. Maybe they don't understand why it's important in the greater scheme of things..??

They also don't maintain high-rise condo buildings well either.. (unless they are VERY high-end - to attract Farangs..)

Why is that..???

ChrisP

[Rinrada]

[

She also bullshitted her salary to the bank by 50%. When I asked her about this she said "everybody does this" Go figure!!

<{POST_SNAPBACK}>

Most banks and building Socs have guidelines that stipulates that standard (approx) Mortgages should be limited to around 2.5 to 3 times your yearly income and yet with the average price of a rabbit hutch in the Smoke hitting £250,000 the market although not booming seems to be OK.

So to make a comparison it would appear that anyone who wants to buy a wee "hutch" here must be earning about £85 K...../ US $160 K.a year....Dont think so.......as you say...Go Figure. Not only in Thailand

[ProThaiExpat]

As touched on by one poster, ChrisP, the failure of Thais to maintain their property and their failure to fix it up for sale, only compounds the problem of re-sale. I looked at so many dumps that were on the market for new house properties that I gave up. Having been in the remodeling business before, I looked to save money on a "fixer", only to find that all resales I looked at were "fixers" and their re-sale price was not adjusted accordingly.

Another factor is no property taxes after purchase. There is no ongoing expense of any material degree in keeping a house empty in hopes of market improvement since, unlike in the west, no property taxes act to forbid maintaining a house empty in Thailand.

I am surprised at the reference to a 25year loan. All I have heard of is five or seven year property loans on new houses.