Condo Developers Target Foreigners

[pautai]

Developers woo foreigners

Published on February 07, 2005

Up-market condominium projects are beginning to focus more on foreign buyers as local sales slow down.

In a recent survey of Grade A properties, leading real-estate consultant CB Richard Ellis (CBRE) found expatriates now formed a bigger share of the residential condominium market.

“Foreign buyers now account for about 25 per cent of Grade-A condominium purchases,” said CBRE managing director Aliwassa Pathnadabutr. “That’s up from 10 per cent a few years ago.”

Under Thai law, foreigners can own up to 49 per cent of a Thai condominium property. They are, however, not allowed to buy freehold land.

“For many years the average percentage of foreign buyers in condominiums was less than 10 per cent,” she noted, “but that is changing quite quickly.”

To tap this segment, Bangkok Bank recently organised a real-estate exhibition in Singapore in the hope of luring buyers from there.

Actual sale numbers from the show, numbering about 10 units, were far from spectacular. “But they do indicate a strong interest among buyers there,” said Aliwassa.

The organisers were pleased with the high turnout. CBRE, which represented several projects at the event, said the show had largely been a public relations exercise rather than an outright sales campaign.

Like the annual Phuket and Samui property shows in Hong Kong and Singapore, such functions aim to create awareness about available properties.

Despite the recent economic downturn in Hong Kong and Singapore in the past two years, there were still plenty of cash-rich expatriates who were keen to invest in Thai real estate.

Phuket homes were said to provide rental returns of 20-30 per cent a year. But that was before the tsunami struck in December, wiping out revenue prospects for many.

The Singapore exhibition is more cautious about over-stating returns. Bangkok outfits are now citing annual gains of 5-6 per cent, the same as US state bonds and treasury notes.

Still, developers are optimistic Thailand is able to draw foreign buyers. The fundamentals are solid: a friendly populace, a relatively low cost of living, steady rental returns and resale opportunities all go to boost interest.

On the downside there are traffic jams, pollution, street vendors and poor management of public areas such as pavements and parks. For buyers from spick-and-span cities like Singapore, such drawbacks are not taken lightly.

While CBRE believes that overall overseas sentiment is positive, one US real-estate agent was more cautious. “Singapore buyers are more practical than Hong Kong buyers, who buy for lifestyle,” he said.

“Singapore buyers want to see real returns. They want finished products that can generate cash. They do not like projects sold off-plan.”

Still, the long-term trend favours Thai properties, said Aliwassa. In the firm’s assessment of the market last week, the agency said condominium supply was shrinking after surging for the past two years.

Developers agree, saying that because of the slump last year many projects are slowing down construction and some won’t get built at all.

CBRE said 4,546 new units were coming on the market this year on paper. In reality, that number is likely to be lower.

Next year the amount is 5,679 units while in 2007 the number will drop sharply to 3,185 units.

The downturn will affect firms that do not possess good locations, said the agency. But Grade-A sites such as those situated in the central business district will continue to do well.

“Projects such as Athenee Residence on Wireless Road are commanding Bt100,000 a square metre and more,” said Aliwassa.

There is always demand for good properties in the inner city, but here is limited supply, so there is always strong support at key locations, she said, citing Soi Lang Suan as an area where buying had picked up quickly following the 1997 financial crash.

At the same time the picture is not so pretty for firms which paid too much for land and built too far from the inner city.

“High land cost and high construction prices will be tough challengers in today’s market,” said Aliwassa. Such factors often determine the success or failure of a project.

Itthi C Tan

The Nation

[Harmonica]

>>>>>>Up-market condominium projects are beginning to focus more on foreign buyers as local sales slow down.<<<<<<<<

Yeah right! Always looking for the foreigner to spread and take the lightening rod -- then expect him to keep his cool and say " Khap khun Kap" --- this is the time to wear 2 sets of underwear, amigos -- preferably one made of steel with barbed wire!!

[astral]

Don't believe all you read.

Anyone planning to invest needs to do their homework.

Rental income of 20-30% sounds ambitious to me.

On a property costing 3 million you would need an monthly rent of 50K - 75K...............

[wcr]

Rental income of 20-30% sounds ambitious to me.

On a property costing 3 million you would need an monthly rent of 50K - 75K...............

<{POST_SNAPBACK}>

Rental income of this amount would mean you investing 8 - 11M Baht on an average return of 8%.

[Erwin1011]

And 8 % return is very good. Think more in terms of 5%

[PeaceBlondie]

Wait. I thought that in much of Thailand, condo rentals run close to 0.5% a month of the fair market sales value. Thus, a property worth 3 million would yield 15,000 baht per month, or A GROSS OF 6% a year. After expenses, vacancies, damages, maintenance fees, etc., you'd lose money.

I'm in a condo project in Chiang Mai that began as luxury, but is now past its glory. The units above me are for sale at 16,000 baht per square meter. Directly above me, 95 sq. meters (? that's optimistic; more like 80) rented last year for 10,000 (too high). They're trying to sell it for 1,550,000 baht. You'd be lucky to keep it rented at 8,500 baht, year by year. Annual gross rentals, about 100,000 baht before expenses. Do the math - isn't the new owner still going to lose money if he pays 1.4 million and rents it out for 9,000 baht?

[wcr]

Wait.  I thought that in much of Thailand, condo rentals run close to 0.5% a month of the fair market sales value.  Thus, a property worth 3 million would yield 15,000 baht per month, or A GROSS OF 6% a year.  After expenses, vacancies, damages, maintenance fees, etc., you'd lose money.

<{POST_SNAPBACK}>

Depends where in Thailand you are. I'm in Pattaya and condo's in a good building fully furnished with quality furnishings should yield 7 - 10%. Damages shouldn't be an issue as the tenant pays for that. Don't see how you can loose money when property is raising in value too, as it is in Pattaya.

[PeaceBlondie]

Wait.  I thought that in much of Thailand, condo rentals run close to 0.5% a month of the fair market sales value.  Thus, a property worth 3 million would yield 15,000 baht per month, or A GROSS OF 6% a year.  After expenses, vacancies, damages, maintenance fees, etc., you'd lose money.

<{POST_SNAPBACK}>

Depends where in Thailand you are. I'm in Pattaya and condo's in a good building fully furnished with quality furnishings should yield 7 - 10%. Damages shouldn't be an issue as the tenant pays for that. Don't see how you can loose money when property is raising in value too, as it is in Pattaya.

<{POST_SNAPBACK}>

Good point, wcr. When property is rising in value, you can't lose money. Conversely, when property is falling in value, you can't save money. The trick is to know when the market's overvalued, and sell.