Property Is It Time To Buy Yet ?

[trogers]

I agree Midas, but your supposed to buy BEFORE the recovery, not when we are told 'We have now recovered"

Every man and his dog knows recovery wont be until at least mid 2010 which puts us around the bottom in March this year. Thats why the smart money is hitting property and the Markets around 6 mths ago just look at the gains in the DOW . I bought more property and Stock HEAVILY in NOV You should know as we have had this conversation in the past. Modesty prevents me from reveling the gains made. If you want to make money in property buy now. Sitting on the sidelines never made anyone rich

I bought my 5 condo units between Aug 2008 and Jan 2009.

You must have got them for a good price. Please share with us the discount off the peak price and the price range (in thb psm) for these condos. I'm looking to buy condo too but my impression is that Thai condo prices haven't corrected in the past year and sellers are still asking for peak prices for 07/08.

All my condo units are not in new projects, but are old condos completed 13 to 20+ years. So the difference between peak prices and my purchase prices are not much - 10-15%. The largest unit 163m2 was secured from an auction of seized properties, and the smallest (45m2) was sold by a Taiwanese who was in a hurry to liquidate because his stock portfolio is on margin call.

I based my decisions on the total investment I have to make, including cost for refurbishing the units, to the ease of renting the unit and the rental income - giving me net rental yield (after deducting maintenance fees and taxes) of 7-8% per annum.

Here is the before and after photos of a 121m2 unit:

[robert10]

I agree Midas, but your supposed to buy BEFORE the recovery, not when we are told 'We have now recovered"

Every man and his dog knows recovery wont be until at least mid 2010 which puts us around the bottom in March this year. Thats why the smart money is hitting property and the Markets around 6 mths ago just look at the gains in the DOW . I bought more property and Stock HEAVILY in NOV You should know as we have had this conversation in the past. Modesty prevents me from reveling the gains made. If you want to make money in property buy now. Sitting on the sidelines never made anyone rich

I bought my 5 condo units between Aug 2008 and Jan 2009.

You must have got them for a good price. Please share with us the discount off the peak price and the price range (in thb psm) for these condos. I'm looking to buy condo too but my impression is that Thai condo prices haven't corrected in the past year and sellers are still asking for peak prices for 07/08.

All my condo units are not in new projects, but are old condos completed 13 to 20+ years. So the difference between peak prices and my purchase prices are not much - 10-15%. The largest unit 163m2 was secured from an auction of seized properties, and the smallest (45m2) was sold by a Taiwanese who was in a hurry to liquidate because his stock portfolio is on margin call.

I based my decisions on the total investment I have to make, including cost for refurbishing the units, to the ease of renting the unit and the rental income - giving me net rental yield (after deducting maintenance fees and taxes) of 7-8% per annum.

Here is the before and after photos of a 121m2 unit:

Well, I'm amazed that your nett rental yiels are 7-8% ! I've been looking at new projects and at current asking price, the gross yields are 5+% only. Taking into account maintenance fees, taxes and vacant period (the sale agents were good enough to say that it will take say 3mths to rent under current market conditions), the nett yields are 3% plus. That makes me feel that current asking prices are too high. Comments welcome.

[trogers]

Well, I'm amazed that your nett rental yiels are 7-8% ! I've been looking at new projects and at current asking price, the gross yields are 5+% only. Taking into account maintenance fees, taxes and vacant period (the sale agents were good enough to say that it will take say 3mths to rent under current market conditions), the nett yields are 3% plus. That makes me feel that current asking prices are too high. Comments welcome.

Yes, I know. Prices of new condos are out of whack with rental income. That is why I invest only in old condos in selective locations.

The one in the photos is an over 20 year old building in Sukhumvit 24, a choice location. My neighbour is renting her non-renovated unit at Bt25k a month. Units in recently completed projects along this soi are asking Bt70-75k. The question in my mind is, why are there no units asking rents somewhere in between these two extremes rental rates? And so, I created the supply - charging rent at Bt45k a month.

Edited August 1, 2009 by trogers

[Abrak]

There is never a bad time to buy property - IF you can afford to do it!

I think this saying might apply better to land than housing.

Actually if you look at say Shiller's analysis of housing against inflation for the last 450 years in Amersterdam then house prices havent really deviated from their mean. The same can be said for the US over the last 130 years.

To the extent there is a rise a) there is no real return unlike bonds or equities and if instead of assuming there is no bad time to buy property, if you simply sold when it reached 2x bear market lows and bought back at 1.5x you would have made money c) there were at least 2 x 30 year periods when there was negative real returns.

Applying all this to Thailand is a bit of a stretch. Obviously the economy has not suffered or benefited from the sort of asset price boom we have seen in other western economies over the last 15 years due to loose monetary policies. But if you assume no 'real' price appreciation in property then prices have only undone most of the previous 10 years. The real problem with asset price appreciation of homes is that there is no supply inelasticity verses land. In other words prices may go up because of cost inputs (although manufacturers are becoming more efficient) but all the real capital gain accrues to land whose supply is fixed and maintenance cost is zero.

Edited August 1, 2009 by Abrak

[Abrak]

Well, I'm amazed that your nett rental yiels are 7-8% ! I've been looking at new projects and at current asking price, the gross yields are 5+% only. Taking into account maintenance fees, taxes and vacant period (the sale agents were good enough to say that it will take say 3mths to rent under current market conditions), the nett yields are 3% plus. That makes me feel that current asking prices are too high. Comments welcome.

I think net yields of 7-8% are vaguely justified if you consider buying second hand and if you pencil in some 3% maintenance costs. Thai condos with the heat etc are pretty high to maintain (far more expensive than a girl). And really, it is so true, as a previous poster pointed out, that buying second hand is so much cheaper than buying new. This is especially true if you want to renovate in any case. (So to some extent I wouldnt argue with you over the net yields (after everything) being only 3%.)

I would guess that with a second hand unit you wouldnt go too far wrong, no more than is justified in owning a place as opposed to renting.

[trogers]

Well, I'm amazed that your nett rental yiels are 7-8% ! I've been looking at new projects and at current asking price, the gross yields are 5+% only. Taking into account maintenance fees, taxes and vacant period (the sale agents were good enough to say that it will take say 3mths to rent under current market conditions), the nett yields are 3% plus. That makes me feel that current asking prices are too high. Comments welcome.

I think net yields of 7-8% are vaguely justified if you consider buying second hand and if you pencil in some 3% maintenance costs. Thai condos with the heat etc are pretty high to maintain (far more expensive than a girl). And really, it is so true, as a previous poster pointed out, that buying second hand is so much cheaper than buying new. This is especially true if you want to renovate in any case. (So to some extent I wouldnt argue with you over the net yields (after everything) being only 3%.)

I would guess that with a second hand unit you wouldnt go too far wrong, no more than is justified in owning a place as opposed to renting.

I think it is more expensive to upkeep a new condo project selling at Bt100-120k/m2 in order to maintain an asking rent of bt70-75k for a 120m2 unit.

But one underlying reason I invested in an over 20 year old building is that it is the lowest condo building along this soi - 12 floors with units starting on the 3rd floor. There are only 80 units on 2 rai of land. Wait out another 2 property cycles (16-18 years), and it is ripe for redevelopment. Like you have said, "all the real capital gain accrues to land".

[robert10]

Well, I'm amazed that your nett rental yiels are 7-8% ! I've been looking at new projects and at current asking price, the gross yields are 5+% only. Taking into account maintenance fees, taxes and vacant period (the sale agents were good enough to say that it will take say 3mths to rent under current market conditions), the nett yields are 3% plus. That makes me feel that current asking prices are too high. Comments welcome.

I think net yields of 7-8% are vaguely justified if you consider buying second hand and if you pencil in some 3% maintenance costs. Thai condos with the heat etc are pretty high to maintain (far more expensive than a girl). And really, it is so true, as a previous poster pointed out, that buying second hand is so much cheaper than buying new. This is especially true if you want to renovate in any case. (So to some extent I wouldnt argue with you over the net yields (after everything) being only 3%.)

I would guess that with a second hand unit you wouldnt go too far wrong, no more than is justified in owning a place as opposed to renting.

I think it is more expensive to upkeep a new condo project selling at Bt100-120k/m2 in order to maintain an asking rent of bt70-75k for a 120m2 unit.

But one underlying reason I invested in an over 20 year old building is that it is the lowest condo building along this soi - 12 floors with units starting on the 3rd floor. There are only 80 units on 2 rai of land. Wait out another 2 property cycles (16-18 years), and it is ripe for redevelopment. Like you have said, "all the real capital gain accrues to land".

From your market knowledge, what's the %price differential between old condos and newly completed condos in the same area?

[SMEEERE]

We have watched the property market closely for the last 3 years,prices have rocketed to rediculous amounts especially with the baht being so strong against the pound and the dollar.

We currently rent but this cannot go on for ever surely all the properties that are for sale must start to bring the prices down ?

Im not sure where you live or intend buying, but on our estate in pattaya at least 10 homes are for sale ( of about 35 homes total ) prices were about 5-6 mill 4 years ago, they are now strugging to get 3.5, in fact when we moved here we had the only empty one, the other day i walked the dog around and saw about 10 now for sale and most have been for a long time, seems everyone i talk to here says the same thing, its still depressed, me id wait til the baht improves and ill bet it will,.rents on this estate have also dropped from 35-45 and will come for 20,.good luck

[trogers]

Well, I'm amazed that your nett rental yiels are 7-8% ! I've been looking at new projects and at current asking price, the gross yields are 5+% only. Taking into account maintenance fees, taxes and vacant period (the sale agents were good enough to say that it will take say 3mths to rent under current market conditions), the nett yields are 3% plus. That makes me feel that current asking prices are too high. Comments welcome.

I think net yields of 7-8% are vaguely justified if you consider buying second hand and if you pencil in some 3% maintenance costs. Thai condos with the heat etc are pretty high to maintain (far more expensive than a girl). And really, it is so true, as a previous poster pointed out, that buying second hand is so much cheaper than buying new. This is especially true if you want to renovate in any case. (So to some extent I wouldnt argue with you over the net yields (after everything) being only 3%.)

I would guess that with a second hand unit you wouldnt go too far wrong, no more than is justified in owning a place as opposed to renting.

I think it is more expensive to upkeep a new condo project selling at Bt100-120k/m2 in order to maintain an asking rent of bt70-75k for a 120m2 unit.

But one underlying reason I invested in an over 20 year old building is that it is the lowest condo building along this soi - 12 floors with units starting on the 3rd floor. There are only 80 units on 2 rai of land. Wait out another 2 property cycles (16-18 years), and it is ripe for redevelopment. Like you have said, "all the real capital gain accrues to land".

From your market knowledge, what's the %price differential between old condos and newly completed condos in the same area?

Take Sukhumvit 24 as an example, condo units in President Park which were completed in 1995 are selling at Bt47-53k/m2 depending on condition of interior finishes. Compare with the recently completed Emporio Place, units here are selling for Bt110-120k/m2 without furniture.

[SMEEERE]

"are farangs hanging on for top prices?"

The vast majority of the Thai real estate is owned by Thais, so I'm not sure why you are only interested in farang-owned property. It would behoove you to look at ALL of the real estate available.

"The vast majority of the Thai real estate is owned by Thais" .And those that arent are also owned by thais, we cant own property/land remember ,.

[SMEEERE]

There is never a bad time to buy property - IF you can afford to do it!

Or for sellers IF you can afford to lose it,.....dont beleive me?, come to pattaya, houses that were 4-5mill 4 years ago are making/struggling to make 3.5.,great investment,.

[robert10]

There is never a bad time to buy property - IF you can afford to do it!

Or for sellers IF you can afford to lose it,.....dont beleive me?, come to pattaya, houses that were 4-5mill 4 years ago are making/struggling to make 3.5.,great investment,.

That's quite a big drop! How about condo prices there... have they dropped that much too? Any recommendation for good condos there selling at relatively cheaper prices for those willing to take the price risk?

[Abrak]

From your market knowledge, what's the %price differential between old condos and newly completed condos in the same area?

Well the problem with this question is that it doesnt really take into account the fact there is a very wide differential in second hand home prices. Many are simply priced too high on the basis that the owner compares them to new build. Also some people simply assume that their second hand home is worth as much as new build.

But if you take what I would consider like for like - namely a furnished and generally well maintained home v and unfurnished but new development - the price differential must be some 25-30%. If the second hand home is unfurnished or hasnt been well maintained then the price differential is probably nearer 50%.

[trogers]

From your market knowledge, what's the %price differential between old condos and newly completed condos in the same area?

Well the problem with this question is that it doesnt really take into account the fact there is a very wide differential in second hand home prices. Many are simply priced too high on the basis that the owner compares them to new build. Also some people simply assume that their second hand home is worth as much as new build.

But if you take what I would consider like for like - namely a furnished and generally well maintained home v and unfurnished but new development - the price differential must be some 25-30%. If the second hand home is unfurnished or hasnt been well maintained then the price differential is probably nearer 50%.

The prices at President Park were acquired prices of a few units at a recent foreclosure auction (about 2 months ago).

[trogers]

There is never a bad time to buy property - IF you can afford to do it!

Or for sellers IF you can afford to lose it,.....dont beleive me?, come to pattaya, houses that were 4-5mill 4 years ago are making/struggling to make 3.5.,great investment,.

That's quite a big drop! How about condo prices there... have they dropped that much too? Any recommendation for good condos there selling at relatively cheaper prices for those willing to take the price risk?

If you are interested in acquiring condos, make sure they are completed projects. There are and may be more suspended projects in Pattaya.

[samtam]

I agree the secondary market may finally be coming into its own because of the huge variance in prices between new build and older properties, which cannot be justified or sustained. Also, older properties usually have larger rooms, and a larger footprint for facilities. As well as this they are completed, (and a lot of the new properties will surely fail), and they have occupancy, which enables the management fees to be collected, and the buildings to be properly maintained.

Edited August 2, 2009 by samtam

[ScienceGuy]

The median price of homes should be about 4x the median income(price-to-income ratio). If that's 10k baht, then 4x12x10k=480k. I believe that's on-par out in the provinces, however, in Bangers and Pattaya, the incomes may be higher like 20k which gives 960k. I don't really believe a house or condo could be worth much more than that unless it's in a great location or very big. I've seen 4 bedroom homes with big yards in Bangers for under 2M. I've also seen places right on Silom for 20M. My condo wants 1.2M for 1-bedrooms which is a little high but it's 100m from the BTS so I suppose the location is "good".

All tolled, prices are "fair" in Thailand. Not exactly great, but affordable to most Thais. It does appear the supply of new homes is very large. It could cause an oversupply but I don't know the real numbers so I can't comment.

[trogers]

I've seen 4 bedroom homes with big yards in Bangers for under 2M. I've also seen places right on Silom for 20M.

This price difference is the due to land value. How much per sq. wah?

[xbusman]

Thanks guys for doing the math, and its nice to see some real math, not the boiler room variety.

Lets go back and address the question in summary of some of the fine posts here.

First, and foremost, its only the time to invest in Thailand if you are using money you can walk away from and not notice, unless of course you have a Thai passport. The first rule of investing here has been, and will always be, never invest more than you can walk away from.

So, if we are talking about the money in the bottom of your laundry basket, then the rest is simply math. For property investment, we use the formula 100 times rent to determine if property is a worth while investment. Forget speculation, if you want to speculate the lottery is probably a better option as the real estate or gold bond salesman dont get a cut of that. Our rule of thumb changes with tax structure, maintenance costs, transfer fees, distance, etc. but in the end it does not vary too much. As the posters pointed out above, for us we need to net around 7% before its even a consideration. Other than that, there are other places to put money.

We also use calculations of per capita income related to average housing to keep an eye on bubble markets. I have seen the same in economic analysis as well so its not all that uncommon. That would seem to indicate that the real estate market here is extremely over priced but those calculations might be difficult in a country with such a wide disparity between the rich and poor. I have read somewhere that Thailand has about the widest disparity in the world, but I am not sure if that is true or not, it seems to be.

Best to keep with ROI calculations to determine if your spare change is worth investing here.

[zorro1]

Thanks guys for doing the math, and its nice to see some real math, not the boiler room variety.

Lets go back and address the question in summary of some of the fine posts here.

First, and foremost, its only the time to invest in Thailand if you are using money you can walk away from and not notice, unless of course you have a Thai passport. The first rule of investing here has been, and will always be, never invest more than you can walk away from.

So, if we are talking about the money in the bottom of your laundry basket, then the rest is simply math. For property investment, we use the formula 100 times rent to determine if property is a worth while investment. Forget speculation, if you want to speculate the lottery is probably a better option as the real estate or gold bond salesman dont get a cut of that. Our rule of thumb changes with tax structure, maintenance costs, transfer fees, distance, etc. but in the end it does not vary too much. As the posters pointed out above, for us we need to net around 7% before its even a consideration. Other than that, there are other places to put money.

We also use calculations of per capita income related to average housing to keep an eye on bubble markets. I have seen the same in economic analysis as well so its not all that uncommon. That would seem to indicate that the real estate market here is extremely over priced but those calculations might be difficult in a country with such a wide disparity between the rich and poor. I have read somewhere that Thailand has about the widest disparity in the world, but I am not sure if that is true or not, it seems to be.

Best to keep with ROI calculations to determine if your spare change is worth investing here.

this one line thrown about on TV more than any other. Kind of negates the rest of your post when you start it

"never invest more than you can walk away from."

Nobody in thier right mind would make the biggest purchase of their life knowing it may get taken away from them. I am always willing to learn and have asked this question many times usually without a reply so hopefully you can shed some light.

How and who would take your condo away from you? and do you know anyone who has had their condo taken away?

I can only think of one situation that would be difficult and that would be deportation however the condo is still yours and can still be sold or rented

[trogers]

Thanks guys for doing the math, and its nice to see some real math, not the boiler room variety.

Lets go back and address the question in summary of some of the fine posts here.

First, and foremost, its only the time to invest in Thailand if you are using money you can walk away from and not notice, unless of course you have a Thai passport. The first rule of investing here has been, and will always be, never invest more than you can walk away from.

So, if we are talking about the money in the bottom of your laundry basket, then the rest is simply math. For property investment, we use the formula 100 times rent to determine if property is a worth while investment. Forget speculation, if you want to speculate the lottery is probably a better option as the real estate or gold bond salesman dont get a cut of that. Our rule of thumb changes with tax structure, maintenance costs, transfer fees, distance, etc. but in the end it does not vary too much. As the posters pointed out above, for us we need to net around 7% before its even a consideration. Other than that, there are other places to put money.

We also use calculations of per capita income related to average housing to keep an eye on bubble markets. I have seen the same in economic analysis as well so its not all that uncommon. That would seem to indicate that the real estate market here is extremely over priced but those calculations might be difficult in a country with such a wide disparity between the rich and poor. I have read somewhere that Thailand has about the widest disparity in the world, but I am not sure if that is true or not, it seems to be.

Best to keep with ROI calculations to determine if your spare change is worth investing here.

this one line thrown about on TV more than any other. Kind of negates the rest of your post when you start it

"never invest more than you can walk away from."

Nobody in thier right mind would make the biggest purchase of their life knowing it may get taken away from them. I am always willing to learn and have asked this question many times usually without a reply so hopefully you can shed some light.

How and who would take your condo away from you? and do you know anyone who has had their condo taken away?

I can only think of one situation that would be difficult and that would be deportation however the condo is still yours and can still be sold or rented

Perhaps some people are worried that their condo units will be taken to Dubai?

[zorro1]

No I think they would take them to India. India growing at a rapid pace and they short of condos. I just did the math, yep more people than condos for sure

[trogers]

No I think they would take them to India. India growing at a rapid pace and they short of condos. I just did the math, yep more people than condos for sure

Nah! Condo living is communal living, not suitable for a country with a caste system. That's why there are more people than condos in the first place.

[doodee]

I bought my house off a thai guy who couldnt pay his mortgage repayment due to gambling and drinking.We found out from some thai friends and they drove us to the place and he gave us a price which was about 600,000 baht less than the value and he paid for the selling fees too.There are good bargains to be had and i think the thai people know much more than some of these farang rip off merchants,oops i mean agents.

[zorro1]

well they cant take them to Dubai because the Dubainese are already taking away farang owned condos as well.

[trogers]

well they cant take them to Dubai because the Dubainese are already taking away farang owned condos as well.

Not the locals there. The condo units in Thailand are for building a red shirt community around a certain mansion...

[trogers]

I bought my house off a thai guy who couldnt pay his mortgage repayment due to gambling and drinking.We found out from some thai friends and they drove us to the place and he gave us a price which was about 600,000 baht less than the value and he paid for the selling fees too.There are good bargains to be had and i think the thai people know much more than some of these farang rip off merchants,oops i mean agents.

I wonder whether the social group around this house was the reason this Thai guy got hooked to drinking and gambling...

[craigt3365]

I was in the village a few weeks ago. Head a great story about a farang who married a local gal. He built a home for about 3M Baht. Really nice for out in the rice fields. He caugh her cheating with a Thai guy, they divorced and she obviously got to keep the house....so he hired a bulldozer and tore the place down! What a hoot...

[ronswelters2]

The funny thing is that the doomsday folks and the optimists are both more right than they usually are. Just like the people who bet on huge inflation five years ago. The reality is that the times are unstable, so extremes are more probable than in normal times.

[Tokay]

There are good bargains to be had and i think the thai people know much more than some of these farang rip off merchants,oops i mean agents.

I'm driving down a rather busy soi the other day in Pattaya. My TG points out a pretty large Thai apartment building that I would guess would sell for no less than 3.5 - 4m. It was nice size, good shape. She tells me that the place she eats (out front), the owner was eating a few weeks ago talking about this or that problem and she needed money ASAP. She was willing to sell this building for 1.5m but she needed the sale quick or she had "big problem" says my TG. The next day the neighbor bought it from her.

My TG is telling me this and I asked her, "baby... for 1.5 for such a large unit that is already full of tenants, why on earth did you not tell me about this?" Her reply, "I think you no want Thai apartment."

The Thai who bought this got a deal. This was at least a 3.5 - 4m baht building.

So yes, I agree, deals are to be had EVERYWHERE, you just have to know how to look and who to talk to. As the economic problems get worse, you will find more and more Thais (and falang) who are in a spot and need to ditch an asset or two.