Do You Think Shophouses Are Good?

[actiondell4]

I have always had an interest in buying a shophouse before i retire to Thailand,preferably in Pattaya.

I was looking at some on a real estate site and i couldnt believe the prices,3 shophouses with 3 storys on top was selling for 21 million baht in jomtiem !

Wow,wish i had invested there about 10 years ago,but on average most shophouses with rooms on top are selling around the 4 mil price upwards.

I figure i could live in a top room and lease out the bottom half shop etc.

But then im concerned about ownership issues etc.

Another area i looked at was KLONG TOEY area in Bangkok,i think this area could rise in price.

Edited June 13, 2010 by actiondell4

[Morden]

'Location, location, location', as they say.

The area that you mention seems still to be overpriced given that no-one knows when tourists will return and local expats. are running away as fast as they can. However, if you look elsewhere you should find some that are much cheaper. Many blocks of shophouses stand virtually empty and covered in black mould, suggesting that it's not easy to find the right place.

If you plan to live in one then you have to consider the trades around you and the close proximity of your neighbours. You might like that type of environment, of course.

There's uncertainty about the future of Thailand and many expats. already living here with incomes from their home country are suspending any plans to spend money. I would say that you brother has given you good advice but review it in a year's time.

[Pakboong]

8 years ago those same shop houses were selling for 1.5 million baht each. The classic bubble. If prices do not return to reality, buy something else. There is a glut especially in Pattaya right now and it is likely you will lose for sure on the capital investment end of the deal and likely on both ends. I read that at a point a couple of years ago there were over 10,000 vacant shop houses in Pattaya. So what if the number was really only 8,000, or even lower, it is way too many to expect any kind of a profit.

[Morden]

That reminds me, I hear that the situation with condos. in Pattaya is no better - just in case your thinking drifts in that direction.

[ducksonspeed]

Have never owned a shop house but i lived in one and ran a small school in the bottom two floors and lived in the top two floors. It was great. I lived inside the moat in Chiang Mai and found little problems with neighbours.

If you rent out the lower half you know that someone will always be there when your not. Thai business spend little time closed. Just make sure it is a quiet business. The school thing worked well because we only had kids hanging around between 4 till 8 pm during the week and mormings on saturday and sunday.

I recommend the living side but the buying side I am very cautious about. I am waiting for six months at the moment to see what happens in Thai and global economies.

enjoy your shop front

[floridaguy]

As already said, location is the key. I also was interested in a shop house, also in the Klong Toei area of BKK. They can be had for as little as 600-800k THB, or as much as you said. It depends on the area, the neighbors, the condition. Around Suk 62 my cousin had a fairly nice one, right on the main road, 100 meters from Sukhumvit. He had it for about 20000THB a month. Not bad for 5 stories, and about 15 meters of frontage. And the utilities couldn't be cheaper! Billed at residential rates. Electric with air con running most of the day never exceeded 900 THB a month.

[Pib]

Seems like in some areas there are a million shophouses with about 500,000 of them empty and/or at least empty/closed on the ground floor/shop area. And as I drive around in Bangkok and the surrounding provinces I see more and more and more shophouses being built maybe because many Thai's have the dream of running their own little business in a shophouse and I guess some builders "think" they can easily be sold. And I've seen some groups of shophouses where whole sections of shophouses appear built within the last few years/brand new, but it sure looks like they have never been occupied. I just see so many shophouses empty/closed up and, IMHO, built in a bad location to do much of any kind of business/allow easy access for potential customers.

Be very careful and do a lot of research before you invest in a shophouse.

[actiondell4]

I also like the Chinatown area however i imagine a shophouse there on a main road would be in the 10 mil mark.

On Another point anyone here in the Pattaya area ever see those vacant row of one storey shops just before the traffic lights.

bad position,they are all for lease and have been for a few years.

[Heng]

I think 10 might be a little on the low side, unless you're talking about a back soi.

Plenty of vacancies everywhere, but on the whole, it's pretty easy to mothball a shophouse (compared to a house or stand alone building with no one else around) and wait it out, especially if you're 100% equity on it. You don't win at Monopoly by only renting (that said, you probably shouldn't be buying if you're a foreigner unless you have a solid local foundation that won't sell it all out from under you) and the masses will always need their mix of goods and services providers (who in turn will lease from you while you just check your bank balances and make rent collection calls).

[midas]

I think 10 might be a little on the low side, unless you're talking about a back soi.

Plenty of vacancies everywhere, but on the whole, it's pretty easy to mothball a shophouse (compared to a house or stand alone building with no one else around) and wait it out, especially if you're 100% equity on it. You don't win at Monopoly by only renting (that said, you probably shouldn't be buying if you're a foreigner unless you have a solid local foundation that won't sell it all out from under you) and the masses will always need their mix of goods and services providers (who in turn will lease from you while you just check your bank balances and make rent collection calls).

Wait it out for how long ?

It seems pretty clear by now that we are in living in deflationary times.

Japanese have been waiting for 20 years and their real pain hasnt even started yet ?

WILL IGNORING THE MISTAKES OF THE PAST RESULT IN A 20 YEAR BEAR MARKET? | PRAGMATIC CAPITALISM

Edited June 14, 2010 by midas

[Heng]

I think 10 might be a little on the low side, unless you're talking about a back soi.

Plenty of vacancies everywhere, but on the whole, it's pretty easy to mothball a shophouse (compared to a house or stand alone building with no one else around) and wait it out, especially if you're 100% equity on it. You don't win at Monopoly by only renting (that said, you probably shouldn't be buying if you're a foreigner unless you have a solid local foundation that won't sell it all out from under you) and the masses will always need their mix of goods and services providers (who in turn will lease from you while you just check your bank balances and make rent collection calls).

Wait it out for how long ?

It seems pretty clear by now that we are in living in deflationary times.

Japanese have been waiting for 20 years and their real pain hasnt even started yet ?

For as long as it takes. What's the rush? No interest to pay, very low property taxes, no estate taxes, and they last quite awhile (and even XX years down the road, rebuilds cost very little for those of us with construction companies in the family).

Not quite sure where that pain would be coming from that folks like to say is inevitable.

[midas]

I think 10 might be a little on the low side, unless you're talking about a back soi.

Plenty of vacancies everywhere, but on the whole, it's pretty easy to mothball a shophouse (compared to a house or stand alone building with no one else around) and wait it out, especially if you're 100% equity on it. You don't win at Monopoly by only renting (that said, you probably shouldn't be buying if you're a foreigner unless you have a solid local foundation that won't sell it all out from under you) and the masses will always need their mix of goods and services providers (who in turn will lease from you while you just check your bank balances and make rent collection calls).

Wait it out for how long ?

It seems pretty clear by now that we are in living in deflationary times.

Japanese have been waiting for 20 years and their real pain hasnt even started yet ?

For as long as it takes. What's the rush? No interest to pay, very low property taxes, no estate taxes, and they last quite awhile (and even XX years down the road, rebuilds cost very little for those of us with construction companies in the family).

Not quite sure where that pain would be coming from that folks like to say is inevitable.

The pain is that property prices in Thailand at least are going to be as flat

as a pancake for a very long time and even worse some sellers may not be able to get their

money back. What you are suggesting doesnt seem prudent at all to me.........buying something

that may never have an income ?

Why not buy agricultural land in that case and least get a crop of rice every year ?

[Heng]

The pain is that property prices in Thailand at least are going to be as flat

as a pancake for a very long time and even worse some sellers may not be able to get their

money back. What you are suggesting doesnt seem prudent at all to me.........buying something

that may never have an income ?

Why not buy agricultural land in that case and least get a crop of rice every year ?

I certainly sympathize with those buyers, but IMO like any other purchase, whether it's a bottle of wine, a lawnmower, or a set of 4 shophouses on 3rd Road, one shouldn't be going in if one is going to want a refund in the foreseeable future.

It may indeed not be prudent for you at all. If you're not content with your net returns (from whatever your other investments and businesses are) without input from a particular property (and you are counting on a particular property to produce an return in the 'near' future), then of course it wouldn't be a prudent purchase. If however you're okay with simply holding onto said property for when someone finally does want to lease it from you, then it most certainly is prudent, especially when development/commerce/etc. moves into a particular area there might not be anything left for sale at that point. All that's left then is for folks to either lease or 'seng,' which for us, we don't subscribe to being on the end user side of either concept. I'm not a big fan of undeveloped property, although my folks and grandparents were, and we're still holding plenty of unused titles... more than a few with crops of rice/shrimp/yams/etc., mostly because it's quite a time killer in upkeep and often legal skirmishes.

I think the main difference in thinking comes from looking at real estate (and any other kind of permanent assets) on a different time horizon. A lot of folks (perhaps you included) think that 'if I don't see a return in 50 years, I'll most certainly be dead by then, so what would be the point?' I'm part of the demographic (and I don't mean that in a condescending way... there are folks with low to high levels of net worth in this group) that thinks 'if I don't see a return in 50 years, it's not a big deal because even if I'm dead, Heng Jr. will be 52, his kids will be in their 20's, etc...'

Edited June 14, 2010 by Heng

[actiondell4]

I dont know what the argument really is ?

If i had bought a shophouse say in the ChinaTown area say 10 years,surely my investment would have doubled.

Had I bought a property in some parts of Australia 10 years ago,namely in some parts of Sydney,such as Mount Druitt etc,my property would have been lucky to rise by 20 % in all those years.

I am thinking you may mean Condos ,especially in holiday places such as Pattaya which obviously there is a oversupply.

But im surprised actually how Thais can afford those prices I saw on the online Thailand real estate websites with studios selling for 2 mill etc in Chiang Mai.

On showing these to my Thai tenant here in Australia,he exclaimed '"Only for farang,we Thais dont pay those prices"

I think about showing caution here however in buying shophouses especially in certain parts of Bangkok where your investment may be demoloished as one poster wrote.

[Heng]

If i had bought a shophouse say in the ChinaTown area say 10 years,surely my investment would have doubled.

In this case, I would still say nothing is sure. I'd say, you'll most likely have tenants and a decent appreciation in value within the next 50+ years.

But im surprised actually how Thais can afford those prices I saw on the online Thailand real estate websites with studios selling for 2 mill etc in Chiang Mai.

For 7-8 million Thais, 2 mil. isn't really that much. For about 60 million Thais though, yeah, they probably can't even afford the transfer fees for the condo without breaking the bank. (just an estimate, I'm sure others around here have some exact-ish figures)