Real Estate

[PattayaOneTeam]

How to beat a Buyer's Market

By Tim Gladwin, Managing Director of Sallmanns

It should be news to no-one that the Pattaya real estate market has been relatively quiet since the start of the global economic downturn. One of the main reasons is that, notwithstanding recent increased interest in the market from, typically Bangkok-based Thai buyers, much of the money that has driven the market to grow very significantly over the last decade or so has originated from overseas. The fact that the effects of the economic crisis have been particularly severe in the West has for the time being reduced the amount of money being invested in Thai property by foreign buyers.

One obvious consequence of there being fewer buyers around is that sellers of properties face more competition. In other words it is a buyers' market. The most obvious way to compete with other sellers is on price and those sellers who are most motivated to sell have been reducing the prices of their properties, making for some very attractive deals for opportunistic purchasers over recent months. However, in a buyers' market, an attractive price is not always enough.

We deal with a surprisingly large number of sellers who try to sell houses/condos that they have allowed to get into a really bad state. In some cases, the properties have clearly not even been cleaned for a long time. Paintwork, both exterior and interior, is flaking off and badly stained. If there is any furniture, it is generally old and falling apart. In a market such as the one with which we are currently faced, for such a property to have any chance whatsoever of being sold, the asking price would have to be so low as to be simply unrealistic.

I understand that some sellers do not have the money to undertake significant improvements to properties they are looking to sell. That said, I have a hard time believing that they can't find themselves a mop, a bucket and a duster. However, for those who do have the ability to finance a little more, there are various improvements that can be made that have the ability both to make a house a great deal more sellable (in this or any other market) and also, typically, to increase the value and likely selling price of the property by more than the cost of the work.

In this regard, the best example, over and above a good clean, tends to be painting both the interior and exterior of a house that looks run down. If you know where to look, the cost of paint and capable painters here in Pattaya can be extremely reasonable. For example, when I painted the outside of my house (shortly after buying it) the total cost was in the region of 30,000 Baht for a very good job. And it positively transformed the place appearance-wise. There is absolutely no doubt in my mind that the value of the house increased by several times more than the 30,000 Baht I spent. Moreover, an ugly looking house, by reason of the previous colour scheme, became a very attractive one almost overnight. I see an awful lot of properties for sale where the same effect could be achieved by a similar exercise.

For those who have the ability to spend a little bit more, there is also no doubt that “dressing” a property nicely can make it hugely more interesting to a majority of buyers. It is for this very reason that property developers spend an awful lot of time and money making their show units as beautiful as possible. Buyers are, to a very large extent, motivated by aesthetic appearance. More often than not they buy on the basis of the way something looks rather than the way something could look, and they often pay a premium for properties that look particularly nice.

Accordingly, taking the time or, alternatively, employing a specialist to decorate and furnish the inside of your property can regularly pay dividends, again both in terms of attracting a buyer (or a tenant) and in terms of the purchase price (or rent) that you will be able to achieve. Speaking from experience, the houses and condos that we have decorated and furnished for our clients have undoubtedly fared well in both the sales and rental markets such that the clients in question certainly consider that the cost, which need not be a particularly large amount, has been money well spent.

Clearly there are countless other areas in which you can consider undertaking home improvements and most of them, assuming they are done properly, will make your property more sellable. That said, not all of them will increase the value of your property by as much as or more than the cost of the work. A good example tends to be replacing windows for, say, UPVC double glazing. It definitely benefits the property and will make it more attractive to buyers, but it is rare that the cost will be fully reflected in the increased value of the house. In most cases, the same can be said for the installation of new bathrooms and kitchens, although it is worth bearing in mind that it is often said that houses are most commonly sold by their bathrooms and kitchens.

Here in Thailand, bearing in mind the hot, sunny climate, there are a couple of home improvements that can be undertaken that suit the environment and thus tend to make a house a great deal more sellable and also more valuable. Firstly, assuming you have the space, it tends to be a good idea to install a private swimming pool. The dream of lots of prospective purchasers (and tenants) from overseas is to own a house with its own pool. Without one, you tend to limit the number of people who would be interested in your house. Moreover, with it being possible to build a nice, good quality 8 x 4 metre pool for around 500,000 Baht, the cost and usually a little more can generally be recovered by way of the increased value of the property.

Secondly, installing solar panels can attract prospective purchasers who are concerned about reducing their so-called “carbon footprint”. Increasingly, individuals everywhere are becoming more and more concerned with environmental issues. Offering a house for sale that is considered to be “green” is not only socially responsible, but it differentiates a property from others that prospective purchasers might also be considering. This is one of the reasons why we (at Sallmanns) have recently partnered with Thailand's leading authority on solar power. By installing on-grid systems you can generate and sell electricity to the Provincial Electricity Authority for which you will typically be paid a little more than 10% of the cost of the equipment each year (for example a system costing around 350,000 Baht will normally generate roughly 35,000 Bahts' worth of electricity each year). Bearing in mind that panels come with 20 to 25 year warranties, not only are the panels environmentally friendly, they also make exceptionally good financial sense.

If you have any questions or queries in relation to the above, or if you would like to discuss any other matters related to the local real estate market, please call me on 087 137 0392 or email me at [email protected].

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-- Pattaya One 2011-12-09

[TJo]

You make a lot of good points about how sellers often need to try harder to make a sale. However I have to disagree that current conditions constitute a buyer's market.

My understanding of a buyer's market is the ability of the buyer to buy at a relatively low price and to make a good investment. In my experience this is simply not the case in Pattaya now. Asking prices are completely unrealistic given global economic conditions (at least as these affect overseas buyers who drive much of the Pattaya market) and the level of risk, and of economic development, in Thailand. In this last regard it is now possible to buy equivalent units at lower prices than in Pattaya in developed jurisdictions in Europe and the US. However much one might like Pattaya, that does not make one bit of sense.

My understanding is that the sales market is all but dead at the moment. Agents claim to have deals, but when pressed can't really come up with anything attractive.

That is far from being a buyer's market or a seller's market....it's a closed market.