What Are The Advantages Of Buying Property In Chiang Mai

[egdirb]

Putting aside any legal requirements of buying property in Chiang Mai and focusing on investment returns only, are their any advantageous of buying a property in Chiang Mai as opposed to renting.

I am certainly no expert, but from my observations of just the last 12 to 18 months it appears that there is a massive over supply of properties on the market, including new houses, and those current been completed or planned moo ban projects.

Has there been any growth in the Chiang Mai property market over the last few years. If so, can it be backed up with proof.

[tolstoy]

Not much financial advantage but overall it is nice to have your own place.

[egdirb]

Not much financial advantage but overall it is nice to have your own place.

I would certainly agree with that. Chiang Mai is a fantastic place to live, but I just cant see the advantages of buying a property here of that of renting.

[mallmagician]

It's nice to be able to do stuff to a place, which feels much better when you are adding those bits to a place you own.

If you own it, that money is there in bricks and mortar. So you don't have to worry about finding money for rent in the future. But to be honest, you would have to be very young to save any money buying a place instead of renting.

the money you pay for rent is not going to you. The house you buy if lived in and well maintained for some time, may possibly lose less than what you would lose paying rent .

Very long term, the land it sits on could go up in value, especially if you are close enough to the main city. But then if you buy moo bahn land, that is a struggle as it's vastly inflated...

[onthedarkside]

Really depends on your time horizons. You would need to be looking at 10 years to make it worth buying. Fact of the matter is that rental rates work out at about 5% (10% at most) of the property real world value. I actually own my own home (or my wife does ) but there are downsides, such as repair & maintenance costs, noisy neighbors, building works next door, etc. Plus it's not so easy to sell for the market price, can take a year or so. I suppose if you consider property appreciation then in the long term buying can work out better than renting.

And lets not forget that as a foreigner you cannot directly own the land. Therefore there are obstacles in the way to own your own home.

[ludditeman]

Without considering rise in property value, maintenance or interest on your money, 15-20 years rent = 1 house/condo price.

That must be considered a bad investment by anyones judgment.

I can't imagine living in the same place for more than 5 years.

[uptheos]

And lets not forget that as a foreigner you cannot directly own the land. Therefore there are obstacles in the way to own your own home.

Right, but if you're married, maybe with kids it's nice to know that your family will have a place to live rent free plus some security for the future, if you happen to die. Worried about if she dies first? Make joint wills leaving the property to each other, a foreigner can inherit land/house, but he must sell it within a year.

[egdirb]

I guess what prompted me to ask this question in my OP is that my landlord currently wants to sell the house I am renting from him for THB4,500,000. He has had it on the market for 6 months with no real interest. I pay THB18,000 per month to live here.

If I convert the THB4.5M to my own currency and what I can get if I invest in the bank back home, I would get about THB20,000 per month interest (THB2000 more than what I pay in rent).

If I was planning on living in the house for the next several years and there was growth in the property market of say 5% per annum then it would be a good investment (not that I would pay what the owner wants anyway).

However I think it is highly unlikely that a place worth 4.5million (if it is worth that - it isn't) will be worth THB7,330,000 in 10 years which would equate to compounded growth of 5% per annum.

[ludditeman]

I guess what prompted me to ask this question in my OP is that my landlord currently wants to sell the house I am renting from him for THB4,500,000. He has had it on the market for 6 months with no real interest. I pay THB18,000 per month to live here.

The minimum return I ever had on my investments over the last 10 years was 7% pa (after tax).

So lets assume 7% pa on your 4.5M giving an income of = 26,250 pcm.

You would immediately be 8,000bht pcm worse off by buying the place mat the asking price.

Risk assessment (potential profit Vs potential loss)

At 2.25M it might be worth the risk, if that doesn't eat into your capital too much

(I would consider risking 10% of my capital on a property under the right circumstances).

But you would still need to consider, someone taking the property from you, Spicy moving next door, losing your Visa, etc.

PS

At 18k a month that must be one hell of a house!

Edited March 5, 2012 by ludditeman

[egdirb]

I guess what prompted me to ask this question in my OP is that my landlord currently wants to sell the house I am renting from him for THB4,500,000. He has had it on the market for 6 months with no real interest. I pay THB18,000 per month to live here.

The minimum return I ever had on my investments over the last 10 years was 7% pa (after tax).

So lets assume 7% pa on your 4.5M giving an income of = 26,250 pcm.

You would immediately be 8,000bht pcm worse off by buying the place mat the asking price.

Risk assessment (potential profit Vs potential loss)

At 2.25M it might be worth the risk, if that doesn't eat into your capital too much

(I would consider risking 10% of my capital on a property under the right circumstances).

But you would still need to consider, someone taking the property from you, Spicy moving next door, losing your Visa, etc.

PS

At 18k a month that must be one hell of a house!

Very well said.

[lannarebirth]

I bought a house about 7.5 years ago. I figure, right about now would be the break even point on what I'd have paid had I rented it versus buying it, Not taking into consideration the currency I bought it with has depreciated 30% + since then and it's market value has doubled (according to the recent unsolicited offer I had). I tend not to think about that stuff, as its my home. I feel sorry for people that see their home as one of their investments.

[Semper]

I am certainly no expert, but from my observations of just the last 12 to 18 months it appears that there is a massive over supply of properties on the market, including new houses, and those current been completed or planned moo ban projects

I think you answered your own question.

[onthedarkside]

I guess what prompted me to ask this question in my OP is that my landlord currently wants to sell the house I am renting from him for THB4,500,000. He has had it on the market for 6 months with no real interest. I pay THB18,000 per month to live here.

If I convert the THB4.5M to my own currency and what I can get if I invest in the bank back home, I would get about THB20,000 per month interest (THB2000 more than what I pay in rent).

If I was planning on living in the house for the next several years and there was growth in the property market of say 5% per annum then it would be a good investment (not that I would pay what the owner wants anyway).

However I think it is highly unlikely that a place worth 4.5million (if it is worth that - it isn't) will be worth THB7,330,000 in 10 years which would equate to compounded growth of 5% per annum.

Yes, you have hit the nail on the head. In my previous post I did not get into the weeds of the finance.But since you have started down that road then lets discuss more. Fact of the matter is that renting is cheap, and buying is expensive. Talking about a 5% per annum property increase is not realistic for a 2nd market property (might work that way if your buy off plan, upfront, and take the risks involved with off plan).

In my case I just like the concept of owning (well not really own, but at least my Thai wife will eventually reap the benefits) and that's a big consideration for me. As I previously said the downside is the hazard of noisy neighbors and the never ever ending construction noise.

It's a tough choice and it's a major life decision. I wish you the best of luck.

[chiang mai]

On the other hand, the idea of paying a fairly up market rent for somewhere nice, combined with a low risk return on cash of only around 3%, buying can look attractive. For my part I agree with LRB, I've only ever bought a home as a place to live, never as an investment.

[kjhbigv]

One type of property that seems to be a good investment is live/work shop units.

The GF has had a house In Sansai (in a moo baan) on the market for over a year (at a realistic price), the normal type of thing 3 bed detached....seems like the market IS flooded with these and once you have one, not easy to sell! Partly, I guess, due to the fact that they can and are building more and more moo baan's and Thai's do like 'new' generally! Now it has finally sold she has been looking for live/work shop unit, 2.5-3 storey, shop at bottom, living above.

The price of these has dramatically increased in the past few years and sell before they are finished if they are in a good location. She has been looking around Santitham/Tanin market. The new developments around that area are selling almost immediately, more often than not, a buyer buying the whole lot of maybe 4-8 units.

[uptheos]

I tend not to think about that stuff, as its my home. I feel sorry for people that see their home as one of their investments.

I agree, a family consists of more than one person. Obviously things can change in a relationship, just as they do all over the world (look at divorce rates in one's own home country), but if the relationship isn't trustworthy at the beginning then of course I'd say rent and don't buy......or perhaps get a different partner.

Breaking up can be really tough, but that's the way it is.

[egdirb]

One type of property that seems to be a good investment is live/work shop units.

The GF has had a house In Sansai (in a moo baan) on the market for over a year (at a realistic price), the normal type of thing 3 bed detached....seems like the market IS flooded with these and once you have one, not easy to sell! Partly, I guess, due to the fact that they can and are building more and more moo baan's and Thai's do like 'new' generally! Now it has finally sold she has been looking for live/work shop unit, 2.5-3 storey, shop at bottom, living above.

The price of these has dramatically increased in the past few years and sell before they are finished if they are in a good location. She has been looking around Santitham/Tanin market. The new developments around that area are selling almost immediately, more often than not, a buyer buying the whole lot of maybe 4-8 units.

Hi kjhbigv,

Thanks for your input. However you state that "The GF has had a house In Sansai (in a moo baan) on the market for over a year (at a realistic price)"

Too me that sends the warning alarms buzzing, because if a house has been on the market for over a year already, it suggest only one of two possibilities;

1. The house is over priced; or

2. The house is not over priced, but there is a massive oversupply where supply far exceeds demand.

If it is the latter, then I cant see any end in sight with the constant amount of new properties coming into the market. I was also told this evening that most banks will give almost 100% finance to new house and land projects, which has the effect of making lived in home less desirable to new home and land projects.

Edited March 5, 2012 by egdirb

[LannaFarang]

hmmmm..... buy a house built by tradesman who are unskilled workers on sweatshop wages? Maybe for 1,000 baht. Any more than that and you are getting ripped off.

Edited March 5, 2012 by LannaFarang

[egdirb]

hmmmm..... buy a house where all the tradesman are unskilled workers on sweatshop wages. Maybe for 1,000 baht. Any more than that and you are getting ripped off.

LannaFarang

Sorry but I don't follow you.

[LannaFarang]

hmmmm..... buy a house where all the tradesman are unskilled workers on sweatshop wages. Maybe for 1,000 baht. Any more than that and you are getting ripped off.

LannaFarang

Sorry but I don't follow you.

sorry, meant to say.... "buy a house built by tradesman who are unskilled workers on sweatshop wages? Maybe for 1,000 baht. Any more than that and you are getting ripped off."

[elektrified]

hmmmm..... buy a house where all the tradesman are unskilled workers on sweatshop wages. Maybe for 1,000 baht. Any more than that and you are getting ripped off.

LannaFarang

Sorry but I don't follow you.

Don't bother trying to follow him/her.

[ludditeman]

If it is the latter, then I cant see any end in sight with the constant amount of new properties coming into the market. I was also told this evening that most banks will give almost 100% finance to new house and land projects, which has the effect of making lived in home less desirable to new home and land projects.

On the moobaan I have lived for the past year

There are three houses for sale (about 1.5MB), they have all been for sale the entire time I have lived here.

The moobaan office will build you a brand new house for 1.45MB, and give 100% credit at 6% interest rate (no credit check, moobaan will finance, a bank will do the finance cheaper with credit check and deposit).

This is not an uncommon practice in CM, you can see many houses falling apart, not being able to sell the owner just moves away and the bank repossesses an unsalable house. If it is one of the moobaan sponsored houses, they merely rent it out and still make a profit.

Edited March 5, 2012 by ludditeman

[cloudhopper]

I bought a house about 7.5 years ago. I figure, right about now would be the break even point on what I'd have paid had I rented it versus buying it, Not taking into consideration the currency I bought it with has depreciated 30% + since then and it's market value has doubled (according to the recent unsolicited offer I had). I tend not to think about that stuff, as its my home. I feel sorry for people that see their home as one of their investments.

Completely agree and although I built instead of bought I have seen a similar appreciation. But it was pure luck. Houses have never been a good investment outside of credit bubbles IMO. And LOS will not escape the current global real estate devaluation.

[oldgent]

(advantages verses disadvantages.) buying a new house in a Mooban Requires a 5% deposit and the longer u take out a mortgage the less ur monthly payments will be. based on a 3million house deposit 149,500bht over 20 years

@ 21,421bht/month. and renting a house whatever u pay a month is lost money. and nothing to leave to your beloved

[lannarebirth]

I bought a house about 7.5 years ago. I figure, right about now would be the break even point on what I'd have paid had I rented it versus buying it, Not taking into consideration the currency I bought it with has depreciated 30% + since then and it's market value has doubled (according to the recent unsolicited offer I had). I tend not to think about that stuff, as its my home. I feel sorry for people that see their home as one of their investments.

Completely agree and although I built instead of bought I have seen a similar appreciation. But it was pure luck. Houses have never been a good investment outside of credit bubbles IMO. And LOS will not escape the current global real estate devaluation.

You're probably right but since I don't have a mortgage and never will again, that's one less thing to care about,

[tolstoy]

The average 2 million baht home would rent out for between 10k -15k Baht a month. That would be more than 11 years of mortgage payments (more like 15 if you add in interest). Not too mention what others have said about repairs and upkeep. Floods, earthquake damage, termites, faulty wiring, inconsistent construction practices.

Housing doesn't always increase and neither does property. Everyone thinks that after they buy the property they should sell it for double. Houses sit on the market for a long time here. I have seen one house sit for 3 years already. What if some farmer in your area decides to sell his 100 rai of land for 5K per square wah (don't know the English equivalent) But you paid 8-10K for yours. Good luck reselling your house. Or what if the community you live in the owner needs some money to pay off his gambling debts and lowers the value of the plots right next to you.

Unless you have kids or want to leave something behind for others renting is usually the best option.

[Dean1953]

I have a teak house that I had built 7 years ago. Not counting what I have put into landscaping and sprinkler system, I spent 4.2 million baht on it. About 1.8 million of that is what I paid to have one teak house and one teak warehouse taken apart and moved to Chiang Mai, along with 14 used teak logs that support the house. The land is in my wife's name (with a 30 year lease back to me) and in 11 years, we will put the house in my son's name. I don't ever intend to sell it, but, for whatever reason (political instability, divorce) a situation develops where I need to do something with the house, but can't sell it, I could always have it dismantled and either sell the teak (hopefully for a decent profit) to ship it to the U.S. and either sell it or use it.

[kjhbigv]

One type of property that seems to be a good investment is live/work shop units.

The GF has had a house In Sansai (in a moo baan) on the market for over a year (at a realistic price), the normal type of thing 3 bed detached....seems like the market IS flooded with these and once you have one, not easy to sell! Partly, I guess, due to the fact that they can and are building more and more moo baan's and Thai's do like 'new' generally! Now it has finally sold she has been looking for live/work shop unit, 2.5-3 storey, shop at bottom, living above.

The price of these has dramatically increased in the past few years and sell before they are finished if they are in a good location. She has been looking around Santitham/Tanin market. The new developments around that area are selling almost immediately, more often than not, a buyer buying the whole lot of maybe 4-8 units.

Hi kjhbigv,

Thanks for your input. However you state that "The GF has had a house In Sansai (in a moo baan) on the market for over a year (at a realistic price)"

Too me that sends the warning alarms buzzing, because if a house has been on the market for over a year already, it suggest only one of two possibilities;

1. The house is over priced; or

2. The house is not over priced, but there is a massive oversupply where supply far exceeds demand.

If it is the latter, then I cant see any end in sight with the constant amount of new properties coming into the market. I was also told this evening that most banks will give almost 100% finance to new house and land projects, which has the effect of making lived in home less desirable to new home and land projects.

"The house is not over priced, but there is a massive oversupply where supply far exceeds demand."

Correct, that is exactly what I am saying....and I can only see it getting worse, just drive around the outskirts of CM and see how many new developments are being built and there is plenty of land to keep the developers going for years to come! Enquire about any 2nd hand property in a moo baan and ask how long it has been on the market? A year to sell is nothing unusual at all here, unless they are giving it away! A lot of them are just left empty!

[egdirb]

On a 1,500,000bht house with a 5% down deposit of 75,000thb:

Loan Amount = 1,425,000bht

Average Monthly Repayments = 9200bht (6% bank finance over 25 years)

Total Interest paid = 1,330,400

Total Cost 2,830,400 (not inclusive of maintenance and repairs)

Note the above does not include repairs, maintenance, homeowner expenses etc which perhaps would be an extra 10 to 15% of total costs (I may be very wrong on this) so add another THB425000 (over 25 years)

So at the end of the 25 years your house is owned outright at approximately 3,254,960.

At the end of the day I guess the questions needs to be asked what your 1.5thb home will be worth in 25 years?

[KNJ]

What if some farmer in your area decides to sell his 100 rai of land for 5K per square wah (don't know the English equivalent) But you paid 8-10K for yours.

It would NEVER happen, Thais have an attitude that if a neigbouring peice of land was sold for 8k then his is worth at least as much and more. They would never sell for less.

Regardless of the condition of that land, or advantages it may have ( access, electricity, view etc)