New Condo Negotiations?

[isawasnake]

I know generalizations are always tough, but if a company in Bangkok is advertising 1 bedroom units for 2 million, can you expect to buy under 2 million? Or is it more fixed? I appreciate any and all input. Thanks.

PS, and I don't mean to buy an undesirable unit for under the 2 million. In other words, if a company had 5 identical units on the east side of a building on the 10th floor listed for 2 million each, could you expect to pay under 2 million. Hope my question is clear.

Edited November 22, 2012 by isawasnake

[trogers]

First thing first. What is the value of a unit?

Only after you have this reference point can you then start negiotiation from a price lower than its value.

[BlackPuddingBertha]

All property prices in Thailand are highly negotiable. For a new build you should at least be able to negotiate off the amount of an agent's commission (anything up to 8%), assuming of course that you approached the developer directly.

[shepsel]

I would suggest that you put in a lowball offer and see what happens. They will probably come back with a counter offer. The

worst case scenerio is that they just send the offer back and say "no". If you are really stuck on that particular building, you could always go back with a near full price offer if your original offer is rejected.

[isawasnake]

First thing first. What is the value of a unit?

Only after you have this reference point can you then start negiotiation from a price lower than its value.

How do you calculate value from rental? I have seen you post on this before, but forgot. Let's say 10k per month rent, its value should be at about......

[Khun Jean]

Even that is for everyone different. For me 10k per month represents a value of around 1 million baht if it is used for investment

When you are owning it to live in other factors go on top of this. Few hundred thousand for good layout and location. Maybe a little more if the fittings are very good. I am never in a hurry, but if you are it can be a few hundred thousand more.

All assuming the 10k rental price is something you can actually get tenants for.

[trogers]

First, understand the meaning of 1-bed. A studio with a partition separating the sofa and the bed does not make it a 1-bed. Most recently built 30+ sqm units are being marketed as 1-bed. A true 1-bed has a proper bedroom and living room, both with its own windows or doors providing natural light and ventilation.

Second, net yearly rental income may be as low as 8 months actual rent, with the missing 4 months paying for agent's commission, common fees and periods the unit is left vacant between tenants. So if Bt10k is a realistic rent you can get for the unit, the net yearly income is Bt80k.

How much money are you willing to put down to earn this Bt80k? Don't forget the time and cost to cash out of the condo unit compared with say placing your money in a time deposit.

Edited November 22, 2012 by trogers

[Baloney pony]

First thing first. What is the value of a unit?

Only after you have this reference point can you then start negiotiation from a price lower than its value.

How do you calculate value from rental? I have seen you post on this before, but forgot. Let's say 10k per month rent, its value should be at about......

Actual rent should be 4-6% of a unit's realistic sale cost. So a unit renting for 10,000 baht probably costs 2,000,000 or less to buy. A unit that costs 3 million baht will usually rent for around 15,000 baht and so on..You will see some owners asking for 7%-10% for units no matter the market which is why those units stay empty. That premium only makes sense if it's at an amazing location or has access to one of a kind facilities.

Edited November 22, 2012 by Baloney pony

[Baloney pony]

When you're uncertain of value always do a little translating on prakard to see what thais are offering each other in the same building then adjust your offer downward from there. Get a thai person to make an initial inquiry as well. The price often gets "inflated" when you ask in the english language or appear as a foreign person.

Edited November 22, 2012 by Baloney pony

[Heng]

All property prices in Thailand are highly negotiable. For a new build you should at least be able to negotiate off the amount of an agent's commission (anything up to 8%), assuming of course that you approached the developer directly.

Best answer. I don't know about getting off all of the agent's commission, but you should be able to take a bite out of it.

[trogers]

First thing first. What is the value of a unit?

Only after you have this reference point can you then start negiotiation from a price lower than its value.

How do you calculate value from rental? I have seen you post on this before, but forgot. Let's say 10k per month rent, its value should be at about......

Actual rent should be 4-6% of a unit's realistic sale cost. So a unit renting for 10,000 baht probably costs 2,000,000 or less to buy. A unit that costs 3 million baht will usually rent for around 15,000 baht and so on..You will see some owners asking for 7%-10% for units no matter the market which is why those units stay empty. That premium only makes sense if it's at an amazing location or has access to one of a kind facilities.

Actual rent depends on supply and demand of the rental market, and not on price of the unit. And the trend in the next few years is downwards as more supply is coming into the market while demand is flat or shrinking due to lower economic growth.

Thai banks are now offering fixed deposit rates of 3% a year, and above 3% for periods up to 3 years.

http://thailand.depo...d-deposits.html

Why would a person buy a condo to earn 4% gross rental income with net rental income being less than 3%?

Edited November 22, 2012 by trogers

[PattayaPhom]

First thing first. What is the value of a unit?

Only after you have this reference point can you then start negiotiation from a price lower than its value.

How do you calculate value from rental? I have seen you post on this before, but forgot. Let's say 10k per month rent, its value should be at about......

Actual rent should be 4-6% of a unit's realistic sale cost. So a unit renting for 10,000 baht probably costs 2,000,000 or less to buy. A unit that costs 3 million baht will usually rent for around 15,000 baht and so on..You will see some owners asking for 7%-10% for units no matter the market which is why those units stay empty. That premium only makes sense if it's at an amazing location or has access to one of a kind facilities.

Actual rent depends on supply and demand of the rental market, and not on price of the unit. And the trend in the next few years is downwards as more supply is coming into the market while demand is flat or shrinking due to lower economic growth.

Thai banks are now offering fixed deposit rates of 3% a year, and above 3% for periods up to 3 years.

http://thailand.depo...d-deposits.html

Why would a person buy a condo to earn 4% gross rental income with net rental income being less than 3%?

Because in theory as well as the annual rental yield there should also be capitol growth. We all know there is a glut of shoeboxes being built throughtout Pattaya and the vendors will struggle to rent these units, however reasonably sized condos in a good location will always rent and appreciate in value.

[trogers]

Actual rent depends on supply and demand of the rental market, and not on price of the unit. And the trend in the next few years is downwards as more supply is coming into the market while demand is flat or shrinking due to lower economic growth.

Thai banks are now offering fixed deposit rates of 3% a year, and above 3% for periods up to 3 years.

http://thailand.depo...d-deposits.html

Why would a person buy a condo to earn 4% gross rental income with net rental income being less than 3%?

Because in theory as well as the annual rental yield there should also be capitol growth. We all know there is a glut of shoeboxes being built throughtout Pattaya and the vendors will struggle to rent these units, however reasonably sized condos in a good location will always rent and appreciate in value.

Even those with good locations will suffer downward pressure on rent due to the principle of subsitution. When rents trend down, what is the basis of capital appreciation? Because there is always a greater fool who is willing to earn less net rental yield?

[PattayaPhom]

Where does the downward pressure come from?.....I got customers coming out my ears at the moment and am struggling to place them all....

[trogers]

Where does the downward pressure come from?.....I got customers coming out my ears at the moment and am struggling to place them all....

You are referring to Pattaya during the start of the high season. The OP is talking about a condo in Bangkok.

Come May in Pattaya, you will have much time to relax...

[Heng]

Why would a person buy a condo to earn 4% gross rental income with net rental income being less than 3%?

For many, the prudent choice is both or all of the above. Just because the current HSBC/DBS/OCBC CNY deposit interest is a bit higher than NZ and AUD deposit rates doesn't mean I'm going to move all of my funds to Chinese currency. I don't think anyone (who isn't a speculator or gambler) is ever really 'all in' on real estate, fixed deposits, or pork bellies.

Edited November 23, 2012 by Heng

[Heng]

Where does the downward pressure come from?.....I got customers coming out my ears at the moment and am struggling to place them all....

You are referring to Pattaya during the start of the high season. The OP is talking about a condo in Bangkok.

Come May in Pattaya, you will have much time to relax...

Most of Pattaya is owned by Bangkokians and they don't really have a high or low season. And while most will never physically 'want out,' they've wanted to get a decent amount of their capital out for a long time now. I do agree there are foreign lulls from time to time though.

[trogers]

Why would a person buy a condo to earn 4% gross rental income with net rental income being less than 3%?

For many, the prudent choice is both or all of the above. Just because the current HSBC/DBS/OCBC CNY deposit interest is a bit higher than NZ and AUD deposit rates doesn't mean I'm going to move all of mind funds to Chinese currency. I don't think anyone (who isn't a speculator or gambler) is ever really 'all in' on real estate, fixed deposits, or pork bellies.

The OP is looking into placing (part?) of his funds in a less risky venture, thus he is considering buying into real properties. I am only leading the question as to whether it is better to place it in a fixed deposit at this point in time if the selling price is so high as to give him a net return similar to the deposit rate.

I have said in other threads, to save capital and use it to acquire real properties after the bubble burst, which I estimate to be by end of next year. Buying opportunity will be in 2015.

[Heng]

Why would a person buy a condo to earn 4% gross rental income with net rental income being less than 3%?

For many, the prudent choice is both or all of the above. Just because the current HSBC/DBS/OCBC CNY deposit interest is a bit higher than NZ and AUD deposit rates doesn't mean I'm going to move all of mind funds to Chinese currency. I don't think anyone (who isn't a speculator or gambler) is ever really 'all in' on real estate, fixed deposits, or pork bellies.

The OP is looking into placing (part?) of his funds in a less risky venture, thus he is considering buying into real properties. I am only leading the question as to whether it is better to place it in a fixed deposit at this point in time if the selling price is so high as to give him a net return similar to the deposit rate.

I have said in other threads, to save capital and use it to acquire real properties after the bubble burst, which I estimate to be by end of next year. Buying opportunity will be in 2015.

Yeah, I'm talking about conservative investors in general, not the OP in particular. Naturally in a basic either/or situation, one goes with the better numbers AND 3% autopilot institutional risk over 'where's my rent' market risk.

[PattayaPhom]

Prices keep rising with minimum wage requirements, shortage of land and. Inflation. Don't assume prices will come down. Many I know kick themselves for not buying and seeing their funder diminish with rising costs and wasted tent

[Baloney pony]

Prices keep rising with minimum wage requirements, shortage of land and. Inflation. Don't assume prices will come down. Many I know kick themselves for not buying and seeing their funder diminish with rising costs and wasted tent

The minimum wage requirements only effect the lowest end of Thai society. It doesn't have much of an effect on inflation or the upper tier rental market that expats are involved in. Not to mention i'm sure most companies will find various ways to game the wage requirements anyways.

[Baloney pony]

A few factors to consider for foreign investors in real estate.

The Thai Baht isn't far from the historically strongest levels in history.

An investment in thai real estate is also an investment in Thai Baht. Thai baht is very strong at the moment if it weakens you stand to lose a lot of value very quickly if you purchase with western currency and hold real estate now.

Interest rates in the U.S. or elsewhere in the western world are at historical lows right now. 5-7% theoretical rental yields in Thai property looks tempting but they will look very mediocre compared with future bond or cd yields once interest rates rise again. Let's just say that betting that interest rates will never rise again in the U.S. is a pretty bad bet. There is also probably some sort of larger economic relationship between western interest rates and real estate markets in Asia too. Various funds hedge abroad with international REIT investments when U.S. real estate is not performing well. U.S. real estate bottomed out around 2010- Q1 2011 in most major cities and has been rebounding as well.

I haven't seen anyone make a strong case that most condo properties in major Thai markets actually appreciate regularly. I can go out at this very moment and bring up properties along the bts/mrt route purchased and sold at the same price as a few years ago. The units that do appreciate seem to be in the minority and have the attributes I mentioned before..one of a kind location and facilities.

Once again an anecdotal bit..

A friend of mine bought a large 100sqm 3 br condo in the ekkamai area at around 60k psqm back in late 2009. Similar sized fully furnished units in duplex or units identical to his floorplan can be bought furnished for the same amount today. The location is not bad. Proximity to BTS is reasonable. The building is decently maintained for its age. Where is the appreciation?

Edited November 23, 2012 by Baloney pony

[davejones]

Yes, you can negotiate. I have seen all sorts of incentives to buy new condos - 30% off, free car, etc. If you're buying the it's up to you to negotiate.

[BlackPuddingBertha]

Why would a person buy a condo to earn 4% gross rental income with net rental income being less than 3%?

Good question, but they do. Presumably because they are getting misleading information about the rental returns.

My favourite bit of agent-speak is "you can get x thousand a month in rent for this unit" without actually saying that this only applies in high season, and includes neither the letting agent's commission nor the ownership costs, and that the unit will probably be impossible to let in low season for more than half of "x", if at all.

[BlackPuddingBertha]

Most of Pattaya is owned by Bangkokians and they don't really have a high or low season.

This seems unlikely as far as condos go.

Most existing decent Pattaya condo buildings are sold out in the farang quota, but some also have units unsold in the Thai quota, sometimes as much as half the Thai quota unsold (View Talay). Most off-plan developments still have units available in Thai quota. I dont think that many of these farang-quota units are owned by farangs from Bangkok, though some are. There are also quite a few units that are owned by local farangs via a Thai spouse, or a company, all of which are counted in the Thai quota. So I suspect that the bulk of Pattaya condos are indeed owned by farangs that are (or were) based in Pattaya.

This obviously does not include the nastier developments in town which are almost exclusively Thai-owned, and they are welcome to them, nor does it include houses for obvious reasons.

[Heng]

Haven't done an audit, but I was thinking about the city and province as a whole. You're right about many developments though.

[isawasnake]

Well, this was my first condo purchase. I actually consider myself a pretty decent negotiator, but this was a different ballgame. I freely admit I feel I got outclassed. No bad blood or anything, they did their bit, and did it well as far as I am concerned. One thing I have learned is it is a whole different world negotiating with a woman on your shoulder. I kinda hate to be negative about it, but I hate it. I mean I was convinced I had them at their rock bottom price, or at least close, but it wasn't the case, not nearly. I walked off once during the negotiations, I think the same walk off would have gotten a much different reaction if I was single.

I really am not worried, just more curious for next time. I will live there at least a few years, maybe sell it and do better the next purchase. It is right smack dam on a bts stop too, so that kinda gets people's juices flowing (meaning mine). Live and learn.

Thanks to all, and by all means continue the discussion.

[BlackPuddingBertha]

It is right smack dam on a bts stop too, so that kinda gets people's juices flowing (meaning mine). Live and learn.

Funny old world, isn't it?

I cant imagine anything worse than needing to be on a BTS stop, and the only thing that is likely to get my juices flowing about a condo is if it has a 180 degree panoramic sea/mountain/city view, like mine does.

Glad you have found something you like though.