Condominium Speculators Are Alive And Well In Bangkok

[george]

Condominium speculators are alive and well in Bangkok

BANGKOK: -- While discussing the resale of a condominium unit in the Phrom Phong area with another broker, I discovered to my surprise that the broker was in negotiations to sell the unit for the fourth time.

Here's the interesting part: the condominium itself was still one full year from completion. In fact, the building was still a bare shell.

How is this possible? You may think that most buyers want to see what they are buying, but this is not the case.

Basically, there is a huge amount of traffic in the resale of condominium units prior to a building's completion. It seems that the "buy new" culture in Bangkok is so great that property speculators are having a field day.

Whereas an off-plan sale from the developer might set you back 80,000 baht per square metre, these units are being mopped up by property speculators who, shortly after putting down the initial deposit, will contact a broker and ask him or her to resell the unit, typically adding on 5% to 10% of the initial purchase price.

Take a luxury condominium unit with an initial purchase price from the developer of 15 million baht. Shortly after signing the sales and purchase agreement, and putting down the initial 10%, the owner will try to resell the unit at, say, 16 million baht. This would make a clear one-million-baht profit, from an initial investment of just a few million baht.

The maths are simple: a successful speculator could make a 30% to 40% return in a few months. And, because there are no transfers of title deeds, there is no 2% transfer fee or 3.3% stamp duty.

But is it right that an individual can sell an asset and make so much money and not pay taxes?

The second buyer could also be a speculator, and buy the unit for 16 million baht and sell it again shortly after for 17 million. But where does it stop?

Well, each condominium has its own potential. Regardless of the fact that there are hundreds of new condominium blocks being constructed, only a few have the potential for massive gains, because only a few have the key ingredient, namely "location, location, location". Many have the potential of more modest gains.

The key _ apart from having a bit of seed money _ is to gauge the economic booms and busts, which is of course easier said than done.

We have experienced a growth period, which might continue for a while longer, but perhaps it's best to wait a few months until the current political turmoil has passed (or however long it takes) before getting back on the bandwagon. However, with construction levels and real estate prices reaching or even exceeding pre-1997 crash levels, time is running out.

I suppose the real question to ask is why developers are not selling the units at higher prices in the first place? Of course, a developer has its own cash flow to consider, and the risk of not selling the units at all may outweigh the potential loss of sales income.

A shrewd developer is one that keeps unit resales in-house. The commissions earned from reselling the unit _ especially if this is done four times over _ certainly make up for things.

Neil Simmons is a director of Soho Properties, www.soho-properties.com. He can be reached at 02-651-3930-1.

--Bangkok Post 2006-03-27

[skippybangkok]

Bit like playing "Old Maid"........

[westcoastnative]

Condominium speculators are alive and well in Bangkok

Just recently during the Real Estate boom here in America we were seeing alot of this type of speculating going on. Mainly in new homes and not condos but the principle is the same. You get in early before the company has broken ground, put down a small deposit of 5-10K US and once it is finished sell the sucker and make 20 - 50 grand in profits or more. It was really big in the Las Vegas, Phoenix and Florida markets. Some States evenually put a stop to it after years of this kind of thing going on. But not before some people made alot of money.

Edited March 27, 2006 by westcoastnative

[h5n1]

it will interesting to see what happens when a) bird flu hits thailand faces up to its chronic water/power shoratges c) people realize that they are putting huge sums of cash in a country that requires all sorts of nonsense for lt visa -which should be granted w/ any domicile purchase d) people realize esp in bkk that it is not at all a cheap place to live and prices are going up

but finally, it is the scam of the century sure. there is sooo much land everywhere in bkk/pty, etc... that can be built upon. unless you have a very special location someone can build ten condos right next to you -so why buy yours when you can have a new one same price.

the biggest scam in thailand is the lack of public records to see what these places are really going for - OR being sold at all.

sells like 97 all over again.

[skippybangkok]

Well, there is a difference. As far as I know, there is no protection if it goes belly up. Next to my office, they were going to build this super dooper condo, non-sukhumvit area at sukhumvit prices. Well, there were alot of bookings and "not much left", and as you guessed, 2 years later, the demo units are closed down, and not a pile in the ground.

For those who put 20% or more down............. they were early, but are now paying for it.

[h5n1]

in in pattaya. there is a big lot where 2 huge towers were to go in. they built a sales office first thing. guess what? not a brick laid. another place touted all over and many in jomtien as 'almost sold out' - many of these appear that only brokers (agents) merely have sales rights - hardly 'sold out'.

finally, guy in my apt lost a million baht down back in 97 on one of those unfinished type projects.

if you buy in thailand - buy becasue you love it. you want to live there and if it gains - good4you! few are clever enuff to play with teh sharks here flipping property - the language, law (lack thereof). deck is stacked.

i also go back to my point about the visa. to hassle all the visa nonsense after investing huge money in a developing country to me is insulting. hat in hand evry year, report every month, money in bank earning no interest...if you buy house/flat/property it should be run thru offical govt authority and visa provided gratis - THAT will make thailand property boom.