Condos Expensive - Houses Cheap - Why?

[thaigene2]

Ever wonder? Does it make commercial sense?

100 M2 in central Bangkok is around 5 million for Grade B up to 12 million for Grade A construction. A house in the same areas is around the same price or less. But of course a house comes with LAND.

I suspect that condos built to western standards are aimed at foreigners who can only buy up to 49% of the total units in the building (or floor area to be more accurate). So it's possible the prices are inflated to cover the costs of the other 51% - that they may not be able to sell to local Thais.

Any other veiws?

Are house prices lower becuase foreigners are essentially out of the market? (especially now..)

[Heng]

I think you can easily find land and houses on 100m2 land areas WELL in excess of 12 million in central Bangkok. About 3 years ago I recall one transaction (not my own) of an 3 story 16m2 shop house in Paorat going for 45 million. Let me know if you find any 48m2 condos for that price.

[geoffphuket]

I think you can easily find land and houses on 100m2 land areas WELL in excess of 12 million in central Bangkok. About 3 years ago I recall one transaction (not my own) of an 3 story 16m2 shop house in Paorat going for 45 million. Let me know if you find any 48m2 condos for that price.

What was it, a three story toilet ?

Edited July 29, 2006 by geoffphuket

[thaigene2]

I think you can easily find land and houses on 100m2 land areas WELL in excess of 12 million in central Bangkok. About 3 years ago I recall one transaction (not my own) of an 3 story 16m2 shop house in Paorat going for 45 million. Let me know if you find any 48m2 condos for that price.

That one sounds like money laundering...a dodgy deal. You wouldn't pay that amount for a similar shophouse right smack next to Victory Monument.

So the question remains..why are houses with land cheaper, metre for metre, than condos in similar areas?

Anyone know?

[Heng]

Just because you don't like the figures doesn't make it money laundering or dodgy. Here's another one that comes to mind.... the 2nd Teck Huat building (next to Teck Huat Lighting), Emporium side, on Sukhumvit. Barely 200 tw2. 80 million.

Naturally one's results may vary. Which projects (same or different developers?) are you comparing condos to home prices, curiously? Perhaps then we can find some reason to the price differences.

[guardian]

Surely don't know about price for purchasing house/condo, but when it comes to renting, definitely the rent for a condo is far more expensive than a house. Have seen 3 story house going for rent as low as 15,000 p/m. Whereas, rent in nearby condos were almost double and in some cases more than double that.

guardian

[Moonfruit]

Its very true that land/house prices are generally cheaper than condo prices in Bangkok.

I guess there may be a couple of reasons for this.

1) This is Thailand after all. There is no valuation system in place, and property is basically worth what people are willing to pay. For Thais, a condo is much more prestigous and preferable to a house, and you do get the extra facilities after all. Security, pool, gym etc etc. Prime example is my next door neighbour. He commutes to Rayong every day where he owns a logistics company. His house next door to mine is around 300m2, 4 or 5 bedrooms, nice garden etc etc in a Moo Baan around On Nut BTS area. However, he chooses to actually live in his Condo on Soi 24, next to Emporium with his family. His condo is less than 1/3 the size of his house, and he doesnt even bother to rent out the house. Just leaves it in the care of his maid.

2) Foreigners can buy condos, but not legally land.

Im afraid Hengs prices, though i do believe that they are true, are not truly indicative of the general pricing of land in central Bangkok. I come into contact with real estate dealings every day (though i dont work in real estate!!!) and would find it very hard to justify those prices, ANYWHERE in Bangkok.

Edited July 29, 2006 by Moonfruit

[Heng]

I think the most accurate valuation if we're simply comparing land + houses to condos would be to take the condo prices of say one floor of a pool of condo complexes, add them together (all the units on the same floor) and simply see if they are higher than the market price of the same area of the same piece of land they are located over. IMHO I think you're going to find that the land wins out every time. I'd dare say that even the land dept. valuation (which is almost invariably lower than the market price) might even beat out the condo sales price. But naturally, as in all things, one's results may vary.

"For Thais, a condo is much more prestigous and preferable to a house, and you do get the extra facilities after all."

Depends on the folks you know. For most of the Thais I know, home/land off -insert main artery road here- vs. condo off -main artery-, there's no contest. Home/land hands down. But yes, acquiring a condo or two for convenience is fine as well. The consensus, usually mixed in with some construction talk, is that these condo buildings will probably come down within 50-150 years (either because of simple building fatigue, sinking Bangkok foundation issues combined with building a bit too close to overload to begin with). At that point there's going to be some serious legal issues between a building's 50-100+ "owners." I don't think the developer's are just going to say... "heck, we'll just build you a brand new building eh? Can you get a hotel room for about a year and a half?"

That's directly against the game plan for folks who acquire property and assets for the next and future generations.

...that said (that I believe in land; that although it's higher priced to begin with on average, it retains and gains with the best of them), for my foreign friends, I always recommend getting that condo first, just for the measure of legal security they afford.

Edited July 29, 2006 by Heng

[thaigene2]

The consensus, usually mixed in with some construction talk, is that these condo buildings will probably come down within 50-150 years (either because of simple building fatigue, sinking Bangkok foundation issues combined with building a bit too close to overload to begin with). At that point there's going to be some serious legal issues between a building's 50-100+ "owners."

Yes, that's another reason why buying a condo here is poor value - especially the skyscraper types. I was at a meeting once where a developer was asked about the depth of their foundations for a new hi-rise condo they were building. There was an evasive answer. I'd previously heard that engineers from AIT were told that developers in Bangkok weren't going down very far, since bedrock was deemed too far down. In the marshy conditions of Bangkok that's a recipe for disaster. You only need to look at all the buildings with hundreds of cracks running down the sides. I know some will say it's not subsidence, just poor quality finishing over the breeze bricks, but I wouldn't be so sure.

I visited a low rise Grade B place near Rama 6 and Soi Aree 5 and noticed that all the supporting columns in the parking lot had cracks that ran all the way through to the other side of the columns - you could push a tape measure all the way through to the other side of the column! (It was one of those places where the open carpark is on the ground floor with five or six floors on apartments above).

Scary stuff..

[Firefan]

Thaigene; if I lived in that place i would park in front! Cheers!

[thedude]

there are a number of factors that determine the value of a piece of land, and these factors together explain why some houses are cheaper than condos, and also vice versa. land valuation is as much a science as it is an art, i often compare it to valuing a diamond, each piece of land is unique, especially in thailand.

some of these factors include:

1. the site location in the city and its underlying demographics, ie "urban economic value"

2. the BMA zoning regulations (e.g. red zone, brown zone, yellow zone, and as many as 10 sub-categories within each zone)

3. the allowable FAR (floor area ratio)

4. the width of the road in front of the site - if road is less than 10m wide, you can only build up to 10,000 sqm per building on the site, if road is less than 18m, you can build up to 30,000 sqm and etc.

5. the shape of the site and its effect on planning efficiency. generally speaking you want sites that are elongated to allow for proper set-back from the road in order to go higher and gain more saleable area.

6. if there is a canal or river adjoining the site, there are further building ordinances to consider, such as additional shoring requirements and further set-backs that dissallow tall buildings too close to the water.

7. existing encumbrances of a legal nature, eg site access and rights of way, government gazzetted land for highways, additional height restrictions next to a park etc.

8. EIA (environmental impact) requirements due to the site's location that may affect traffic flow, drainage and treatment needs etc.

the list goes on.

and so, a bungalow located off a wide road say, Sukhumvit Soi 31, may have a brown zoning and a realisable FAR of say, 7:1, which means you can realise 7 times the land area in building area, developers are willing to pay maybe 200,000 to 300,000 per sq wah for the site (that's 80 million to 120 million baht per rai) because their yield of saleable space is so high. on the other hand, another bungalow located of a very narrow soi, say soi 29, can maybe only realise an FAR of 3, making it very inefficient for condo development, therefore, developers may only want to pay maybe 60,000 to 80,000 per sq wah for it (that would still make a 1 rai bungalow worth some 30 plus million). however, if you go out to say, Pattanakarn, where the land zoning is yellow and you can only get an FAR of 1:1, you will find the land there being quite bit cheaper, a 1 rai land with house may only cost you 12 million baht.

its all in the economic potential for the land and not as some people imagine, left to the whims of an uninformed market. thai people buy and sell land as a part of life, and most are acutely aware of the intrinsic economic value of their land.

[magpie3]

thedude,

Makes my heart sing to hear a rational approach to valuation here in BKK!

I've always known there was a diamond somewhere in the dust.

Develop the formula in Excell and adjust it through a feedback loop from actual sale prices; build in a bit of mitigating circumstance factoring (eg - airport nearby, motor way planned within a few miles etc) and supply the competitive (cheap) service to all Farangs and Thais alike!

I know, I know - - won't be that simple, but it could give a sound starting point for assessing the value and potential of a proposed sale/purchase/investment.

Speaking of which - are you BKK based and willing/able to help/advice in regard to finding a starting value for our 400sqm place in Ladkrabang? Eventually to be bought by AOT - eventually - I think - so they keep saying. All as part of the airport fiasco. Laid back informal approach or otherwise, any would be really welcome.

By the way, did you say EIA?!

More like E I E I O - although even farmers seem more aware that land use has to be managed than AOT.

Best regards

Magpie3

[SpacemanSpliff]

Ever wonder? Does it make commercial sense?

It does if someone actually buys it.

No way would I invest heavily in what is essential a rudimentary built apartment block with a fancy name. And they want, what, again for that in Bangkok? It's about as desirable as cheapo social housing in a grim area in the UK. And they want 10-20-30 million baht for anything that's larger than a hotel room.. Sorry but that's just nuts.

So, count your blessings and get a house, no matter if it's sale or rent.

Are house prices lower becuase foreigners are essentially out of the market? (especially now..)

Why are foreigners out of the market? Not overhere they aren't.

[Abrak]

Hmmmm I dont know that houses are that much cheaper.

I built a house to serious western standards on 150 sq wah in Suk soi 24 three years ago. The house is about 600sqm excluding the swimming pool. The total cost was about Bt55m.

Now that isnt cheap but you dont buy land in suk soi 24 cheaply. Building costs if you go for limestone, imported kitchen, western fittings etc. are very expensive.

That is how much it cost me.... will I get my money back? We will see......

Edited December 20, 2007 by Abrak

[SpacemanSpliff]

Hmmmm I dont know that houses are that much cheaper. I built a house to serious western standards on 150 sq wah in Suk soi 24 three years ago. The house is about 600sqm excluding the swimming pool. The total cost was about Bt55m. Now that isnt cheap but you dont buy land in suk soi 24 cheaply. Building costs if you go for limestone, imported kitchen, western fittings etc. are very expensive. That is how much it cost me.... will I get my money back? We will see......

You're a lot more likely to make a profit on that compared to buying a condo of 55 million, that's for sure! (Assuming you don't run into turbulence with whoever actually owns the land. )

But anyway, the point was that a house that's kitted out to a similar standard as a condo, and offering a similar amount of space, is much cheaper. The point was not "all houses are cheap". Obviously there's some very valuable houses around. (and.. Try finding 600 sq meters of condo space plus a private pool & garden, built to serious Western standards... I dare say you'd then spend double what you spent, and STILL don't own the land, of course, but something elevated built on concrete pillars that may or may not still stand erect in 25 years.)

[PattayaParent]

Quite simply it's the construction costs.

It costs at least twice as much per square metre to build a high rise condo as it does to build a 2 storey house.

[Gary A]

Hmmmm I dont know that houses are that much cheaper.

I built a house to serious western standards on 150 sq wah in Suk soi 24 three years ago. The house is about 600sqm excluding the swimming pool. The total cost was about Bt55m.

Now that isnt cheap but you dont buy land in suk soi 24 cheaply. Building costs if you go for limestone, imported kitchen, western fittings etc. are very expensive.

That is how much it cost me.... will I get my money back? We will see......

That's cheaper than most condos. At 150,000 baht per square meter for a mid range condo it would cost you 90,000,000 baht.

[ProThaiExpat]

There is a saying that one shouldn't "compare apples with oranges"!!!

The cost of building a high rise condo is so much more per sq. meter of livable space than that of a one or two story house, that you really can't rationally compare them.

Consider, houses don't have elevators, parking garages, halls, stairways and common areas, pools, fitness facilities and large lobbies. These "amenities" and many more such as more expensive engineered construction, more steel etc. and the list goes on. The cost of all of these spaces and construction costs are added to the cost of an individual unit, not so in a house. Enough said.

[Landwatch]

There is a simple logic working behind it. These condos are high end luxury condos and where ever you go their prices will be just bombastic. The high end condos are for a niche percentage of the population. So even the prices are niche and ultimately high:-))

[thaigene2]

Interesting to see this thread active again. My main point as the OP was to try to undestand why condos (ok - 'seem") to be more expensive than land/house.

I take the point of several here that a condo in, say, Sukhumvit will be cheaper metre for metre. However, does that hold true when you get away from the Suk Soi 15 - 51 and Paholyothin Soi 1 - 21 corridors?

In On Nut and Bang Na and even Lad Prao the price spread doesn't seem so great..Condos in those places for the average low-rise (or maybe hi-rise too) are still high whereas the houses/land drop considerably.

I agree it's better to rent at the moment -- and rents appear to be dropping too. Not to mention lots of newly built places to rent - so quality available + supply has improved a lot.

[PattayaParent]

Given that the land cost should be the same in those areas you mention it is still more expensive to build a condo than a 2 storey house, at least twice the cost depending on the quality of finsihes and facilities provided.

Therefore the costs of a condo will always be higher than a house.

[quiksilva]

Exactly. One of main considerations is the relationship between the net usable space and the gross built up area. aka net:gross ratio.

In a house the net:gross ratio could be as high as 95-97%, whereas in a condominium it is likely to be in the region of 50-60% (multistory car parking, pool decks etc.)

Condo developers pass on the cost of construction of these common areas to co-owners when they buy units, hence the higher price per square meter of usable space.