Condos don't appreciate in value

[mikiea]

I'm not an expert but it seems obvious to me that the exponential rise in price for condos that was the case in the past was and is unsustainable. People were buying condos, renting them out and selling them after 5 years with 100% profit, going on to the next purchase. A bubble, no idea when it will collapse.

a shoe box by any other name is still a shoe box , overpriced to start . rent , more bang for your buck and no headaches .

[mikiea]

Some do, some dont. It's all down to location.

I know people who have doubled their money by buying a condo here and I know people who have halved it.

As far as risk goes I would say Thailand compares badly with popular places in Europe/UK that have a history going back many decades of being desirable. The other advantage of Europe/UK is that you are much less likely to get ripped-off by crooked agents, lawyers, dealers, building management etc etc

Here it happens all the time.

people have doubled there money ........ya think they will tell you they were foolish and lost half of their investment ? no..... they will tell you a lie because they can and they do not care about what ever you think ....... wake up its time for eggs and backie

[newnative]

I'm sure lots of people doubled their money on a condo--not that hard to do if you bought years ago. Wasn't around when vt1was built but I imagine a studio couldn't have gone for more than 500,000 baht or so. Pretty easy to sell it for 1mb now. I never doubled my money but I did buy condos for 2mb and sell them for 3.2 to 3.5mb. Harder to do now, though, due to a variety of factors.

[manarak]

Just come back to reality, in a normal economy, it is NOT normal for real estate to great appreciate in value with time.

This phenomenon occured in the Western world because the market is flooded with cash.

In Thailand, only the best and most desirable properties will appreciate, because for any other standard condo, there is a new condo being built nearby.

If ever Thailand decides to transition into a mass consumption market with high wages and welfare (I hope not), then property prices will explode the same as they did in the west since the sixties.

Edited May 21, 2015 by manarak

[rixalex]

I know people who have been forced to sell their house because of the tax. They bought cheaply in an out of the way place. Then the yuppies turned up...prices went up..the Governments valuation went up... tax went up and they couldn't afford to live there anymore. Fred was 80, his wife 70. Absolutely criminal.

Sounds like they were in a pretty good position. Sell the property they had in the area that had boomed in value, and buy the same sort of property in an area that hadn't boomed for much less money.

[Time Traveller]

Not wanting to get off-topic, but I'm in a condo in Huay Keaw Rd, and from my eagle's nest I can see 8 condos within 500 metres going up.

Isn't anyone worried about over-supply, or is an invasion from the South expected?

This must affect prices.

Only the people that bought property for investment purposes need to worry. Or those whose income rely on the property market.

[bangon04]

Much of it will depend on the price of building materials - it seems they are always building new projects, to the extent of being overbuilt, and people will prefer a new build to a 2nd hand -

I hot the impression that Thai buyers look down on "second-hand" condos, especially where the bugs have already got a foothold.

So who else is left to buy the "used" condos?

[ttthailand]

One thing I never see discussed regarding owning a condo or house verses renting here is age and finances. If someone has a good retirement income they can rent anywhere and has the ability to go if there is something they don't like, life is already too short for older retirees. 70 years old and single why would you want the buy and lock yourself down in Thailand. If you get sick and need to return to you home country the last thing you need to worry about is a property 10,000 miles away.

If you are a young guy wanting to take some risks or have a Thai family then it might make sense.

[12DrinkMore]

One thing I never see discussed regarding owning a condo or house verses renting here is age and finances. If someone has a good retirement income they can rent anywhere and has the ability to go if there is something they don't like, life is already too short for older retirees. 70 years old and single why would you want the buy and lock yourself down in Thailand. If you get sick and need to return to you home country the last thing you need to worry about is a property 10,000 miles away.

If you are a young guy wanting to take some risks or have a Thai family then it might make sense.

Sometimes I wonder if the oldies (and I am rapidly becoming one) somehow delude themselves that if they "own" somewhere then they it also confers some measure of "permanence" to their lives.

Every so often I consider buying.

And then I am very thankful I did not.

So easy to spend the money, so difficult to earn it and once spent on a property in Thailand, very difficult to sell.

When making the decision, do not leave out the monthly maintenance charges, which ARE included in your rent, but are NOT included in your purchase price. So subtract the few thousand from your monthly rent and then work out whether it is worth turning liquid cash and flexibility into a non-liquid asset and a possible liability.

For a young guy the sums are exactly the same.

For a young guy with a family, then a condo is really not the place to bring up kids.

[ttthailand]

If there is little or no appreciation then the one percent rule should apply for an investment property since the risk is high. Basically the one percent rule says the amount you can ask for a months rent should be one percent of the value of the property. Example, 1 million baht condo should be able to rent at 10k a month. I see too many condos in Bangkok selling for 4 million and renting for 18k. They would need to rent for 40k to meet the one percent rule.

[KittenKong]

If there is little or no appreciation then the one percent rule should apply for an investment property since the risk is high. Basically the one percent rule says the amount you can ask for a months rent should be one percent of the value of the property.

Who would pay 12% per year of a property's value in rent? Not me.

[wowfactor10]

In my opinion :

Thai Housing and even the thai condo market are dead as can be...

The reasons are that the Thai Government is not willing to attract foreign investment by easing their harsh conditions.

No farang will buy a house for only a 30 year lease and or in wife her name fully..Those days are over..

Thai Condos hardly went up in price,if u can sell your unit then your lucky but it will take u years...

Most units will not gain anything so u loose out on it...only if you was able to buy it really dirt cheap and on a special location then you might get back your input.

on a positive note It is possible to make 3-6 % with rental returns..

[trogers]

Property prices rise or fall depending on several factors:

1. Location

2. Availability of land for future supply in that location

3. Point on the property cycle the purchase was made

4. Amount of overpriced/underpriced of the purchase

5. State of maintenance and upkeeping of the bought project

Edited May 22, 2015 by trogers

[CapeCobra]

Let's say you bought a condo in 2008 for THB 3m and sold it in 2014 for the same price. You paid cash from Europe. Now you transfer back. This results in a profit of about 36%, because you paid €55866 at 53.7 and received €87209 at 34.4. In addition you saved rent for 7 years. This scenario worked well because you made the right moves at the right time. If the location was great and the area in demand like the South of Pattaya, you may have yielded a higher price which would turn your condo into a big moneymaker. People tend to forget the impact of currency fluctuations.

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[Pinot]

expert opinions????? Haven't seen a post yet that's in any way realistic. My personal experience...bought and sold a number of condos. First one bought for 1.6m sold for 3.3m after 6 yrs. second one bought for 900,000 sold for 3.8m after 10 yrs. tell me that's a bad investment!! Tread carefully, but condos CAN be a good investment

There are plenty of anecdotal examples on both sides of the fence, just as there are buyers with good judgement and those with bad.

The OP is asking for a generalisation. As with all investments, there are risk/reward factors to be weighed up. The problem is that most people are lazy or ignorant, they do not do thorough due diligence and end up paying the price.

The topic is complex, encompassing such factors as timing in the business cycle, location, exchange risk, political risk, planning law and changes, title deeds, management, liquidity of the market - to name but some.

It's not that complex. I lived in a rented condo for project in Phuket for four years. I enjoyed renting there at 25k a month, well taken care of and beautiful pools, 5 minutes from the beach. When I first got there the 3 br 2 ba units were selling for 5.5B. I moved out this year when the battle between the owners and the management company resulted in the place going so far down hill, in terms of maintenance, there was no choice. The units are now selling for 2.5B and people can't get rid of them. The court battle between the two sides goes on and on with no end in sight. Meanwhile the appearance of the place deteriorates by the day.

Yes this is is anecdotal, except for the fact that I know of two other condo projects that are experiencing the exact same bullshit. Real estate is in the dumper here in Phuket, yet they continue to build at a furious pace, adding to the already completely overwhelmed sewer and water systems.

Again, why would anyone buy anything?

[Anthony5]

Let's say you bought a condo in 2008 for THB 3m and sold it in 2014 for the same price. You paid cash from Europe. Now you transfer back. This results in a profit of about 36%, because you paid €55866 at 53.7 and received €87209 at 34.4. In addition you saved rent for 7 years. This scenario worked well because you made the right moves at the right time. If the location was great and the area in demand like the South of Pattaya, you may have yielded a higher price which would turn your condo into a big moneymaker. People tend to forget the impact of currency fluctuations.

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Currency fluctuations have nothing to do with real estate appreciation. You could have put the money in a bank account and made the same profits, and additional interests.

[watcharacters]

If there is little or no appreciation then the one percent rule should apply for an investment property since the risk is high. Basically the one percent rule says the amount you can ask for a months rent should be one percent of the value of the property. Example, 1 million baht condo should be able to rent at 10k a month. I see too many condos in Bangkok selling for 4 million and renting for 18k. They would need to rent for 40k to meet the one percent rule.

I think you may have modified the one percent rule.

Investopedia applies it to the mortgage and not the sales price of the property.

INVESTOPEDIA EXPLAINS 'ONE PERCENT RULE'

Purchasing a piece of property for investment requires a thorough analysis of future rents compared to the cost of owning that property. Property owners want to maintain a cash flow greater than costs. For example, an investor is looking to purchase a home valued at $200,000, with the goal of renting the home out for income. After placing 20% down, the investor has a mortgage of $160,000. The one percent rule says that the home would have to be rented out for no less than $1,600 per month ($160,000 * .01).

[newnative]

I've started to do some research on Bangkok condos and so far what I have found is that the condos are expensive and, in many cases, may not command the rent to justify the investment--i'm sure there are exceptions. But some seem to be appreciating if they are walking distance to metro.

[CapeCobra]

Let's say you bought a condo in 2008 for THB 3m and sold it in 2014 for the same price. You paid cash from Europe. Now you transfer back. This results in a profit of about 36%, because you paid €55866 at 53.7 and received €87209 at 34.4. In addition you saved rent for 7 years. This scenario worked well because you made the right moves at the right time. If the location was great and the area in demand like the South of Pattaya, you may have yielded a higher price which would turn your condo into a big moneymaker. People tend to forget the impact of currency fluctuations.

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Currency fluctuations have nothing to do with real estate appreciation. You could have put the money in a bank account and made the same profits, and additional interests.

---------

That is correct. But you can't live in your bank account.

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[Anthony5]

Let's say you bought a condo in 2008 for THB 3m and sold it in 2014 for the same price. You paid cash from Europe. Now you transfer back. This results in a profit of about 36%, because you paid €55866 at 53.7 and received €87209 at 34.4. In addition you saved rent for 7 years. This scenario worked well because you made the right moves at the right time. If the location was great and the area in demand like the South of Pattaya, you may have yielded a higher price which would turn your condo into a big moneymaker. People tend to forget the impact of currency fluctuations.

----------

Currency fluctuations have nothing to do with real estate appreciation. You could have put the money in a bank account and made the same profits, and additional interests.

---------

That is correct. But you can't live in your bank account.

---------

But if you had signed up for a 6 year term deposit in 2008, you could rent a veeerryyy nice condo from your interests on your 3M baht, and no need to find a buyer today.

[namatjira]

If you intend to live in it for a number of years, and it is in a good location it is not such a bad idea,

I bought 4 years ago a condo for 1.3 million baht, i got it at a good price, did my homework and studied the market.

Fully renovated by a japanese couple, they spared no expense, its a joy to live in.

I rented in the condo block first for 6 months, decided it was very nice to live there.

My next door neighbour was an australian who had been there for 8 years, he was of the rent it mentality,

Over those 8 years he paid 1,152,000 in rent over that period, and when he walked out the door and headed home he had nothing to show for his outlay.....as said, 4 years down the track the condo now only owes me 576,000 baht.

Another 4 years and its paid itself off....there has been some capital appreciation as well in that time with condos like mine selling for 1,600,000. For me, its a nice feeling owning rather than renting, if i tire of it i can just lock it up and use it for a holiday once a year, the holding costs here are minimal....it has worked for me, and in the west it has worked for many many people..........just do the homework and buy right, live in it and enjoy it and you will get your money back in the end.............long term renters in the western world certainly missed the gravy train...but then it has always been like that.......

[ttthailand]

I've started to do some research on Bangkok condos and so far what I have found is that the condos are expensive and, in many cases, may not command the rent to justify the investment--i'm sure there are exceptions. But some seem to be appreciating if they are walking distance to metro.

Exactly.... Some condos will increase in value but only if location is good and building is maintained. Having said that, the true value is what someone is willing to pay. These made up prices are just that, made up.

Rental return is really what I think you need to look at. I rent a place 10 meters from BTS, new building and 40sqm. I pay 19k a month. This place sold for 4 million. If you do the numbers and add in the risk factor I am not sure if it is a good idea to buy. A building just 100 meters down the street use to sell 52sqm condos for about 5 million about 10 years ago. Now you can buy for 3.5 million but only rent for 15k. That building is only 10 years old but looks much older.

I think the only way to buy is to find something that is under valued and has a 10 year pay back and then the risk is low. I know guys who have bid on bank for closures and have got condos for a few hundred thousand. After investing another hundred or two end up with a great rental with 10 year return or even less. They are out there but you need to look.

[rijit]

I've started to do some research on Bangkok condos and so far what I have found is that the condos are expensive and, in many cases, may not command the rent to justify the investment--i'm sure there are exceptions. But some seem to be appreciating if they are walking distance to metro.

Exactly.... Some condos will increase in value but only if location is good and building is maintained. Having said that, the true value is what someone is willing to pay. These made up prices are just that, made up.

Rental return is really what I think you need to look at. I rent a place 10 meters from BTS, new building and 40sqm. I pay 19k a month. This place sold for 4 million. If you do the numbers and add in the risk factor I am not sure if it is a good idea to buy. A building just 100 meters down the street use to sell 52sqm condos for about 5 million about 10 years ago. Now you can buy for 3.5 million but only rent for 15k. That building is only 10 years old but looks much older.

I think the only way to buy is to find something that is under valued and has a 10 year pay back and then the risk is low. I know guys who have bid on bank for closures and have got condos for a few hundred thousand. After investing another hundred or two end up with a great rental with 10 year return or even less. They are out there but you need to look.

Any idea where banks list tbeir foreclosures?

[ttthailand]

If there is little or no appreciation then the one percent rule should apply for an investment property since the risk is high. Basically the one percent rule says the amount you can ask for a months rent should be one percent of the value of the property. Example, 1 million baht condo should be able to rent at 10k a month. I see too many condos in Bangkok selling for 4 million and renting for 18k. They would need to rent for 40k to meet the one percent rule.

I think you may have modified the one percent rule.

Investopedia applies it to the mortgage and not the sales price of the property.

INVESTOPEDIA EXPLAINS 'ONE PERCENT RULE'

Purchasing a piece of property for investment requires a thorough analysis of future rents compared to the cost of owning that property. Property owners want to maintain a cash flow greater than costs. For example, an investor is looking to purchase a home valued at $200,000, with the goal of renting the home out for income. After placing 20% down, the investor has a mortgage of $160,000. The one percent rule says that the home would have to be rented out for no less than $1,600 per month ($160,000 * .01).

Try this ....

How do you know if an income property (rental property) is a good investment?

Start with The One Percent Rule: Does the monthly rent equal one percent of the purchase price or more?

Example:

Purchase Price: $100,000

$100,000 x 0.01 = $1,000

Is the monthly rent greater than, or less than, $1,000? If the monthly rent is greater than $1,000, this property merits further consideration. Otherwise, ignore the property and move on.

[ttthailand]

I've started to do some research on Bangkok condos and so far what I have found is that the condos are expensive and, in many cases, may not command the rent to justify the investment--i'm sure there are exceptions. But some seem to be appreciating if they are walking distance to metro.

Exactly.... Some condos will increase in value but only if location is good and building is maintained. Having said that, the true value is what someone is willing to pay. These made up prices are just that, made up.

Rental return is really what I think you need to look at. I rent a place 10 meters from BTS, new building and 40sqm. I pay 19k a month. This place sold for 4 million. If you do the numbers and add in the risk factor I am not sure if it is a good idea to buy. A building just 100 meters down the street use to sell 52sqm condos for about 5 million about 10 years ago. Now you can buy for 3.5 million but only rent for 15k. That building is only 10 years old but looks much older.

I think the only way to buy is to find something that is under valued and has a 10 year pay back and then the risk is low. I know guys who have bid on bank for closures and have got condos for a few hundred thousand. After investing another hundred or two end up with a great rental with 10 year return or even less. They are out there but you need to look.

Any idea where banks list tbeir foreclosures?

My friend's Thai wife knows a banker who tells her about the sales and auctions. Also banks sometimes post on boards in lobbies. I am not sure if a Farang could buy outright or bid on property but maybe??? Get your wife busy asking around and inquire at your bank. I am sure with some effort you can find.

I am now happy to rent but if the right deal comes along I will buy and try to flip. Price however needs to fit into the one percent rule.

[ExpatForever]

expert opinions????? Haven't seen a post yet that's in any way realistic. My personal experience...bought and sold a number of condos. First one bought for 1.6m sold for 3.3m after 6 yrs. second one bought for 900,000 sold for 3.8m after 10 yrs. tell me that's a bad investment!! Tread carefully, but condos CAN be a good investment

There are plenty of anecdotal examples on both sides of the fence, just as there are buyers with good judgement and those with bad.

The OP is asking for a generalisation. As with all investments, there are risk/reward factors to be weighed up. The problem is that most people are lazy or ignorant, they do not do thorough due diligence and end up paying the price.

The topic is complex, encompassing such factors as timing in the business cycle, location, exchange risk, political risk, planning law and changes, title deeds, management, liquidity of the market - to name but some.

It's not that complex. I lived in a rented condo for project in Phuket for four years. I enjoyed renting there at 25k a month, well taken care of and beautiful pools, 5 minutes from the beach. When I first got there the 3 br 2 ba units were selling for 5.5B. I moved out this year when the battle between the owners and the management company resulted in the place going so far down hill, in terms of maintenance, there was no choice. The units are now selling for 2.5B and people can't get rid of them. The court battle between the two sides goes on and on with no end in sight. Meanwhile the appearance of the place deteriorates by the day.

Yes this is is anecdotal, except for the fact that I know of two other condo projects that are experiencing the exact same bullshit. Real estate is in the dumper here in Phuket, yet they continue to build at a furious pace, adding to the already completely overwhelmed sewer and water systems.

Again, why would anyone buy anything?

I'm aware of a similar project in Samui which suffered the same fate. That's why I've been a tenant for so many years. I'm leaning more towards staying on that path.

I don't get it though. Why can't a project hire the management company of their choosing?

[hhgz]

Condos do appreciate in value.

[wowfactor10]

Yes Bangkok from all cities is the worst to invest for condos in Thailand ..

Problem there is too many thais who hardly buy ur resale condo....Thais only buy new condos off plan with payment plan..

then like the guy said its normal to pay 4 M BHT for 40 sqm and fetch 19 K on monthly rent..if ur lucky to rent it out...

Then they just keep building so rental prices only going down

U can forget about the one procent rule in BKK

[KittenKong]

Why can't a project hire the management company of their choosing?

They can. But it requires some motivation and effort on the part of the committee and the JPM.

Also many management companies are not very good, so it may not be very easy to find one that is.

Edited May 23, 2015 by KittenKong

[trogers]

Yes Bangkok from all cities is the worst to invest for condos in Thailand ..

Problem there is too many thais who hardly buy ur resale condo....Thais only buy new condos off plan with payment plan..

then like the guy said its normal to pay 4 M BHT for 40 sqm and fetch 19 K on monthly rent..if ur lucky to rent it out...

Then they just keep building so rental prices only going down

U can forget about the one procent rule in BKK

Why buy a 40 sqm for 4m baht when you can get a 72 sqm for 3.8m baht?