You’ve thought about it, and many of your friends and colleagues have done it – some with regret and others with delight. With Thailand’s strict laws on land ownership, buying a condo without restriction is one of the few ways a foreigner can feel like they truly live here.
There are a lot of things you need to consider before signing on the dotted line for your piece of paradise, however, some of which you will find in the Property Buying Guide on the AD ASIA Real Estate website, and all of which we are happy to share with our clients in the course of briefings before, during and after their decision to purchase.
We also work closely with leading luxury property developers so that we are able to offer clients the top-of-the-line projects in their preferred area, whether that’s the capital or one of Thailand’s resort destinations.
Off-plan investments in Thailand can offer investors the ability to buy at the lowest possible price and achieve the maximum return on their investment. If you keep the unit, you can benefit from the excellent rental income opportunities while watching your property appreciate in value.
Buying a condo can be done without establishing a company, provided the foreigner: Foreign ownership ratio of your chosen development does not exceed 49%. But if you choose to buy through a Thai company you can save even more as many developers will offer a substantial discount for buying in a Thai name. There is a downside however, which is the requirement that balance sheets be submitted each year, something we can help you with but which does incur an ongoing cost.
Clearly, as condo projects are completed, it is possible to purchase completed units, but they will be priced substantially higher as they are generating a return on the investment of the original investors.
Quality investment opportunities in Thailand are always located in areas that offer the greatest potential for capital appreciation on the property – invariably popular tourist locations that will allow investors to generate rental returns. In Bangkok, as we note in the Property Buying Guide, “the enthusiastic expansion of the MRT and BTS train systems around Bangkok are essential factors that affect investors’ decisions. This economic expansion also increases property prices in Bangkok and other areas of Thailand”.
Buying close to public transport, the beach or nightlife areas, however, can be a trade-off, as the developer often drastically reduces the size of the units and inflates the prices. The current trend is that the closer a condo is to a mass transit station, the smaller it will be.
Buying off-plan enables you to pick and choose your unit – based on showrooms, artist’s impressions, diagrams and computer simulations of course. A real estate developer is always exposed to risk and naturally wants to cap this risk as fast as possible and limit any bank loans he may have. This is why they sell units off-plan at lower prices, which in turn poses is a risk to the investor and is is why we conduct rigorous due diligence and recommend a conservative investment strategy that mitigates risk and maximizes reward.
In addition to the lower purchase price, the investor also benefits from financial structures that allow him or her to spread the payment across the construction term with a deposit of only about 25% of the value of the purchase and the rest payable in the form of monthly installments during construction with the final amount due on completion and transfer of ownership.
It is important to keep in mind that payments during the construction of the condo are generally made directly into the developer’s bank account and not into a third party escrow account that will protect the buyer. This is because developers need the ongoing payments for to finance the project and under the 2008 Escrow Act and subsequent 2008 Condominium Act are not required to offer escrow agreements to buyers.
Clearly, this poses some risk: in the event of default or bankruptcy on the part of the developer, the buyer could lose all the money paid up to that point. Additionally, in the event of a dispute, the developer is in a much stronger position as he has already received a large part of the purchase price. If there is a disagreement and the buyer does not make the final payments because the developer did not deliver as promised, or delivered a substandard unit, the developer can claim that the buyer defaulted by not making the final payments and that he is therefore entitled to retain the payments made by the buyer and sell the unit to someone else – something he would not be able to do if the payments were held in a third party escrow account.
So where’s the good news, you ask? There are developers that are desperate to secure sales in the early stages of a project to pay off creditors and secure further funding for the next stage of construction, which allows you to get a much better deal if you buy early and, if the project is in the right area, you may then sell your new unit to someone eager to get in on the action when all the others have been sold.
This is when it helps to know the right people, the right areas, and the right developers. You also need to know the market, because you don’t want to be stuck with a condo two years from now in an unpopular rental location.
It is also important to know a thing or two about construction is you are considering putting your money into a project in Thailand, where the quality of workmanship can often leave something to be desired. Even the big-name developers who tout their construction as ‘European standard’ can often be long on marketing and short on quality, as may be seen by the trained eye when simply walking past some project sites.
It’s not the workers’ fault. Most have no formal construction training are often given inadequate tools and low-quality materials for the job, and are held in such low esteem by their bosses that they are often subjected to low safety standards and even lower wages.
AD ASIA Consulting provides project management advice for our clients’ projects throughout the entire construction process, from the initial feasibility studies to planning, cost management, and materials sourcing, until the completed project is handed over – so we know what to look for when we look at any project you may be interested in.
If you’re starting to feel that it doesn’t make sense to enrich your landlord each month with your rent money, or if you’re coming to Thailand a few times a year and spending a fortune on hotels, buying an off-plan condominium could be the solution you’re looking for – but call us first and let us show you how to buy off-plan the way the locals do.