As prices of luxury condominiums in Bangkok’s central business district (CBD) have gone up dramatically over the past six years, there has been continued interest from buyers looking for more affordable units in older buildings in the area.

However, according to Jones Lang LaSalle, there are several factors that buyers need to consider when buying used luxury condominium units as divestment under the current market condition – where the levels of both old and new supply are high – can pose a big challenge.

“We have seen continued interest in used luxury condominiums offering relatively attractive prices, particularly in well-managed buildings. Some of these condominiums may be offered at prices as low as half of those commanded by units in newly completed buildings or under construction projects,” said Daonum Lilavivat, head of Residential Agency at Jones Lang LaSalle.

Findings from Jones Lang LaSalle’s recent market study indicate that newly completed or currently under construction luxury condominium units in Bangkok’s CBD are now offered for sale at prices ranging between Bt110,000 and Bt200,000 per sqm, whereas units in older luxury buildings (aged ten years and older) in the same area are available for sale at between Bt55,000 and Bt90,000 per sqm.

“Discussions with our customers who purchased condominiums in older buildings show that aside from lower prices, most of the older buildings in the luxury segment offer relatively larger common space and full recreational facilities. These amenities include large swimming pools, fitness/sauna rooms and tennis courts, which are not typically provided in many new condominium projects. In addition, some buyers prefer the more ‘cozy’ environment offered by older condominium buildings rather than the ‘hotel-like’ atmosphere in new buildings,” says Daonum.

Good time to buy for own occupation
Buying used luxury condominiums in the CBD for own occupation now is a sound decision, says Daonum. “The strong competition in the leasing market due to the rapid growth of new condominium supply has put downward pressure on rents. Many owners who bought condominiums for investment purposes many years ago may now find it difficult to let their units as most tenants prefer newer buildings. For this reason, these investors are keen to divest their holdings,”

She adds that many of these units offer attractive prices and good value for money for those who are looking to buy used condominiums for their own occupation.

Daonum’s view is supported by Jones Lang LaSalle’s new market study which provides an analysis of gross and net yields in the high-end Bangkok condominium market.

Dan Tantisunthorn, head of Research at Jones Lang LaSalle, says “In a study to be published shortly, we found that the average resale price and current borrowing rates have adjusted to a level resulting in a gross yield which would attract end-user buyers. At these same price levels and assuming no vacancy, investors can earn a net yield above long term ‘risk-free’ rates, despite the yield on some of these, such as the recent government bond issue, rising.”

Doanum believes buyers can expect a capital appreciation in the long term as there are less sites/land plots available for new developments, whilst development costs of future projects are likely to rise.

Nonetheless, investors looking to buy used units to let at this time must be very cautious, says Daonum. “Aside from the downward pressure on rents because of strong competition and tenants’ preference for newer buildings, an investor may also have to make a big cash outlay to renovate a unit prior to putting it up for rent.”

Quality of property management – a key factor to look at
Because of old age, the condition of some condominium buildings can deteriorate – so can their asset values. Therefore, apart from price and location, the quality of building/property management is another key factor that buyers must pay a lot of attention to.

“There are a number of older luxury condominium buildings that are well managed and have always been kept in a like-new condition. Units in these buildings are able to sustain their asset value despite the high levels of supply entering the market over the past few years, and have a higher potential to enjoy a capital appreciation once the market picks up,” says Daonum.

“The attitude of the condominium juristic person committee plays a vital role in determining how the building is managed. A committee with a forward-thinking outlook will not be reluctant to invest in property management, including the regular maintenance and improvement of common areas, communal facilities and all systems within the building,” Daonum says.

SOURCE: Property-report.com

Thailand’s biggest company that arranges the auction of second-hand vehicles will soon launched the “Khao Kho Hiland City” property development project in the Khao Kho district of Petchabun province that aims to capture rich clients.

Union Action Group will embark on the property development after its resort in Khao Koh, launched a decade ago, became a such a huge success.

Yongyoot Fupongsiripant, deputy managing director of the project, revealed the project, which would stand 800-metres above the sea level, should serve as a tourism attraction.Yongyoot said this phase would offer a total of 500 plots, divided into 100 to 400-square-wah areas.

He added that the outstanding point of this project was that it would offer buyers complete ownership of the land, convenient access and favourable weather.

Moreover, Yongyoot revealed aside from the resort, some vacant lots in the project were targeted at high-end customers who wanted to build resorts on their own land.

Yongyoot explained the Khao Kho Hiland City project is divided into two zones the Mountain Due Zone and the Green Neighbour Zone.

He added, the group would also provide customers with home-building services as well as different levels of housekeeping services.

He expressed confidence that the project would be sold out mainly due to the high potential of the Khao Koh destination.

Yongyoot said the group had purchased another 1,500 rai to develop a luxury resort and allocate large plots for high-income earners under the “Khao Koh Hiland City 2″ project.

SOURCE: news-realestatethailand.com

Recently, we have seen news headlines about the government getting tough on Thai nominees suspected of holding land plots for foreigners, especially in southern tourist destinations like Koh Samui and Phuket.

There are also reports that foreign investors are believed to have invested in rice farms in some provinces and the government is investigating.

Looking at the government’s stance, it is obvious that the idea of foreign ownership of land is not yet popular. It is understandable that nationalist sentiment is a deeply-rooted explanation for this resistance and Thai people are accustomed to the proposition that foreigners should not own Thai land. However, I think the economic and social environments are so dynamic that it is imperative for us to re-examine the current legal framework and see whether it is actually deterring or inciting these cases of nominees for foreign owners that the government is trying to eliminate.

According to recent news reports, the Lands Department and the Business Development Department have been stringent in checking the shareholding structures of companies suspected of holding land plots while exceeded the foreign-shareholding limit. The checking is done annually, in June.

Over the past five years, the Land Department claims to have forced companies whose foreign ownership exceed the legal limit to transfer 28 plots that have proven to be illegally acquired. That is fewer than six plots per year, while there are more than 31 million land plots in Thailand that the Department needs to sort out.

How long does it take to check all of these plots? Is the task even possible?

My point is that an evolution (if not a revolution) in laws and regulations governing land and real estate is imperative for a country like Thailand. I think the current laws need to be reviewed and fine-tuned, to make them more accommodating to foreign investors and buyers. The more restrictive the rules are, the more likely it is that people will try to find ways around them, and find loopholes to achieve what they want to do.

Looking back to the aftermath of the 1997crisis, the International Monetary Fund applied pressure on Thailand to relax its laws restricting foreign ownership of property. This was an effort to bring in foreign investment, particularly to nonperforming real estate investments.

However, the IMF idea was politically unpopular. Politicians were willing to sacrifice foreign investment in order to grandstand patriotically and politicise the notion that if the property market were opened wide to foreigners, then prices would skyrocket out of the reach of Thais, and we stood to lose sovereignty and cultural integrity.

I think the scenario has changed, especially because of the current global economic crisis. With few countries being spared from the crisis, we can clearly see that the purchasing power of foreign investors and buyers has subsided and I think there is no longer the need for stringent regulations. Land tax and inheritance taxes, although branded as “taboo” for ages, have not only been debated, but will also soon to be enforced. Why can’t the same consideration be given to foreign-ownership laws?

As I mentioned earlier, I believe that the tighter the regulations are, the more likely people will struggle to find loopholes and ways around them, especially with the help of local connections and corrupt officials. That will only result in more nominee cases and complex legal issues. Illegal transactions like these are likely to be damaging to the whole real-estate industry because they encourage exploitation and greed. In the end, they will lead to unsustainable development.

If we look around in other countries, we find prerequisites and conditions that are structured to allow flexibility, yet legitimacy. For example, foreigners wishing to buy property are conditioned to sell the property back only to locals or, in some countries like Australia, foreigners are only allowed to buy first-hand, newly developed properties. I strongly believe that such conditions are meant to make sure that the host countries benefit from these investments in the long term. Such approaches are a few of many adjustments and changes that I believe developers and consumers are ready to adapt to and accept.

However, the question is whether or not the relevant agencies are willing to share this view, and evolve.

SOURCE: The Nation