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condobangkok · Joined: 02 Oct 2006 Posts: 2 Location:

Many people toy with investing in residential condominiums and wonder whether it’s a good idea, but the best way to analyse it is to look at other places where people put their money,

Basically, are three areas apart from property where people commit surplus funds, starting with bank accounts.

"Those, as everyone knows, generally pay very low interest rates, typically 1% or less. So as a long-term investment this is not a good investment at all because inflation will over time reduce the value of cash held in the account.

"Of course in the short term everyone needs money to do various things, that’s fine, but I don’t think anyone should leave large amounts of money in the bank, it’s a waste of money actually."

Another choice is the stock market which is having a reasonable if unspectacular year, but in Thailand it tends to be very volatile. "For example, in 2003 you would have more than doubled your money and last year you would have lost it.

The third area is bonds. Government bonds pay more than bank accounts, typically 2.5% to 4.5%. "Because they’re backed by the Thai government there’s limited risk of default so they are generally safe." Corporate bonds are riskier and as a result will pay higher rate. The risk lies in the fact that investors do not know what is going on internally because transparency can be limited.

Rental returns are quite attractive at around 6% for a Thai residential condo, better than in Singapore where 3.5% is considered quite handsome.

As well, there is also the potential that a property’s value will go up.

"And people, especially expatriates, will always need a place to live. It’s a kind of guaranteed rental market unless expatriates decide to leave the country which is quite unlikely."

If you are thinking of buying an investment property there is a lot of choice among both new developments and the second-hand market.

The other potential advantage concerns tax because the Finance Ministry plans to reduce property taxes but has not said when this will be introduced, he noted.

However, investors should be realistic about prices and seek advice from good agents to advise what those prices are. "If you don’t know about the market then your expectations might be completely wrong. We see that all the time here."

Also bear in mind that if you have property, no matter what happens to the economy or prices you will still have it there and you can always live in it or rent it out, maybe at a lower rate, but at the end of the day you will still own it.

"There’s a term in England, ’safe as houses’. You know at the end of the day that no matter what happens you still have a tangible asset, which is different from investing in the stock market because if that crashes you haven’t got anything."

An added plus is that property always keeps up with inflation; historically, its value has outpaced inflation, making it a good long-term holding. "So it’s as good a place as any to put your money at the moment.

Even so, the immediate future is a bit cloudy because it definitely sees more pressure on rental yields because there will be more supply than demand.

"And I think that the older, less well-maintained buildings will suffer the most. When you get more supply in the market people will always look at the best the market has to offer and those are going to be well-maintained buildings and probably the newer buildings as well."

Investors should not be disheartened because even an average unit in an old building will rent out if it is sensibly priced.

Regarding prices of new condominiums, it is uncertain whether they will fall but what is clear is that there will be downward price pressure.

"And we will see that trend clearly in about 18 months from now, when most of the projects launched will have been finished and then I wonder how much take-up there is."

That said, advise buying a condo in an area where the expatriate rental market is, and in Bangkok this is Sukhumvit up to Ekamai, as well as Silom and Sathorn.
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