DIY and Property Renovation TV shows are a BIG thing in Europe and the United States. Most of these shows follow a similar pre-packaged scenario as follows:
Part 1: Investor/ Home Owner want to dramatically transform an old dilapidated property.
Part: Contractors are called in and it looks like the project will be a total disaster.
Part 3: “Unveiling” (After much Suspense…), big surprises (Not really!) the property is radically transformed into a dream home!
Interestingly homes have gradually transformed from a utilitarian tool of basic survival into a status symbol used to impress friends and family! This is a universal and global phenomenon and Bangkok is no stranger to the excitement of beautifully design Condos and/or houses.
It is fascinating to note, that “renovating and refurbishing” a property is still in its infancy; and for the most part Bangkok and the local Thai market still prefer buying property off-plan and straight from the developer.
However numerous older/second hand Condo buildings are gradually coming to a point where renovation/refurbishment could potentially add-value and be a savvy investment choice. Condominium Freehold titles are a relatively new concept with the first Condominium Act (B.E. 2522) only introduced in 1979; in the early stages, this resulted in an experimental period for local developers that produced buildings with varying degrees of quality.
The varying level of construction-standards (Good, bad and even ugly) has created an opportunity as Bangkok now offers a multitude of Condos that could be renovated. These old condos could require anything from a simple refurbishment project (Repainting walls and changing furniture) to a complete overhaul of the interiors (I.e. Refitting new bathroom and kitchen).
Why are property preferences, gradually likely to shift?
Older/ Second Hand Condos are gradually starting to offer interesting investment advantages compared to their off-plan (Trendier) counterparts notably:
1. Relative Price
It has become incredibly expensive to develop new projects especially in Bangkok’s CBD; this is due to a variety of reasons such as increasing land price, more expensive labor and rising construction material costs. This means that to make a project’s return on investment more attractive Property Developers are gradually developing more expensive (Per/ Sqm.) and smaller Units. This has created a curious market trend, whereby new developments’ Units are offered at much higher prices compared to neighboring older condos. This makes the sales price of older buildings comparatively more attractive over time!
2. Rental Yield
Yield calculation, is usually determined by a combination of achieved rental price and total price of a Condo. So to calculate gross yield an investor would have to use the following formula:
Rental Amount Achieved PA/ Purchase Price of Property X 100.
In Bangkok Rental Yields of between 4-6% are considered standard; however with older properties, since a lower “Purchase Price” can theoretically be achieved, this could mean a higher than average Rental Yield for a buy-to-let investor.
3. Size and Refurbishment Potential
Older Condos often offer larger floor space therefore giving contractors and interior designers more room to maneuver. Also it is important to note that older condos often offer inefficient “layouts” (With strange partitioning of rooms) that can be re-worked to improve natural light or simply living environment of the property.
“Words of warning” before jumping in:
Before calling Property Agencies and trawling the web for old condos with large floor areas and cheap price tags it is important to do background research on the individual buildings. Some Older Condos are unfortunately “Value Traps” that have construction, building management or simply poor brand-image problems.
Since “Fresh Property” is a Condo specialist, this Article has been firmly focused on Condos. However an article about property renovation would be incomplete without a brief mention of “houses and shop houses”. Bangkok being a sprawling mega-city, it offers a wide variety of houses and shop houses that offer amazing refurbishment potential!
However a few drawbacks for foreigners:
1. Legally Foreigners cannot own land and since houses/ shop houses are a “landed” form of property ownership this will make purchase of such assets difficult.
2. Houses and Shop Houses tend to be a more Thai affair, therefore a foreign investor should have good network of Thai contacts and a deep understanding of the local marketplace.
However do not let this stop you, as numerous savvy investors are currently profiting from this niche opportunity.
Bangkok is a unique city with an active rental market, as the years go by it is likely that Central Business District Property will reach stratospheric levels; this means that second hand property will be the more viable investment option for everyday retail investors. When this time comes, renovation will likely become a mainstream investment strategy!