Anyone who has ever attended a “pre-sales event” must have experienced that ecstatic and exciting feeling of money changing hands and fortunes being made!
The stereotypical event is always hosted in a plush five star hotel (Usually the Ball Room or Conference Room), pretty hostesses usher buyers in and classy suited sales people are there to swoop-in and guide buyers toward the numerous Condo Building replicas!
The atmosphere is buzzing and the room is full of people enquiring, deciding and most importantly booking units before the “stock” runs out. If a participant was to step back from the fray and take a minute of introspection he would probably wonder…
“…Is this irrational exuberance?”
The famous expression used by the former Chairman of The Federal Reserve of the United States, to describe the waves of speculation that led to the financial crisis of 2008.
So the big question, can you profit from buying off-plan?
The answer is undoubtedly YES; however careful due-diligence is required and it is important not to give-in to the herd-mentality or even worse the pressure-selling tactics of the sales event!
Before anyone buys off-plan, it is important to consider the benefits and risks!
Ananda Development, Marketing for Ideo Mobi Asoke!
Benefits of buying off-plan:
1. Today’s Price Tomorrow
If you could obtain a quality condo in a prime Bangkok neighborhood, for the price it was selling 2 years ago, would you buy it?
Unequivocally, the answer would be yes.
2 Years ago, the price of that same Unit would have been cheaper, than its current market price. This metaphor rings true for off-plan units, which are offering today’s current market price for a Unit that will be delivered in approx. 2 Years. Provided all things remain equal (I.e. Unit is not massively over-priced and the local economy doesn’t crash), this means you are assured of a paper profit. This is especially the case for Condos located in Bangkok’s Central Business District as prime developable plots are becoming a scarcity.
On top of this, Bangkok is experiencing natural urban development with the expansion of Mass Transit Lines (BTS and MRT) and general improvements in infrastructure; this is bound to have a positive impact on property prices locally.
2. Delayed Payment Plan
Developers of off-plan condos do not expect buyers to pay for the whole condo upfront. There is an element of risk for potential buyers, as the building is not even completed. Therefore Developers tend to offer payment plans that structures condo repayments into manageable installments.
Beautiful Ad, for Park 24!
For foreigners getting access to a “mortgage/ financing” for Bangkok Property is difficult and in most cases, rates do not make the investment attractive. However off-plan properties give a certain degree of leverage on a property investment. Obviously, the buyer of an off-plan property cannot generate rental yields however they can participate in an upswing in demand (In the local economy or for the area) and benefit from capital appreciation in the medium to long-term.
Risks of buying off-plan:
1. Non-Completion
While Bangkok has in recent years offered a certain degree of security for investors and non-completion has become a rarity, this eventuality is always present. Condos are essentially developed by Companies that are subject to a range of possible problems from under-capitalization, over-spending to legal issues with shareholders of that corporation.
Therefore off-plan investors are always advised to select and book units from respectable developers with a strong track-record of completing successful projects.
2. Marketing Material Hype
Do not always believe what you see on Marketing Materials and/or show units! Developers need to generate hype and excitement for their projects, therefore they always ensure that marketing materials are curated and polished to look perfect. Some developers make good on their promise and deliver quality, but this is not always the case.
3. Economics Swings
With any property investment off-plan or second hand there will always be the inevitable risk of an economic downturn. However for off-plan investments, the issue is aggravated firstly because the development company may experience difficulty to complete the project. Secondly as a buyer you are committed to “transferring” the Unit upon completion (Unless you are happy to forfeit your previous Installments); if the economy is dipping this may mean a higher price than the prevailing market conditions.
So now that you know the risks and benefits… what next?
Fresh Property advocates an attitude of balanced risk-taking and careful due-diligence!
There is money to be made in off-plan properties and that is the reason why our Property Agency actively markets a carefully selected handful of Condominium Projects (We wouldn’t sell them if we did not believe in their investment potential).
However those who approach off-plan investments recklessly, blindly relying solely on information provided during “pre-sales events” may inadvertently purchase trouble.
Off-plan opportunities are mushrooming throughout Bangkok and the well-researched and most-prepared Investor will profit!
