Real estate for foreign investment began to be built in Thailand 15-18 years ago. The first steps are noticeably different from modern facilities. Right now, the housing sector is in its prime. Transactions are carried out online, for this it is not even necessary to be in Thailand. And here the question arises: what is more profitable to buy? Invest in an apartment in the primary market from the developer or take ready-made housing in the secondary? Let’s look at all the pros and cons in order.
- Prices in new buildings and in the secondary market
- Payment and installment
- Additional purchase costs
- Housing condition
- Risks and pitfalls when buying
- Pros and cons of new buildings
- Pros and cons of secondary housing
Prices in new buildings and in the secondary market
It seems that it will be cheaper to buy real estate in new buildings than in the secondary market. But it is not always the case. It all depends very much on the object. The average price per square meter in a new building is 100,000 baht ($3,000) . And the closer the construction is to completion, the higher the price. You can find great deals for 70 thousand baht per square meter in the very first stages of sales.
Resale property prices are highly dependent on many factors. Location, distance from the sea, type of object, urgency of sale – all this affects the cost. There are very good offers at prices lower than in a new building. Sometimes owners urgently need money, and they are ready to give in. The average price per square meter in the secondary market is lower than in new housing.
Payment and installment
If you are buying an already built new home from a developer, you usually pay 40-50% of the price at the time of signing the contract. After registration of ownership of an apartment or house, you pay the rest.
At the stage of pre-sales or launch sales, developers offer a profitable system of interest-free installments for buyers. After paying the deposit, the price is frozen and cannot be increased. All terms and conditions of payment are individual: negotiated before purchase, depend on the company itself and the stage of construction. Usually you will be offered a period of 1-3 years to pay off the payments. The scheme itself is something like this:
- an initial deposit of $3,000 to reserve a specific apartment or villa;
- the first transfer of 30% of the cost to the developer’s account to activate the contract;
- payment of the remaining cost upon receipt of the keys or payment of 15-20% at each stage of construction: laying communications, laying the foundation, erecting the frame of the building, finishing the facility;
- final payment of 5-10% when registering an apartment as a property and receiving the keys.
There are even developers who are ready to make concessions and offer a system of additional installments at 5% per annum after construction is completed. After receiving the keys, you can rent out your apartment and repay the debt with the income received.
For secondary housing, you need to pay at a time and pay the entire amount at once. Thailand does not have a mortgage system for foreign tourists. It is available only to foreigners working at the same place for more than 2 years. The maximum for which payments for secondary housing can be stretched is 2 months. Only after full payment you will receive the keys to the apartment or house.
Additional purchase costs
All services of a real estate agent are always paid by the seller – developer or owner. A contract is signed, where a commission for the help of a realtor is prescribed. The buyer in this case does not pay anything. If unscrupulous agencies offer you to pay for their services 3-5% of the cost of an apartment or house, do not fall for deception and look for another realtor. When dealing with real estate in Thailand, the commission is always paid by the seller, not the buyer.
What is the buyer paying for? The transaction when buying a new apartment is very simple. The developer assumes all additional costs: legal services, accounting and other paperwork. The buyer will not have to pay anything, except for the standard fees, which are discussed below.
If you are buying a resale property, you will have to pay extra for some services. First, the lawyer checks the apartment or house and prepares a tripartite agreement. All legal services, as well as the costs of payment, are paid by the buyer.
For both new and resale real estate, there are additional fees: registration and stamp duty, business tax. They are usually paid by the seller, or the cost is shared with the buyer by agreement.
The last few years in Thailand, building standards have changed: footage, design, building materials, quality of construction. Most developers are now building complexes specifically for investment. It is understood that the owner of the property will rent it out and receive passive income.
Modern apartments are similar to hotel rooms and are sold already finished and furnished . For resort property, a studio or 1 bedroom apartment is enough to accommodate a family of 4. For a comfortable stay for several weeks, this property has everything you need: a kitchen, a washing machine, and more. At the same time, the developer gives guarantees for new housing, which are prescribed in the contract. For example, load-bearing structures are guaranteed for 5 years, for windows and doors – 2 years.
On the other hand, the construction of elite real estate is now developing. Villas with a garden and a private pool will bring good rental income in the future, and the properties themselves will grow in value.
Secondary housing, built more than 6-7 years ago, was bought mainly for their own residence or recreation. Then they built spacious apartments and houses with several bedrooms. The condition of such property depends on how it was maintained. If the house or apartment was often rented out, cosmetic repairs, replacement of the air conditioner or other manipulations may be required. As a rule, secondary housing is sold with all furniture and appliances.
Risks and pitfalls when buying
Any investment has its risks. Reliable real estate agencies check new properties of developers, studying not only company documents, but also personal accounts of co-founders. This check is called due diligence. The lawyer raises all the data about the land, zonality, location relative to the sea and the permitted number of floors. Possibilities for water supply and communications are checked. If there is any doubt about the completion of the construction, the agency will not sell this object.
For buyers at the pre-sale stage, when construction has not yet begun, the contract specifies the completion dates for construction. In this case, the developer specifies penalties for the delay. At the request of the owner, you can contact a lawyer and recover the full amount of the costs. Usually the delay occurs for six months due to bad weather or similar factors. Therefore, on average, the construction of a new condominium lasts 2-3 years.
By buying ready-made new or resale real estate, you save yourself from the risks of delaying construction. You can immediately evaluate the area and its infrastructure, see your neighbors and the object itself. What are the pitfalls in buying such a home? You need to study the rules of residence and existing lease agreements. Perhaps the previous owner entered into a guaranteed rental agreement. Then the management company is engaged in leasing during the specified period. Or a condominium provides only long-term lease. Or housing is not provided for living with animals. These nuances must be studied before buying.
Let me summarize the difference between buying new and resale property. Each case is individual and is considered depending on the purpose of the purchase, budget and wishes for the object. If the primary market has a large selection of modern apartments for investment and luxury villas, then the secondary market boasts good options for spacious housing for your own living.
Advantages of buying real estate under construction:
- the best prices before the start of construction;
- the price increases by 15-20% by the end of construction;
- the ability to choose the best option from the presented (layout, floor);
- the possibility of changing the layout or furniture package;
- convenient system of interest-free installments;
- guaranteed rental income program 7-8% per annum;
- easy and transparent system of transactions and payments.
Cons of buying real estate under construction:
- there are risks of construction delays;
- income from investments is deferred until the end of construction;
- for full equipment for rent, you need to buy some things: a refrigerator, a kettle, a toaster, a microwave oven, and so on.
Pros of buying a resale property:
- prices are comparable with already built new facilities;
- profitable offers of apartments or houses for urgent sale;
- you can immediately see the property and evaluate the area;
- rental income can be received immediately after the purchase or you can use the property for living;
- no risk of construction delay;
- as a rule, the buyer is left with a complete package of furniture and appliances, including a refrigerator, bed linen and towels;
- The resale process is much easier than selling a home under construction.
Cons of buying resale property:
- there is no installment plan, the entire amount must be paid within 1-2 months;
- minor repairs may be required;
- the presence of an already signed guaranteed rental program signed by the previous owner for several years.
As for Phuket, the main value here is land. Most of the island is occupied by hills and national parks where construction is prohibited. There are no more than 12-15% of the area of Phuket left for construction. The boom in the construction of new facilities began in 2017, and in 2-3 years there will be an order of magnitude fewer new buildings. Already, real estate is steadily growing in price by 3-5% per year.