Property Platform
Thailand Real Estate Magazine | Issue 56 January 2006
By: Town & Country Property
Buying off-plan: Great annual returns!
Buying into a brand-new development is something not everyone is
familiar with. Some people are hesitating because there might be
potential risks involved: The developer might go bankrupt; the
finished article isn’t as nice as what you expected; money
transfers might get “lost”; problems with the transfer of
owner-rights upon completion and so on. Many “ghosts” that
potentially could keep you awake at night…
Yet, buying in a ‘healthy’ development with a good concept on a
good location with a decent building-quality and good management
could bring-up some completely other thoughts...
Especially if you are one of those seed-investors that are buying
immediately after the project is launched or even in the pre-sales
period as we see in many developments.
Perhaps many people don’t know but very often developers work
through the duration of a project with different price-scales.
The following image shows how your initial investment could easily
grow within a year’s time with 15% (or more)
This needs some more explaining:
Phase 1 – Launch prices
Many projects are launched with pre-promotion prices or
introduction conditions. The developers’ aim is to find so-called
“seedinvestors” that will enable the developer to give the
financial position of a project a head-start.
Don’t underestimate the often tremendous, expenses that are being
made during the pre-construction phase of a project. (The purchase
of land; the preparation of the building site (leveling,
back-fill, infrastructure etc.); marketing expenses; planning
(architect- and engineers planning) and so on). With a number of
confirmed bookings at least some of the initial costs are being
recovered.
Phase 2 – Rack rates (price increase e.g. with 5% to 105%)
A couple of months after the launch of a project often allows for
the first price increase. Increases of 5% to 10% are quite
feasible and often seen.
The model homes are finished; sales office is up-and-running and
the
ground-works are done, so the genuine sales can start! With condo
developments the piling-works and ground floor level is done, so
there is no more way back, and the apartments in “foreign
ownership” start to sell. The seed-investors (phase 1) made their
first ‘return on investment’.
Phase 3 – Ownership (price increase e.g. with 5% to
110%)
Housing projects are getting more mature and condominium
developments are running out of foreign-ownership or sold all 49%
already; re-sales start to occur. In a healthy property market the
market value and competitors’ conditions have risen and so another
price increase is again justified.
Phase 4 – Re-sales (price increase e.g. with 5% to
115%)
Especially with condominium-projects “re-sales” units are
starting to change ownership. They are probably selling at 10% over
the list –prices of remaining units available. You guessed it;
another step-up is made before the completion of the project. The
seed-investors (phase-1) made a profit of 15% or more and not even a
successful rental contract is able to coop with that.
That might be some food for thought…
If you would like to evaluate an interesting property investment
you can call us for an appointment at 038-374136 or send us your
email at:
info@towncountryproperty.com. Town & Country Property Group;
Your realty partner with a personal touch…
Disclaimer:
Any opinions or representations from this article are for general
information purposes only. While considered reliable, the
information provided is not guaranteed. For accurate advice and
information, consult Town & Country Property directly.
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