When deciding where to live in the center of town, careful consideration must be made. This is particularly true if you do not come from an affluent background or benefit from a sizable inheritance which would allow you to purchase any prime real estate you want, the questions you need to ask yourself include, “Where should I buy property that meets all my needs for living in the city? And where is the best value?”
If what you are looking for is a nice condo in a great location, the first thing you will likely look for is a freehold property where you can own the land title. At today’s property valuation, you are looking at prices around 350,000 Baht per sqm, as compared to leasehold property which costs around 40% less at 200,000 Baht per sqm, for a difference of around 150,000 Baht per sqm. Now if you were to take this 150,000 Baht and either put it into an interest-bearing savings account or invest it in stocks, at 2-4% growth you would have 500,000 Baht after 30 years. Therefore, if you purchase a leasehold on a 120 sqm property instead of buying the same size freehold property, the accrued difference in value over 30 years would come to around 30-50 million Baht.
But finding a good condominium in a decent location at a price you can afford is not easy, because real estate prices in inner Bangkok continues to skyrocket, especially in the most prime areas, where you see prices of 1.5 million Baht per square wa. What this means is that developers cannot build freehold properties that sell for less than 200,000 Baht per square meter if they want to recoup their investments. Furthermore, there is a limited supply of freehold land available in the most prime areas of Bangkok, with most of the real estate being leasehold property owned by state institutions, such as the State Railway Authority of Thailand, the Privy Purse, Crown Property Bureau, Chulalongkorn University, the Treasury Department. This is why the leasehold market in Thailand continues to grow steadily, and if you are deciding to buy a condominium to live in or as an investment, it is worth learning more about the pros and cons of Freehold and Leasehold property over the long term.
Buying a condo is not the same as buying a house in a good location. With the passage of time, even if the house deteriorates, you can likely still sell the land for a profit. However, after living in a condominium for 7-8 years, the value may be less than a new condo in the same area by almost 50%. A major reason being that over time, the condo deteriorates and it is increasingly difficult to make repairs, resulting in leaks and malfunctions. Major repairs can be even more difficult if juristic person cannot come to agreements on expenditures. Also, it is hard to sell a piece of land with a condo because there may be hundreds of owners of the land represented in the juristic person. So far, there has been no instance in Thai real estate history where a juristic person came together to agree on a sale of land resulting in a profit.
For the vast majority of condominiums renting land for 30 years, the developers are not the landowners, and if you choose to purchase as a leasehold, the value of the condominium will continue to fall, especially as it gets closer to the expiration of the 30 year leasehold. You will see the value of what you paid drop precipitously, hence it is not a popular ownership model. Over the long term the resale value of a condominium falls due to various factors, such as poor record of maintenance by the owner, lack of funds to perform major repairs, material and equipment reaching their effective lifespans, and failure to invest in refurbishing the property before the leasehold term ends, all of which can make it extremely difficult to sell on a leasehold condo.
Therefore it is vital to select a property development that has the highest quality, especially if the owner of the land has a solid reputation in the real estate industry and undertakes the development themselves, selecting the highest quality building material and finishings and designing the project to last an exceptionally long time to benefit the general public. Another important factor is they offer favorable leasehold terms that specify definite terms for renewal, this would preserve the resale value. So when looking to buy a condominium in a prime location, it is something that should involve thorough consideration before coming down to a final decision.