If you are among the opportunists who are looking to take advantage of declining prices in real estate, or if you are searching for a new home there are a few things that you may have to consider before making a big decision.
The decision needs careful consideration and the use of the escrows account.
The new escrow account law has been in place since May but is not compulsory and very few home buyers know of its existence.
What is escrow?
Escrow is a legal arrangement in which an asset (such as cash, property or other tangible assets) is deposited into safekeeping (eg, a bank account) under the trust of a neutral third party (an escrow agent) pending satisfaction of contractual contingency or condition. Once the condition has been met, the escrow agent will deliver the asset to the party prescribed by the contract.
An escrow account is defined as "an account established by a broker under the provisions of the license law for the purpose of holding funds on behalf of the broker's principle or some other person until the consummation or termination of a transaction", or "a trust account held in the borrower's name to pay obligations such as property taxes and insurance premiums".
With so many developers especially the smaller developers going bust after having taken part of the down payments for the condominium units, the use of escrows account is a must and buyers can ask for their right to use the escrows account.
Although developers in the upper spectrum of the market are less likely to use this method, the use of escrow account is highly recommended.
The most fearful sector is the condominium market that is mushrooming across the city.
In the past, there were many developers who did not abide by their obligations to complete a project and despite the boom there are many unfinished building visible across the city, especially in the Sathon and Rama 3 areas.
A few of these buildings were unfinished because there was no escrows account available and buyers were left at the mercy of developers.
Therefore, buyers should insist on an escrows account when they buy their units.
The market today
This is especially important in markets, such as the current one when the take-up rate of single houses and townhouses in the first six months has shown a remarkable increase - almost double year-on-year growth due to government tax incentives and a mass transit kick-off.
Property consultant Agency for Real Estate Affairs (Area) managing director Wason Khongchantr said pent-up demand from last year was stimulated by the tax incentives. Most homebuyers shifted to buy low-rise units instead of condominiums as they would get tax benefits before they expire on March 28 next year.
Single houses sold in the first half of 2008 totalled about 9,000 units, rising from about 5,500 in the same period last year. Townhouse sales were around 10,000 units, up from 5,000.
Condominium sales sharply declined from 20,000 units to 14,000 units. However, oil prices would be a positive factor boosting condominium sales in the second half of the year, he said.
Another positive factor boosting condominium sales would be investors looking for quick returns or higher returns than their deposits in the banks that have seen rock bottom interest rates over the past few years.
During the first half of the year, real estate sales in greater Bangkok totalled 37,000 units, up 16 per cent from 32,000 units sold in the same period last year. Area expected around 75,000 units to be sold in 2008, up from 65,000 in 2006.
Another factor boosting the Bangkok property market would include foreign investment in real estate, which should resume this year.
In the first quarter of 2008, foreign investment in the property sector in Bangkok totalled 17 billion baht, according to the Bank of Thailand.
Wason anticipated that foreign investment would bounce back from 30 billion baht last year to 50 billion baht in 2008, the same amount as in 2006.
But with the current political environment a lot of people are wondering if it is the right time to buy as higher supply coupled with rising interest rates, soaring construction cost and political unrest are all taking a toll on buyers and developers.
Is the time right?
If you are indeed considering buying a condominium anytime soon, you may need to look into at least a few things before making a decision:
- Be proactive and never rush. Determine what you need, never fall far heavenly offerings concept, yield, special prices - during promotional periods and there are many developers that are offering such promotions currently as they are trying to clear up the remaining unsold units.
- It is always wise to actively collect all data about the properties you are considering, go to the sites, get on the Internet and check blogs as they can provide some insight into the project that the developers will not give you.
- Discuss the matter with your spouse, family or someone that can give you a second or third opinion.
- You need to be clear on the kind of property you want to buy - whether it is a condominium, townhouse or a single detached house.
- What is your motivation for making the investment; to support your retirement, or to acquire savings? Will you occupy the property or will you lease it?
- Will it be your first or second home?
- If you are the occupier, then you are the end user. If so, you need to find a home suitable for the size of your family. Take some time to define your dream house with your family.
- If you plan to rent your property, you need to consider who will rent it, whether they will be expatriates, business executives or students each may have different market needs or cultures.
- Try to make a realistic schedule for meeting with marketing agents of property developers. During the meetings, make sure you find out information on the following: Legal aspects, including buying procedures, signing of the selling-buying contract, provisions to be agreed on and payment procedures, including down payments and bank loan installments.
- With regard to loan payments, you need to choose a reliable bank that offers more than just low interest.
- Find a win-win solution as when a person buys a property it is of future benefit. To achieve this, you need to understand all points of the agreement you sign with the developer, bank, contractor and any other parties involved in the transactions.
- Make sure you fully understand the type of property you are buying and how your family will benefit from it.
- Another important matter to consider is how you will develop your property in the future. For a property that is still under construction, it is a good idea to investigate the developer's track record.
- Look at the location as it is a key factor these days - the location and accessibility of your property and its yields and capital gains all depend on the location.
- Another important thing is the method of payment system. Don't think that you can afford it, the property should not be a burden on the family but instead it should be one that is affordable and falls within the resources available.
Source: My life, Bangkok Post volume 1, 025, September 4 -10, 2008
INVEST IN A CONDO AND RENT IT OUT
Pre-retirement sideline for those with patience
With constantly rising prices becoming a worrying aspect of the economy, people are beginning to search out forms of investment that will deliver returns to beat inflation.
There are various such investments, ranging from stocks and fixed- income instruments through mutual funds, gold and property assets.
The problem is that ordinary fixed deposits at banks are no longer making the grade. While banks are offering interest rates of 1.5 to 3.25 percent for three –to 12 month fixed deposits. The Bank of Thailand expects inflation to reach 4 to 5 percent this year, and Finance Minister Surapong Suebwonglee warned just this week that it could reach 5.5 percent, because of rises in food and oil prices.
This means that money left in bank fixed deposits is quite rapidly losing its purchasing power. Seeking investment channels that keep the value of saving ahead of inflation will depend on your risk profile.
One inflation-proof investment perhaps worth considering is buying a condominium for rent. With good management and prudent procedures, investing in a condominium and then offering it for rent will generate much higher returns than leaving your money in bank deposits. However, it is suitable only for investors with enough money to invest for some years, because nobody gets rich from this business in a few short years.
A condominium for rent will provide gradual return. It can be a sideline to your current job, something that can become a permanent job in retirement. But it would be wise to begin before retirement.
For example, a condo in a prime location can cost about Bt 5 million and you can charge about Bt 50,000 per month in rent. After deducting maintenance and other expenses, the payback period can be around 10 years. Normally, the value of real estate rises over a long term, so once you get your money back, you can consider selling the unit when the price is right.
For those who wish to get a mortgage for a condominium, remember that you must have money reserves in case there is a period without tenants and you must foot the repayments personally.
Demand for condos in prime areas of Bangkok is still high, particularly for projects near mass-transit routes. Grade A to B condominiums make good investments as many expatriates coming to work in Thailand need residences within walking distance of the Skytrain or subway. This could make investment in a condominium for rent a long term business, as long as the government provides an open door for foreigner to work here. Moreover, Thais who wish to live in condos for convenient access to work or education will also be potential customers.
Grade B and A customers who are able to pay Bt 20,000 to Bt 30,000 per month, or more, for space of 50 Square metres will soon dispel fears that they may be unable to continue rental payments.
Where to find such customers? You can advertise in newspapers or on the Internet, but and easier way may be to find a broker. However, a broker will charge one or two months’ rent for rental contract covering one or two years. Experts say most foreigners prefer a large living area of at least 60 to 70 square metres and the rental fee for this group could be Bt 30,000 to Bt 50,000 per month.
Location is always the heart of this business. Some expats don’t need expensive serviced apartments. They just want a cheaper condo located in central Bangkok. So think about Sukhumvit, Phloenchit, Silom, Sathorn and areas with lots of foreign companies and international school. Other less-than-prime areas that are still near mass-transit routes include Soi Aree, Ratchadaphisek and Phya Thai.
Another key factor is choosing to buy a unit from a project with credible developers. Don’t buy if the project is less than 80-90 percent completed. Check the financial status of the owners, particularly in times of economic slowdown.
The overall atmosphere of the condominium must be attractive, with good facilities including a lobby, garden, swimming pool, fitness centre, security and parking. In Addition, the project and the surrounding area must be calm and quiet. This is very important for foreigners. All construction and structural materials must be standard or A grade, and you must also check out the administration of the project.
Source: The Nation, Money & Investment column, May 14, 2008
Colour can be a crucial consideration in fengshui.A proper application of colour or colours to your house and office can reinforce or manipulate the elements that contribute to good feng shui. The use of appropriate colours in a business logo can also strengthen the fate of the business as well.
Before considering the colour, one must first understand the basic elements of feng shui. The elements of metal, water, wood, fire and Earth interact with each others and together comprise the cycle of birth and the cycle of destruction.
The cycle of birth can be demonstrated in the following chart.
See graphic 1 --- The arrows indicate the direction of influence that the elements have on each others. Gold can be melt and produce a liquid substance that is equivalent to water. In turn, water can nature wood and allow it to grow. Wood can be burned to generate fire that produces ashes or Earth. Finally, Earth can be petrified, resulting in gold.
The next chart demonstrates the cycle of destruction.
See graphic 2 --- The cycle of destruction follows different set of interaction of the elements. Gold here represents cutting tools made of metal such as axes that can be used to chop wood. Water can put out fire, white wood, especially living plants, can penetrate Earth. High temperature fire can definitely melt gold. And Earth can be used to construct dams to block the flow of water.
Each of the elements has associated colours.
Gold: White. Silver, especially the metallic variants
In feng shui design, the colour can be used in combination, but the desired colour should be featured most prominently.
In addition; the elements are also related to directions and shapes.
Gold is the element of the west and is represented by circular shapes.
Water is the element of the north is represented by wavy lines and curves.
Wood the element of the east and is represented with tall triangles.
Fire is the element of the south is represented with shorter triangles.
Earth is the element of all diagonal directions such the northeast or southwest and is represented by rectangular shapes.
The colour, direction, shapes and elements should be used in coherence to the cycle of birth to reinforce the power as well as balancing the elements. In summary, the following pattern should be observed.
In the south, Place large earth wares and brown or yellow items that represent Earth.
In the north, Place plants or green items that represent wood.
In the west, place water or blue items that represent water.
Avoid placing all of the above items in the diagonal directions such as the northeast.
If possible, also consider the birth date for the house owner and the auspicious date for the placement of items as these could amplify the positive forces of feng shui
Source: My life, Bangkok Post Volume 1, 018, Thursday: July 17, 2008
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