The cost of accommodation is one of the highest expenses in any person’s budget. Generally speaking it can be said that about 30 per cent of net income is being spent on rent. On the other hand, if someone toys with the idea of buying a property, he or she must realize that their capital will shrink considerably.
The financing of new properties in Thailand is for foreigners quite difficult, for second hand real estate downright impossible. Yet if someone manages against all odds to obtain a loan, he will often have to tighten his belt for many years in order to pay it off.
Generally speaking, roughly 30 per cent of the net income is being spent on rent
The question therefore is, whether it is better to be the owner of a personally occupied property or to live in rented accommodation and use one’s capital for other purposes. The answer to this question differs according to one’s financial situation and personal preferences. The often heard phrase “my own estate will increase in value and I will not finance someone else’s property” is a much simplified concept which does not reflect the complexity of that decision.
A property may certainly represent a substantial value, yet at the same time it will tie up a lot of capital, and there is no guarantee that it can be sold quickly, should that become necessary, or that the seller will recuperate his capital, let alone make a profit.
Making a mistake when buying a property can lead to a lot of problems. Therefore one should observe certain basic rules, some of which are, apart from the choice of location, to look at the overall condition of the project and secure proper financing. And don’t forget: to live without paying rent doesn’t mean to live without expenses. A property needs to be run and managed correctly, and the costs for that — even though relatively small in Thailand — should not be underestimated.
Whether owning a property is an advantage, depends largely on the actual situation of the local real estate market. In Thailand, that can be very different from place to place and is difficult to foresee on a long term basis. Local knowledge and experience can be very helpful here, and if you lack this experience it would be wise to deal with a well established local real estate agent. Smart thinking as well as learning the basic fundamentals of Thai real estate laws are most important when considering the purchase of a property.
When buying a property, one should observe certain basic rules
In comparison, Thai real estate is being offered at affordable prices, while the rent for high quality residences is quite high. Especially in areas frequented by foreigners the yearly rent for residential property equals between 5% and 10% of the purchase price.
Far more than shopping for groceries
Because at present there is an excessive supply of unoccupied real estate, substantial price reductions can be achieved when purchasing or renting a property. In comparison to Europe, a tenant in Thailand has very few rights. If the rent is not being paid on time, a tenant can be evicted already after a delay of only 30 days. At this point it should be mentioned that a rent or lease contract with a duration of more than three years has legal validity, only if it has been registered on the property’s title deed at the local Land Department.
Rental return is rather high in Thailand
A not to be overlooked alternative to rental accommodation are the so called “Serviced Apartments”. These furnished and fully equipped flats or apartments with cleaning and laundry services are less expensive and roomier than hotels, usually offer cooking facilities and have a reception desk.
Advantages of renting
- With stagnant or falling real estate prices — which usually means that a lot of properties are not being occupied — renting can, from a financial point of view, be advantageous.
- It is easier to change one’s location.
- There is less capital tied up, which means financial independence.
- One has the opportunity to “sniff out” the chosen property before buying.
- There are no legal obstacles.
Advantages of buying
- If buying at a low price, substantial increases in value can be expected.
- A dream can be realized with affordable means.
- One can be his own landlord and – with some legal safety measures – own a home for life.
- If well chosen, a property is a good investment that cannot be disposed of spontaneously.
- A privately owned property can be laid out, furnished and equipped according to one’s own taste.
- A debt free property, used by its owner, secures one’s accommodation in the later years of life.