Foreign buyers: the answer when they walk away

foreign buyers
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Foreign buyers may refuse to get their Bangkok condo unit transferred if price appreciation after their off-plan purchase fails to meet their expectations.

This warning was sounded by a real estate agent to Thai property developers last week, and was widely reported in the media, but the articles failed to mention one important fact.

Reports said Surachet Kongcheep, Associate Director of the Research Department at Colliers International Thailand, warned Thai property developers to be more cautious of foreign buyers, particularly those from China, as they may not be able to transfer as many sold units as targeted.

He was reported as saying: “Next year, many condominium projects for which a large number of units were sold to foreign investors will be completed. Developers that have large numbers of such projects might face financial difficulties if foreign buyers do not transfer their units.”

He added that Chinese buyers usually expect a 20 percent capital gain from their Bangkok condo investment or speculation, and might fail to transfer the unit if this level is unobtainable.

Many developers now require at least between 10 and 15 percent as a down payment for the purchase of any new condo.

And the point that I’ve yet to see reported anywhere is the signing to but a condo represents a legally-binding Agreement, so the Thai developers can legally enforce any breaches of that Agreement – including walking away if the gamble to gain capital appreciation fails to pay off.

Clearly Thai property developers are not obligating their foreign buyers to maintain the terms of the Sales and Purchase Agreement.

The agency said that when choosing a property, the top two factors that Chinese investors considered are high gross rental yields and appreciation potential.

Bangkok property was viewed as attractive as investment returns were reported to be 12.4 percent, while annual house price growth in Bangkok was ranked at 5.4%= percent.

Tritecha Tangmatitham, Managing Director of Stock Exchange of Thailand-listed property developer Supalai, said it was not worthwhile for Thai developers to sell off-plan units to foreign speculators and take a down payment, which might range from 10 percent up to 25 percent if they refuse to get the unit transferred.

“Those units will eventually return to developers to be advertised and resold. If this number is large, developers will have to spend time and money to resell them,” he said.

According to Colliers’ research on the Bangkok condo market, during the third quarter there were 36,950 unsold condominium units.

Andrew Batt
The author of this article is Andrew Batt, the founder and editor of Andrew has been writing about property and real estate issues in Thailand and Southeast Asia for more than 10 years. He has worked for PropertyGuru Group, DDproperty, Dot Property Group, Hipflat and AsiaRents. He has also produced content for leading Thailand property developers and real estate agencies.

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