There has been continued demand for resale, high-end condominium units in older buildings in Bangkok, according to a recent report from real estate firm JLL.
The reason – prices in these developments have grown at a much slower pace than new projects.
While older condominium projects offer many other advantages than merely affordable prices, there are some pitfalls that prospective buyers should understand.
Thai and foreign buyers and investors who are looking for an upmarket condo, particularly for their own use, have been showing interest in more affordable units in old condos.
Built more than 20 years or more ago, some of these older condos may be priced at less than half of those in new or under-construction developments.
JLL noted that asides from lower prices, buyers like the spaciousness often provided by older condos.
For example, while two-bedroom units in new condo buildings are between 55 sqm and 60 sqm in size, two-bedroom units in many older condo buildings feature as much as 70 sqm.
Older condos can also provide more spacious common area, more parking spaces and full recreational facilities which are not typically provided in some new condominium projects.
For these reasons, JLL said that it comes as no surprise that it is hard to find older condo units for sale by existing owners in several older, upmarket condominium buildings, particularly those with professional management.
However, every coin has two sides.
There are a number of less favourable aspects that purchasers of older condos in aged developments may consider.
Generally, newer condos attract tenants more easily and therefore, purchases of used units in older buildings for rental income can be challenging – unless the building occupies an exceptionally prime location with good transportation links.
Building age issues can occur in terms of maintenance and repairs, particularly when the building is not well managed. Though it may be difficult for prospective buyers to tell if the property is managed professionally until they move in, the profile and track record of the property manager or property management firm can be used as a primary assessment criterion.
Technologies continue to evolve and enhancing the way buildings are designed, constructed and operated, and answer the occupiers’ needs.
Condo units in most of the older generation buildings feature large balconies that may be considered as an inefficient use of space today. Refurbishment may help boost efficiency, but those who plan to purchase and refurbish these units must check out the house regulations with the condominium juristic person.
Refurbishments involving structural changes may be prohibited in some buildings.
On the safety side, the 1992 Building Safety Control Act requires buildings with over eight floors to have sprinkler systems, heat detectors and other fire safety features. Though most of the high-end condominium developments constructed before 1992 have these features, some are not equipped with sprinkler systems. The systems could be installed in buildings that are already constructed but the installation could be difficult because systems must also be installed in each individual condominium unit.
Other technological advancements that have occurred in the last decade and are now common features in most, new high-end condominium developments include high-speed lifts, more efficient waste management systems, better electricity distribution systems and also modern pool designs. These all combine to produce a range of benefits from lower maintenance costs to savings in utility consumptions.
While an upgrade plan can be implemented to keep the building up to these technological advancements, buyers who may be interested in purchasing older condos should also be interested in the condominium accounts, particularly the current level of the sinking fund (saving accounts).
Availability of foreign ownership quota may change anytime when a condo unit changes hands.
The Condominium Act allows foreigners to own the maximum of 49 percent of the total floor area of all units in a condominium building combined. Supposing that a condominium development comprises a total 100 units of the same size, foreigners can own up to 49 units.
Generally, JLL said that foreign ownership accounts for approximately 30 percent in existing high-end condominium buildings, and thus resale of a Thai-owned unit to a foreigner generally is not an issue.
However, there are cases where Thai owners sold their units to foreign buyers without knowing the foreign ownership quota had been reached, and thus the ownership of unit could not be transferred at the Land Department.
While this event could happen in both new and older condo developments, it could be seen more often in old prime condominium developments that are exceptionally popular with foreign buyers.
To avoid any complications, the seller and buyer can ask the property manager or the condominium juristic person for the foreign freehold ratio. This is usually updated each year ahead of the annual general meeting, and is the responsibility of the condominium juristic manager to maintain.
It’s apparent that older condos in Bangkok have some unique advantages that continue to attract buyer interest. But they also come with some disadvantages. Some of these can be looked over or rectified, but others need to be seriously investigated.
The original version of this article was co-written by Bunthoon Damrongrak and Dexter Norville, JLL’s Head of Residential and Director of Property and Asset Management respectively. It was first published in The Bangkok Post.