Here’s why we think Thailand rental prices will rise with the arrival of May 1, the day that Thailand’s new property rental law, for landlords with five or more residential properties, comes into effect.
The law, for applicable landlords, will also overrule any existing rental contracts.
Apart from giving tenants the right to quit with 30-days’ notice for any reason, the law also stipulates that landlords can only request one month’s rental and one month’s security in advance, and not two months as previously.
Many real estate agents and landlords have told me about ways they intend make up for the “lost” income, including furniture protection fees, tenant checking fees and use-of-amenities fees.
We do not believe any of these new charges will be in keeping with the spirit of the new law, which is all about fairness.
It will take just one tenant to test this with the Office of the Board of Consumer Protection, the enforcing government department, but our feeling is that if fees did not exist yesterday, there is a good chance they will be deemed unfair under the new law.
The new property rental law is not intended for landlords to continue to charge the same fees, and indeed profiteering is one word that is used with respect to making money on utility charges, which is outlawed from today.
Unlike the majority of real estate agencies we have spoken to, we believe the only way landlords can make additional income is by increasing their monthly rental fees, and thus rental prices will rise.
When you think about it, it makes sense. These landlords have five or more properties and, in most cases, will be running a business.
They will not want to lose out.
Rental demand remains steady and is showing no sign of slowing, so for decent rental properties in good conditions and prime locations, why shouldn’t we expect to see at least a 20 percent increase in rental prices?
Landlords will not have the ability under the new law to have any long-term security from their tenants. We’ve seen attempts to suggest a one-year contract is enforceable under the new law, but it is not.
We understand agents’ commission will suffer as the “missing” one month was, more often than not, used to pay agency commissions.
For a one-year contract a real estate agent would receive the equivalent of one month’s rental.
But now, with no guarantee of anything more than a one-month contract for their clients, what will happen?
We suggest several months ago that rental real estate agents should consider moving to a fixed fee business to maintain their revenues, but it hasn’t happened yet.
We are personally affected. This morning I will be talking to my landlord to request the repayment of the equivalent of one-month’s rental and ensure we get copies of the physical utility bills going forward.
From anecdotal evidence on social media, it seems electricity costs are normally tripled by the time they are added to the tenancy invoice, and water costs are often more than doubled.
So, the most logical, and legal, way for impacted landlords to recoup some of their potential lost income seems to be to raise rental prices.
Remember where you read this first.
But, these are our own predictions and we welcome ours. Feel free to leave your comments and share your views.