Hidden problems in Bangkok property purchases
I realize as I sit down to write this blog the subject matter will only have importance and complete appeal to a small number of readers. After all there are not so many expats who actually take the plunge and buy a property in Thailand.
The Mortgage Issue
One of the main reasons for this is of course because it is nearly impossible for a foreigner to obtain a mortgage from a local bank in Thailand, and therefore they have to bring over all the money from abroad in cash. And how many people have several millions of Baht lying about in their bank in their home country? And foreign banks, like those found in the UK, US, OZ etc will not easily or willingly lend money to buy a property in a country such as Thailand, as it is seen as both risky and unstable.
So it is then a small number of expats that can actually buy into the Thai market, but incredibly 17% of condos in Bangkok are owned by foreigners.
You may not be a buyer or even a potential buyer yourself, but there is a chance that you know of one, and so the advice contained within this blog, may be of use to them. Over the past decade (well at least until 2003) the Bangkok property market has experienced a surge of supply on to the market. From 1997 – 2003 there was very little activity in the Thai property market as a whole, but since 2003, the property developers have done their utmost to fill any gaps in the supply of new housing stock experienced in those 5-6 years of inactivity.
The Property Boom!
In fact the supply has grown so much, that in Bangkok alone there has been an increase in the last few years of approximately 40,000 new condominium units a year! Yes that is 40 000 extra condo units alone hitting the market each year. And that figure of course does not account for any condos built outside the city, or the detached houses and townhouses built in the city in that time.
The above figure also does not account for the number of apartment and serviced apartment units built in that time! 40 000 condos then a year is a huge amount of supply, and I have focused on condos, as this is by far the most popular type of property bought by foreigners in Bangkok. Before we move on I think it is worth looking at that above figure in context:
Low-rise condos (those of 23m or less – usually 8 storey’s high) almost always have 79 units or less (for tax purposes). So 40 000 units divided up into just low-rises would be approx 500 new buildings!
High-rises are of course harder to substantiate as they have differing heights and number if units, but from experience I can tell you that a block with 2-3 substantial sized towers (say 25-30 storeys each), will house about 400 units. So that would be 100 new large developments a year.
Of course as the developers choose their own configurations and size of investments, determined on innumerate reasons, we will have to just take the mean approximation for the purpose of this article and assume there are approximately 300 new condo developments supplied on to the Bangkok market each and every year. So what are the hidden problems faced by owners of the individual units within these 300 developments?
Well, after a sensible purchaser has sat down for ma fair few weeks or even months analyzing his potential purchase, he should have decided upon a decent location, level of facilities, perhaps an attractive design, checked out the developer’s track record for quality and honesty and of course looked for value for money. There could well be other factors that influence the purchaser’s decision, such as the view or size of swimming pool etc.
Unfortunately though there is one aspect that the purchaser has to go blindly into and has little to no power over. However this one factor can totally change the lifestyle the purchaser faces, and turn on its head all the above decision making. And this factor in Juristic Management of the condominium! Again before we carry on, it is worth looking back at those above figures.
300 extra condo buildings built in Bangkok alone. Once again I remind you this figure does not include Townhouse projects, apartments, serviced apartments, detached houses and while we are at it hotels and guesthouses etc. However all these building types need staff, management and skilled organization. We know in Thailand that over-staffing is the norm, so it is safe to estimate that each new condominium development in Bangkok needs 30-40 staff. Yes I know that sounds like a lot, but think about it.
Go down to the Juristic Office probably connected to the lobby in your building, you’ll probably see 8-10 office staff alone in there. Then there are security guards (3 shifts a day needed in some cases), cleaning ladies, gardeners and on-site mechanics. Very quickly 40 people add up!
So to supply the growing Bangkok property market alone, there are going to be approximately 10 – 12 000 new staff needed per year! And once again this does not take into account, hotels, Moo Baans and apartments etc. Then what about outside Bangkok? Hua Hin, Pattay, Samui, Phuket and other resort destinations are having a boom and need staff of the same caliber. And then towns like Chiang Mai, Khon Kaen and Hat Yai have seen property booms…the demand for service staff is therefore endless.
This would be all very well, if the Thai Universities and Colleges could then keep up and produce flawless well-trained and well organized people, but this is simply not the case. And therefore standards at condos, luxury or otherwise are slipping fast! Mismanagement of condos in rife and often the biggest culprits are the large management firms in Bangkok, who put in very low bids to win the lucrative management contracts and then off-set this by employing cheaper and cheaper staff. And then the old adage ‘you get what you pay for’ comes into play!
Of course, though the building management team that has won the contract will never admit to such behaviour and will instead encourage Common Fees to be increased at every AGM they hold. The losers of course are the owners who then are forced to pay the fees (voted in at an AGM that most owners rarely attend) by a select few of residents on the Residents Committee. And it is these often inexperienced, unknowledgeable and misinformed residents on the Residents Committee that the Juristic Management teams will hide behind when other residents start to complain of mismanagement or a drop in the quality of service.
As a voluntary organization the Residents Committee is often hard to organize to even attend a meeting and often the Juristic Management will refuse to even call them for a meeting even if a group of fellow residents are complaining legitimately. They will often ‘pass the buck’ claim not responsibility and say it is ‘out of their hands’. So when buying a condo, or any other type of property in Thailand, it is advisable to check out who will perhaps be the Juristic Management, and what is their track record.
As mentioned it is often the companies with the big names and flashy marketing that employ the cheapest and most incompetent staff! Another tip is to get on the Residents Committee as soon as you can, so you may influence some decisions, including perhaps the dismissal of the current management team if they are unsatisfactory. Too often we are hearing that condos and Moo Baans are being mismanaged and residents that legitimately complain are being treated badly by the Juristic Management staff, even though they are indirectly paying their wages. A booming property sector may be good for the economy, but in the meantime standards are dropping and property owners in Thailand are suffering for it.