The potential of condominiums

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Last edited: August 29, 2017 at 16:39:03

When discussing the potential of condominiums, we distinguish:

  1. rise in value, meaning capital gains (after re-selling)
  2. earning potential, meaning return on investment or ROI (by renting it out).

We also have to distinguish between older / existing buildings and new projects.

1. Rise in value

If you want to benefit from future rises in the value of your condominium, clearly you have to observe many factors to estimate its potential.
Stated very generally: for existing / older buildings, the earning potential from buying and (re-)selling depends mainly on how cheap you manage to buy, while for new projects it depends mainly on how expensive you can sell. In other words, generalising, the profit potential for older / existing buildings is more on the buying side, while for newer buildings it's more on the selling side.
The reason for this is, that obviously for existing / older buildings a market price has already been established, so when you sell it probably won't be far off the market price. However, if you buy smart, you can buy it cheap, and that's where your profit lies.
The contrary, for new projects a real market price has not yet been established upon the launch, sale and completion of the project. The price has simply been set by the developer, which is often not based on anything else than the developer's hunger for profit.
Only after a few years, when the weak and strong points of the building are proven and there is a stable population of residents, a real market price will have emerged and it may well be not much higher or even lower than what the developer has sold it for. Perhaps the building didn't become as popular as advertised, perhaps there were major construction problems, or perhaps the building is not able to collect sufficient common area fees.
In addition, if you master the skill of sourcing, in older buildings you may find more bargains from owners who are willing to sell off their units without regarding market prices.
Stated differently, for older / existing buildings, the sourcing process could be more important, while in new projects future expectation (and speculation) could be more important.

2. Earning potential

If you rent out your property, your earning potential depends on how attractive it is to tenants, and how much money you have invested in total.

Return on Investment (ROI) = net rental return after all expenses / total investment

As a rule of thumb, "normal decent" returns for rentals in Chiang Mai are somewhere between 8-12%, but of course the range could be wider, say from 4-14%, all depending on the particulars of your unit and the money you spent on it.
Generally, rental returns are somewhat lower for new buildings than for older / existing buildings, typically:

- for older buildings: about 8-12%.
- for new projects: about 4-6%.

The reason for this is, that usually the developer of new projects takes the lion's share or at least a large share of the profit, so you can buy a unit only at a relatively high cost per square meter. In older buildings, you can sometimes buy bargains.
At the same time, of course if a new project becomes very popular, then surely you'll be able to get higher returns.

Current price levels per square meter for condominiums in Chiang Mai

Now what are current price levels?
Prices for new projects generally start at levels not lower than THB 40,000 per square meter and then easily goes up to sixty, seventy and eighty thousand per square meter, all depending on the developer and the location. (Usually, developers offer price lists including and excluding furniture.)

Prices in older / existing buildings range from say THB 9,000 - 30,000 per square meter, depending on the renovation level inside the unit and the popularity of the building.

Rental prices vary wildly, depending on location and the particulars, especially the interior or renovation level of the unit. In condos, you can rent a small unit of about 30 sq m in a non-prime location from as low as say THB 4,000 per month, and a big unit of say 100 sq m in a prime or good location for about THB 20,000 per month. In both cases, the return on investment could be about the same.

Overall, if you compare the potential of condominiums with the potential for land and/or houses, for sure the potential for land (and some houses) is much larger than that for condomiums. However, ways to own such property are also more complicated and incur more risks.

Copyright: Chiang Mai Locator
DISCLAIMER: Any information about property on these pages reflects the personal opinion of our financial reporter and is meant purely informatively. No claim is made as to the exact accuracy of facts and figures nor about any future returns you can make by investing in property in Chiang Mai. Investing or di-vesting Thai property is not without risk, and the risk is to be assumed by you as an investor, and you only. Neither our financial reporter nor this site accept any responsibility to your financial decisions, which you make alone.

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Admin Locator Posted on January 27, 2016 at 22:24:01
This article has been written more than a year ago and last been edited about 1 year ago. Still, units in older Chiang Mai condos can still be found at prices lower than THB 30,000 per sq m, which are good buildings.
AC Posted on January 27, 2016 at 11:20:45
Don't know where you got your numbers from but older Chiang Mai condos are not going for THB 9,000 - 30,000 per square meter...Unless the building is a bad one.