Tips for first-time property buyers

Wichit Chaitrong

The Nation

The current economic situation offers probably an opportune time to buy condominiums, townhouses, single-family homes or commercial units. Housing prices could go up in the near future due to rising oil and building-material costs.

Banyong Visethmongkolchai, managing director of Bangkok Commercial Asset Management, said that prices of new residences would certainly shoot up in five or 10 years, probably by more than 20 per cent.

Atip Bijanonda, president of the Thai Condominium Association, said prices were escalating by about 3 per cent a year.

Banyong suggested that if you have adequate savings - about 30 per cent of a home's price - you should buy it. You can choose a new or resale home that offers competitive prices.

Initial savings would reduce the interest-rate burden after you get a home loan from the bank. Even if some banks offer to lend you up to 100 per cent of the home's price you should not jump at it - just take only 70 per cent, he advised.

His logic stands up if we look at the sub-prime mortgage loan crisis in the United States, which was caused by rising defaults and foreclosures. Many American home-buyers did not properly calculate the future risk of their cash flow or income. In other word, easy loans from mortgage lenders and low interest rates in the first few years of the loan lured buyers into a black hole.

The recent tax package aimed at boosting the real-estate sector would also greatly lower the cost of purchasing a dream home.

"If you buy a residential unit worth Bt1 million you can save about Bt30,000," Atip said.

Many observers suspect that the hot sales of condos may indicate speculation, particularly in projects located near mass-transit routes, which would result in inflated prices.

Atip said he did not support buying condos for speculation. Buyers should buy for residential purposes or as an alternative investment. Investors could earn income from renting the property and could fight inflation.

If you choose a condo as an investment vehicle, you should think about the boring job of collecting rent and maintaining the property. The most important thing may be your priority - buying a house first or finding an alternative way of making use of your savings.

Some of you may want to pursue higher education, career training or study abroad, which will enhance your future income. If you decide to get higher education here you could lease an apartment instead of buying a home. This is a good choice because renting is cheaper, according to the Real Estate Information Centre.

The most popular room rates as surveyed by the REIC are Bt1,000-Bt1,999 and Bt2,000-Bt2,999 a month. They account for 41 per cent and 35 per cent respectively of available rooms for rent.

The survey was conducted in the third quarter of last year in greater Bangkok. The survey covered serviced apartments, apartments and dormitories that had at least 10 units. Rents ranged from under Bt1,000 to more than Bt120,000 a month.

Renting a room offers several advantages and it will prepare you well for that eventual home purchase.

You can try living in different parts of the city if you rent. This is part of your own survey of where you would like to live in the long run. 

The 1997 financial crisis and the current sub-prime crisis in the US have shown that home prices can move up and down. You should not be overly confident that home prices will steadily increase over time. Before buying a home, make sure that you compare other investments - and ask yourself which one serves you the best.