I’ll never buy a condo in Phuket. Never say never, but in this case…NEVER.
I hate what is happening with all the development in Kamala. I’m watching an environmental disaster as one unneeded development after another begins construction. What is the justification for all this construction when there is already an enormous property bubble? Phuket has tremendous environmental issues already with inadequate water, raw sewage spilling into the ocean and no place to put the trash. Yet, 4000 more housing units will be coming on the market in Kamala alone! It’s insanity. In a Western country there would be a building moratorium till the utilities caught up with the construction. I think the only way to stop the insanity is to starve the beast. Don’t buy a condo in Phuket. Maybe it will slow them down.
Foreigners can’t buy a house and have it listed in their name. It can only be registered in a Thai’s name. Foreigners can buy a condo in Thailand. Many have and many are very happy with their purchase. There are a few lucky ones. When I make an investment, I can’t afford to make it based on the possibility of getting lucky. Buying property in Thailand is fraught with problems. Buying a condo in Phuket is a bad financial decision.
10 reasons why I won’t buy a condo in Phuket
#1 It’s cheaper to rent
Let’s do the math: Say I like a condo near the beach that costs 5 million baht. I can earn 6% investing my money in the stock market. Every year 5 million baht would generate 300,000 baht or 25,000 baht a month. I rent a beautiful 2 bedroom house for 17,000 a month. That means if I bought a condo, I would lose 8,000 baht a month. Rents are going down in Phuket with all the new development and places are easy to find. My house is bigger and better than a 10 million baht condo. Rent.
#2 Condos do not increase in value, they go down
The argument is always that the unit would increase in value over time, unfortunately this argument doesn’t hold water in Phuket. The historical 10% increase in value that is the rule of thumb used in many Western countries isn’t applicable here for a number of reasons.
#3 Selling a condo in Phuket at a profit is almost impossible
Good luck selling a condo in the enormous real estate bubble that grows by the day here in Phuket. The fact that no one is buying hasn’t slowed the developers. People generally will not pay a premium price for a second hand unit. New condos aren’t selling, why would you buy a second hand unit? The more expensive the unit, the smaller the market is. Everyone I know who has bought has either bailed out at a loss or is stuck with the condo they bought. The real estate market is basically dead.
#4 Condos are overpriced
Where do they pull the pricing for new units from? Condos are ridiculously overpriced. There is the issue of “artificial pricing” whereby the developer sells, or at least transfers ownership of many of the units to friends and family members who then sell the units once the building is completed. This makes it appear that new units are selling to buyers, don’t buy it. Very little is being sold in Phuket. For a while Russians were buying condos, then the Ruble took a dive. Chinese are reluctant to buy. Buyers are few and far between.
#5 Condos age miserably
Will the building you are looking at buying have the same charm as a 50 or 60 year old condo block back in your homeland? No, not with the local construction standards. Recently built condos can be a mess. The problem is with no tenants, the building isn’t getting the required money coming in for maintenance to be carried out. The tropics eat buildings. The jungle wants its land back.
#6 Condos are often badly managed
Money for the maintenance is often squandered, pocketed or simply isn’t collected. One of the big problems faced by MANY condo buildings is that the owners of condo units go bust or simply don’t pay the maintenance fees. The entire condo project can deteriorate with enough deadbeat owners. Renting out the condos for three months a year doesn’t cover the costs. I know of number of situations where the management and the owners are at legal war. Litigation is slow, expensive and almost always favors Thais.
#7 Maintenance fees are expensive and often inadequate for maintenance
Maintenance fees on Phuket condos tend to be expensive and are often not paid. There isn’t a lot the management can do about it! With a lack of funds for these basic services, building maintenance just doesn’t happen and value goes down. Often management is just ripping tenants off. Condo owners have to have a strong owners committee or they’re in for problems. Owners of older condos are often hit with a very expensive extra fees when for example the entire place needs to be repaired or repainted.
#8 Ownership problems are very hard to fix in Thailand
Some neighbors are going to be problems. There is going to be noise issues from inside or out. Problems that are easily solved in the West can be very hard to fix in Thailand. I’ve moved three times because problems have developed. You’re stuck there with little recourse if you’re a condo owner.
#9 Up and moving is no longer an option
Problems are not always easily solved. Even trying to solve an issue can see things escalate to another level where the only thing left to is…MOVE. You can’t. You got 5 million baht invested in this mess.
#10 Construction is poor and rarely built to specifications
Nothing is built to original specifications in Thailand. Cutting corners on large projects can set a family up for life. What was designed by engineers often doesn’t resemble the finished product. Corners are cut, stuff stolen, general malpractice, mildew, water and poor construction by unskilled laborers result in buildings that are a mess and in constant need of repair.
Ask a realtor if he owns the property he lives in. They rarely do. I don’t know one. That could be because they’re starving in the real estate business or they already know buying a condo in Phuket is a bad financial decision.
One final thing, if you’re going to blow money on a Phuket condo, at least make sure it’s finished. Lots of places like this around.