I have been planning to buy a condominium unit downtown but I am not sure whether to choose a new or a resale unit. The new one costs a lot more per square metre but definitely will not need any repairs at least for the next five years (if I'm right). The much bigger resale unit costs the same overall but is only half the price per square metre compared to the new one. My concern is that even though it looks to be in good condition, I'm aware that deterioration of property can be pricey in a few years ahead.
We have heard a lot about the property boom and a glut of condominiums in Bangkok, yet prices seem not to stop rising. The boom must be ended at some point. If I choose a new condo now, do I risk depreciation of the property since the economy seems to be going downward and there is a risk of a bubble bursting? Are there hidden costs of new condos that I should be warned about?
If I choose an old unit, apart from the repair cost what else should I be aware of? Also, is there any chance to see it rise in value? The maintenance is quite good (the location is on Rama III and the new and old ones sit right next to each other). Is it possible that the old unit may end up costing me more than buying the new one?
My plan is to spend as much as 80% of my savings for the down payment, instalments, plus interior decoration to make sure monthly mortgage payments are under my monthly budget. Is it right to do so? Or is there a better plan?
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA Remember the old proverb: you make money in real estate by what you pay for it, not what you sell it for. Buying at the right price will ensure that you are on the right track. If you are buying in an overheated market or in a "hot" neighbourhood, it is likely that you're overpaying. Secondly, the problem with overheated markets is that they attract amateurs who want to get in on the action. Try to buy from a developer that has a portfolio of successful projects.
Even if the price is right and the developer is great, you will still need to examine the size of the project, layouts, design, amenities, etc. If the project is too big, you can bet that it will feel less like a community and more like a transient bus station.
Condo investments, resale or new, hinge on their location and the neighbourhood that surrounds them. The neighbourhood makes the condo and not the other way around; it has to have the foundation for resale and rental capacity. Lastly, look for owner-occupied buildings. From my experience, the buildings tend to be better maintained if the owners live there as well.
nnnI have 70,000 British pounds in extra funds. Can you please recommend how to make the best out of this sum? I spent more than 10 years working overseas, just moved back to Thailand two months ago, and want to take some time off work. I also have a certain amount of savings that I keep in a safe place, with a low return though. I want to live on the returns from that extra fund if possible.
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA What to do with that extra 70,000 pounds really depends on a host of factors ranging from your age, risk tolerance, long-term goals, debt obligations, etc. A good place to start is to do an executive summary or an Investment Policy Statement (IPS) outlining the important elements that matter such as:
- Current Assets are the first item in your executive summary. It's always useful to know how much you have to invest. This is usually done by adding up all of your financial assets such as bank deposits, stocks, bonds and mutual fund holdings etc.
- Time Horizon is extremely important because asset allocation strategies will be determined by your investment horizon. Usually the longer the horizon, the more risk one can afford to take.
- Expected Annual Return can be a bit tricky to forecast due to varying inflation rates. But the main objective is to achieve a return in excess of the inflation rate, otherwise you are getting poorer not richer. If the current rate of inflation is 3% and you would like a portfolio return four points above the rate of inflation, you are looking at 7% return per year, which means that your portfolio will have to be predominantly made up of equity and commodities.
- Loss Limit is the most you expect to lose over a specified time period given your tolerance for risk. Let's say you could accept losing 15% in any single year or over a five-year period you could lose 3% per year. Therefore, if your portfolio fell by more than 15%, then you need to rebalance your portfolio in order to reduce your risk exposure and meet your goals.
- Portfolio Benchmarks. Like everything else in life, nothing is ever black or white. It's all relative. When evaluating investment returns, it is important to compare the total return of each stock or fund to its category or benchmark and expect it to be in the top quartile (33%) of its category over three and five years.
The Thai Financial Planners Association is the Certified Financial Planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted through firstname.lastname@example.org or the TFPA webboard, www.tfpa.or.th