Developers that sell many condo units to foreigners should be aware that such buyers may refuse to get the unit transferred if the price appreciation does not live up to expectations, says a property consultancy.
Surachet: Chinese of particular concern
Surachet Kongcheep, associate director of the research department at Colliers International Thailand, said Thai developers should be more cautious of foreign buyers, particularly those from China, as they may not be able to transfer as many sold units as targeted.
"Next year, many condominium projects for which a large number of units were sold to foreign investors will be completed," he said. "Developers that have large numbers of such projects might face financial difficulties if foreign buyers do not transfer their units."
He said Chinese buyers usually expect a 20% capital gain from Bangkok condominium investment or speculation, and might fail to transfer the unit if this level is unobtainable.
"[Foreign buyers] might make a down payment accounting for 10-15% of the unit price if they cannot resell the unit," he said. "Condominium units at some projects might see price appreciation without anyone to buy the resale unit."
According to a report on Chinese investment in Thai property by Chinese property portal Uoolu.com, most Chinese investors buy property for capital appreciation and spread the risk by diversifying their investments.
When choosing a property, the top two factors Chinese investors considered were high gross rental yield and appreciation potential.
The report also said Bangkok property was attractive as investment returns were ranked third at 12.4%, followed by Tokyo (28.3%) and London (16.1%).
Bangkok's annual house price growth was also ranked the third highest at 5.4%, after London (10.9%) and Kuala Lumpur (6.9%).
Tritecha Tangmatitham, managing director of SET-listed developer Supalai Plc, said Chinese buyers had high purchasing power but most of them were speculators or investors.
"The Chinese market is growing but we prefer selling a complete condominium unit to Chinese buyers to avoid risk," he said. "It is less secure if we sell them an off-plan unit as it will be unlikely that they can get the unit transferred when the project is completed."
He said it was not worthwhile for developers to sell off-plan units to foreign speculators and take a down payment, which might range from 10-25% if they refuse to get the unit transferred.
"Those units will eventually return to developers to be advertised and resold. If this number is large, developers will have to spend time and money to resell them," he said.
Mr Surachet of Colliers said many condominium developers need to rely on foreign and Chinese investment buyers due to weak domestic sentiment and high rejection rates for mortgages among Thai buyers.
Currently, real demand from Thai buyers is 30-60%, depending on location, down from 80% several years ago.
According to Colliers' research on Bangkok's condominium market in the third quarter, there were 36,950 unsold condominium units.
