Ill Advise Property Purchase?
Adrian Cookson, an avid e-mail user wrote to say "I have
received a newsletter from thaivisa.com containing articles originally
published in a Pattaya newspaper suggesting that foreigners would be
ill advised to purchase property in Thailand" and asked "
What comments do you have on this view?"
As chance would have it I subscribe to the newsletters from thaivisa.com (which incidentally is an excellent source for visa and immigration advice concerning Thailand) and was rather surprised to have received from them the same series of articles about real estate in Thailand.
For the benefit of readers who have not read these articles, their principle points were that in Thailand - mortgages were hard to come by, your new found Thai girlfriend was an unreliable vehicle through which to purchase property, rental yields in Pattaya were often only about 5% and property values might fall (all of which are true enough) and then went on to suggest that since returns on "wisely invested secure medium risk offshore investments" can earn 10% p.a. that you would be crazy buying property and renting was the only wise solution.
Ignoring the fact that the link at the end of the article directed the reader to the authors company's web site promoting a range of offshore investment services, as mine does to my property services company (so we may well both be equally biased), there do seem to be a number of points worth making.
Statistics show that over the long run and taken as an average both stock markets and property markets tend to show substantial increases in value and both can be excellent investments. Averages and statistics can however be very deceiving. Individual stocks (or properties) can significantly out (or under) perform market averages and during certain market cycles values can rise (or fall) in significant variance with the long term trends. Selection of the right stock or property (in the right place at the right time) is therefore the key to successful investment. Good information and sound advice is fundamental to making a wise investment.
While care and prudence should always be at the core of any large investment, I inherently believe that an investment in property (particularly if that investment is in a personal home) is much more than a purely financial decision - it is one that directly effects and if made well, enhances your life style. It may be wise to rent a utilitarian little box to live in, but isn't it more rewarding to have a house of your own that can be further improved and customized to suit your personal needs.
I am not familiar with the Pattaya property market and it may well be that the small sector described in the market (low cost town houses) is not currently a good investment , but this does not mean that other sectors of the Pattaya market (or the Phuket market) do not represent good investment opportunities.
Investment security. For every person who has lost a property to a misconceived affair of the heart, there are an equal number that have fallen for one financial scam or other. With any investment a clear and direct claim over a demonstrable and solid asset is essential. Land ownership restrictions for foreigners in Thailand do make the process unnecessarily complex, but (as explained in more detail in my earlier articles - see below for the link to the web site) there are several well tested ways for a foreigner to secure a direct and enforceable interest over land that is tantamount to freehold ownership - the principle approach being a long term registered leasehold that incorporates predefined leasehold renewals and a purchase option.
Reverting to the financial side of this investment choice and thinking about worst case scenarios (nasty thought really) - say some sort of economic melt down - or a dramatic shift in technologies - Investment in a property (without debt) is an investment in a real asset that will always exist in a substantially unchanged form and be able to be put to very much the same use as originally intended (or even an entirely new one) irrespective of it's market value. Stocks on the other hand are very much intangible interests (even where the underlying company has real assets) in a business that can potentially fail and become bankrupt and completely valueless - save perhaps as a pretty certificate to hang on your wall to remind you to resist the temptation to invest in goods that you can't see, touch, smell, hear and feel.
But don't listen to me, I clearly have a personal bias, having always derived great personal satisfaction and often financial rewards from the properties that I have owned and invested in - and invariably seen those rewards diminish whenever I have tried to invest any property sale proceeds "safely" in intangibles.