Monthly Archives: November 2006

In the past few months, I’ve been friends with this guy who is half Thai, half Caucasian-American. Apparently, Jay has very minimal knowledge of Thai language even though he was raised by a Thai mother along with several of half siblings, who are pure Thais, from his mother’s previous marriage. Apparently when Jay was little, it was that time when his mother wanted to learn English. So she never really spoke to him in her native tongue. Jay has mentioned to me he would like to learn Thai to get in touch with his Thai side. He has been frustrated since people around him tend to leave him out when they are chatting away in the language he knows only 10%. As bad as I am at teaching, I volunteer to teach anyway. Better than nothing, right?

The problem with Jay is that even people around him (who are Thais and yes, can speak Thai) refuse to talk to him in Thai simply because they know he can barely understand it. So they never bother. When they never bother, he never learns. Since he has already had some basic knowledge about the language, I told him that I will, from now on, speak to him in Thai, except when explanation needed for certain words.

Jay came up to me last week, asking what does “Kreng Jai” mean?

Me: “Um…what a good question Jay!”
Jay: “So………?”
Me: “What do you think?”
Jay: “My brother says I am too harsh of a person. I need to learn how to be ‘kreng
jai” to people. But heck, he speaks in English until saying kreng jai. When I ask,
he says he doesn’t know how to explain it.”
Me: “Er……..?”

The thing is that until today, I still struggle daily to explain what “Kreng Jai” really is even in Thai. What exactly do these two simple words really mean?

I told Jay that apparently, a lot of Thai are Kreng-Jai individuals. Personally, Thais feel Kreng-Jai too much. As much as Kreng Jai is a charming quality, at times, it can be very annoying. But hold on, that isn’t the point. What is Kreng-Jai by any means?

While we are chatting away about the words in a restaurant, waiting for other two Thai friends, we order a combo appetizer. The dish is too big that we cannot even finish half of it, so I figure I will leave some for those who are coming. One shows up, so I mention to her that she can have this stuff we get. Conversation goes:

Me: “Plenty of food here, why don’t you just eat this?”
Other: “That’s okay. I will order mine.”
Me: “If you don’t eat this, we are gonna throw them away anyway.”
Other: “Thanks! That’s okay.”

A few minutes later, the girl orders the same combo—I mean the same exact one. Jay asks why she didn’t have ours in the first place. She smiles, saying ‘that’s okay.’

By the time another friend shows up, we all have been talking about Jay’s mother who is in the process of filing a divorce with Jay’s dad. When the guy walks near the table, we suspect him overheard the conversation, and then he walks right to sit by the bar. Jay walks right up to him saying he can join us now. There is no secret or anything. The guy says, “oh! that’s okay. I don’t want to interrupt.”

After dinner while we are walking back to the parking lot, Jay mentions, “what’s up with all the Thai people being too polite…almost way too paranoid?” I look over Jay, pondering: “Now you know what Kreng Jai really means, eh?”

Many people ask me the advantages and disadvantages of buying property in Thailand. As I recently bought an apartment (or condominium as it is usually called here) in Bangkok I thought it might be useful for some if I shared my experience. As with many things in Thailand, that which seemed easy often became hard. That which seemed impossible usually became possible.

Why buy?

Let’s start by asking why anyone would want to buy property in Thailand. The biggest reason is cost. Property remains relatively cheap by Western standards. I bought a 160 square meter condo for a little under 400,000 Swiss Francs (Switzerland being my main country of residence). For an equivalent property in the center of Geneva I figure I would have paid about 2 million Swiss Francs.

The capital value of most developments has been rising steadily since the 1998 economic crisis. This won’t go on forever, and there are too many condos under construction now, but there does appear to be limited capital risk. However, do not expect to make a fast buck return and there are some quite nasty taxes to be paid if you buy and sell quickly.

However, rental yields on newer developments are around 8%, not bad compared to investment returns elsewhere.

New condo developments do not appear to be significantly more expensive than older buildings. The priciest area is Silom, at about 100,000 baht per square meter for the best developments. My place is close to Suhkumvit and Asok and cost 75,000 per square meter. You can get much cheaper if you live in areas such as Sathorn, primarily because they are less accessible to public transport. Buying a new development makes a lot of sense, not least because it is only in the last year or so that developers have finally begun to understand the importance of good architecture.

I personally hate renting. It is money thrown in the waste basket and I want to feel I am in my own home, with my own decor and furniture. This is an admittedly emotional opinion but you spend a lot of time in your home, so to have it feel like a home is important.

The biggest risk would appear to be currency. It would appear to be a fair bet that there will be some form of Asian currency crisis within the next ten or so years. Any such crisis could significantly reduce the transfer capital value of your property. If you are not prepared to keep your property for a long time you should probably not accept the currency risk.

The second big risk is government regulation. Thai government policy is hard to understand at the best of times and there is always a chance that regulations could be introduced that are prejudicial to foreigners.

The third risk is oversupply. There are a lot of new developments around and many more under construction. Most experts do not expect a market slump but the possibility does exist.

The rules
Foreigners may not buy land in Thailand. There are some perfectly legal ways to circumvent this issue but your risk level does rise as a consequence. No such problems exist for condo developments, so long as at least 51% of any development is Thai owned. Simplifying somewhat, if there are 100 equally sized and priced units in a building, foreigners can legally own 49 of those units.

You can buy freehold or leasehold. Most leased properties are property of the Crown. Most realtors and lawyers will recommend you to stick to freehold.

Typically you will pay a 10% deposit when contracts are signed. Increasingly, the deposit being asked for is 20%. If you are investing in a “yet to be completed” development financing can be complicated. You will pay a deposit and then further deposits at set periods of time. There is a fair element of risk involved here. You are effectively financing the cash flow of the project and, if there are not enough buyers, a project could run out of money. Don’t expect much legal protection. Thai law is very biased to the Thais.

I would advise most people to invest only in a completed development, even if it costs you more.

It is possible to raise debt, though not easily in Thailand itself. However most of the banks have branches in Singapore that can arrange loans for you. Typical rates are in the region of 6%, not very competitive when set against a rental yield of 8%.

There are also various taxes to be paid at the time of purchase. Your realtor will usually handle all of this for you. Most people do not engage the services of a lawyer. I am not sure how wise this is but there is no doubt that realtor services are much more extensive than in most other countries.

Some things to watch out for
Everything will take much longer than you think. Nothing in Thailand runs on time but construction appears to be among the worst offenders. I signed a contract on December 12, was assured a December 31 completion and finally got possession on March 10.

Condos are sold in very different stage of development. Some are sold bare shell, meaning you have to install everything: kitchen, bathroom, flooring and so on. Some are sold fully furnished. Make sure you are clear as to what is best for you. I would advise not buying fully furnished. Do you really want someone else choosing your decor for you? Do you really want to have the same furniture and layout as everyone else?

Expect many things not to work. My aircon is still not right now. The door to my shower has fallen off twice in 2 weeks. The slate around my bathroom sink collapsed last weekend. The shower has flooded. The toilets don’t flush properly. I have now declared my bathroom an official “danger zone”. The electrical wiring works but it is eccentrically laid out, and I am being kind when I use the word “eccentric”. The general finish is average at best. Thai craftsmanship is really not of the highest quality.

Costs will overrun. The annual maintenance charge for my condo is 35 baht/square meter. The building now wants to raise it to 50 baht.

No one will ever take responsibility for anything. I brought in an outside contractor to redesign my place. They did a great job but now, if anything goes wrong, the automatic response of the building is to claim that it is the responsibility of my contractor.

If someone tells you that a problem will be fixed on Thursday, expect it to be next Thursday, not the coming Thursday. If are you are not persistent, don’t expect it to get fixed at all.

The residents committee will usually turn out to be a joke with no one able to agree on anything and chaos the likely result.

Do not make the mistake of thinking that your building will be any different from another person’s building. The issues I raise are common to everyone.

Conclusions
So should you buy a condo in Thailand, or not? I can only say that I don’t regret doing so. I am quite happy to keep this place even if I return to Europe. I have a high quality place for a very affordable price. I am not wasting money on rent. Most important to me, I have a real home and that makes me much happier than would otherwise be the case. You cannot imagine the joy I derive from possessing a functioning, clean kitchen!

However, you have to understand that buying property here does carry risks and that you will, for sure, have problems. If you have cash to spare, buying a property here can be rewarding. If you are cash constrai