Are New Condos Really Worth
The Money?
By: Neil Simmons
In a column in March 2006 I noted that property
speculators are pushing up the prices of new condominium units, which one
might consider are already high compared to older ones in Bangkok.
Today let's take a look at an example of this phenomenon. There was a new
condominium launched recently on a plot of land adjacent to another older
building. The latter is a little over 10 years old, but when it was first
constructed it was regarded as one of the few genuine grade A condominiums
in Bangkok. It has a lovely podium level, with a tranquil pool area, tennis
court, every other facility you would expect, and each unit measures at
least 300 square meters. Why am I telling you this? It's because the sales
prices in this condominium are little over one-half of the sales prices in
its new neighbor-to- be.
For convenience, let's say that the older condominium is selling for 55,000
baht per square meter and the new one is selling for 100,000 baht per sq. m.
Is the difference in price really justified?
We can easily rule out the land price, as the two condominiums are right
next to each other. So what is the difference?
Construction methods? Doubtful. In fact, many older condominium units are
arguably more solid than the newer counterparts. Many developers producing
lower-grade new condominiums are using materials, such as plastic imitation
parquet flooring, which are unlikely to last more than a year or two. Also,
lower-grade materials can allow sounds from neighboring units to pass
through.
Facilities? Not in the case above. The older condominium has a full range of
facilities already.
Calibre of the co-owners? In this case the new condominium has a number of
smaller units, geared to perhaps a more middle- class market than the older
building which comprises large units only.
The appearance of the building? This must be it. The new condominium will
have a nice, shiny new lobby, a clean and newly painted exterior, freshly
laid flooring in the common areas, and new furniture. The old condominium is
waiting for a repaint, and a new lobby would be nice too.
Then why don't the owners of the older condominium make these improvements?
Probably because when it comes to buying a condominium, people are ready
with their check books, but for ongoing maintenance, this is not the case.
Or maybe the condominium committee members aren't as good at selling-in this
case the idea of a necessary cosmetic upgrade to add value – as those
working for the developer.
Does this mean that in five or 10 years' time the new condominium will look
like the old condominium? Is buying a condominium like buying a car; the
price depreciates over time?
Well, if you gave the older condominium mentioned above a repaint, gave it a
new lobby with new furniture and resurfaced the podium level, and renovated
the small amount of common space in front of the units, and then the
difference between the two would not be that great. I don't see many
prospective buyers drilling into the concrete structure to check the
integrity of the concrete.
Bear in mind that if you buy a unit in an older condominium, there's a good
chance that inside there could be a lot of old wooden fitted furniture
that's 10 years out of fashion. You may want to rip the whole lot out and
start from scratch. If you carried out a thorough renovation of the unit-new
floors, new furniture, new electrical and sanitary fitting, then you would
probably be looking at spending in the region of 10,000 baht per square
metre.
So perhaps it all depends on how much you are willing to spend on a shiny
lobby. I myself generally spend about one minute per day walking through the
lobby. Most of my time I spend inside the unit. How about you?
About the author: Neil Simmons, formerly of CB Richard Ellis, is co-director
of Soho Properties (http://www.soho-properties.com), a leading real estate
agent and location specialist for property in Bangkok.
Article Source: www.isnare.com
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