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Considerations when buying land

Modern gold rush: land. Those that have it want to hold on if they can. Those that want to buy it end up finding out that parcel that they finally decided on is already sold. As I previously pointed out in the building bubble in Pattaya article there is a lot of available land and lots of underutilized properties in the general Pattaya/Jomtien area.

Although I can’t guess the future, I would predict this (now). As long as there isn’t any dramatic shift, and Pattaya remains an attractive community for long term expat living, there will be increasing strong demand for land here. Right now it seems that all attractively priced new housing supply that comes on the market gets snapped up. There is some rotation out of existing developments (which tend to run down), but new housing gets snapped up correctly. The new housing developments going in are not cheap either, many having entry prices about 7 million.

Part of what is driving the current increases is the depreciation of the US dollar. The baht seems to lose value against the Euro in concert with the dollar. Although there are many well financed Thai development companies, a large portion of land purchases is being paid for by Euros. The Euro has had a good run this year, so for Euro purchases land doesn’t look that expensive.

You can see the avenue of development going on in East Pattaya around Paradise Villa 2. That entire strip is ideal, because it is pristine land (relatively speaking) with only expat developments along it. It doesn’t have the Thai shophouse cluttered junked up look yet. In that basic area there are about 15 high end new developments going in.

Now — on to land buying. On thing I have found is that in general the Thais price their land pretty accurately and will sit on it until it sells. There are fire sales, but normally land prices aren’t discounted that much. If there is an area where land on the main road sells for 600,000 per rai, if you go off the main road a bit it might become discounted to 550,000 per rai.

There are wild cards. You may run in to a real estate agent who is taking it off the top, selling 600,000 rai land for 900,000 per rai and then pocketing the 300,000 + the standard commission of 3% on the 600,000. This, by the way, is pretty standard procedure for farang estate agents, and no one has a problem with it. The seller doesn’t care what the final price is as long as he gets his cut. Normally the falang thinks the land if fairly priced at 900,000 per rai. So indeed everyone is happy, and it is just common ‘inside’ knowledge around here — that is how it works.

Then you run into the occasionally joker. I was looking for land around Pattaya Land and House and saw a two rai chunk next to a major new development. I was thinking the price would be expensive, probably 1.5 million per rai or more. I called and the Thai guy who answered insisted the price was 4 million per rai. I had to laugh. He obviously could tell I was a farang (I know this since he insisted on speaking really bad English) so that might factor in. I only point out this example to illustrate the obvious, people can sell their land for what ever they want. A lot of people say if the buyer is a farang the prices go up. I don’t really know, but sort of discount this. After all there is a farang behind about 60% of land sales around that area.

Another point about real estate agents. Generally they will all know about certain pieces of land. There is no multiple listing service. No one has a problem with you dealing with multiple agents. Also, although I have never run into it, some Thai agents will also do the markup method. In general, I think finding a Thai agent that is going to sell for the 3% commission should be pretty easy, as at least in my experience, those are the type I run into. Generally it is an acquaintance or a person recommended to me though.

The other point about land buying: Thais value certain factors when setting land prices some of which you might have a different take. Some common things which would increase land price (for both Thais and Farangs) –> location, proximity to paved road, proximity to electricity, land level (does it need fill dirt or not). As far as doing a housing development, sometimes it is nice to have the location set back off the main road. Being on the main road would typically equate to a higher price. You can develop your own list of differences when doing a land search, which will allow you to buy land with an aspect you prefer, but that a Thai seller might consider less than desirable aspect of the land – reducing its selling price.

Another way to look at the opposite side of the same coin is that if there is a really bad aspect of the location that the Thai typically don’t notice it won’t cause the price to be reduced. A night market right across the street would be seen as a positive for the Thai seller, but who wants to live right across the street from a night market with huge numbers of people coming in every night and loud noise blaring? The point of this one is when you are buying land be sure not to buy a piece with some defect that isn’t factored into the price, ie. don’t buy next to a pig farm or karaoke bar.

Summary: * Location is very important. * Although it is hard to find a ‘fire sale’ you should look for unseen property values with positive aspects which don’t affect the price. * Likewise, don’t buy a property with a bad aspect which isn’t reflected in the price. * There are many Thai real estate agents who don’t mark the price of land up. You’re better off going this way then by paying the higher ‘full service’ farang price, unless money is no object. * Guesstimate: Prices will continue to rise or hold steady, unless there is something which makes Pattaya less desirable has long term expat base. (ie. prohibition on long term visas, or terrorist attack or…??)

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