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 metres. 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 chequebooks, 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.