Return on investment (ROI) is an important aspect of property investment. If you are purchasing a property as a business venture, you must be sure of the potential returns. There is no point investing your capital and committing to a long-term scheme if there is no end-gain. The property market worldwide can be volatile – there is never a guarantee of a positive ROI. You could purchase a property and in 10 year’s time, it could have decreased in value due to a local or large scale economic recession for example.
Thailand is no exception to the volatile nature of the property market – in decades past, prices have fluctuated greatly. In recent years, the property market in Thailand has stabilised and has shown steady growth with less volatility. If you are purchasing a property in Thailand as an investment, or as a home, you should be aware of the potential ROI and the contributing factors to consider.
Contributing Factors to ROI
There are many generic factors that contribute to your potential ROI. The following is a list of the main factors that could affect your ROI in Thailand:
– Surrounding infrastructure
– Property location
– Property type
– Condition of property
– Initial purchase price
– Availability of surrounding property
– Current economic climate
– Current property market outlook
If you do your research and choose the right property in the right location, there is no reason why you cannot make a strong ROI. If your property is run down and in a worse condition than when you purchased it you are not likely to make any profit – think logically and use your brain. Purchase the property at the lowest possible price. Keep the property well-maintained. Choose a desirable location that has great long-term viability. Choose a property that is attractive and will sell easily. Do these things and your ROI should increase.
Now you understand some of the considerations to make that can affect your ROI, we will look closer at the expected ROI’s you can reap in Thailand.
Short-term and long-term ROI figures
The Thailand property market has seen great growth in previous years. Although growth is slowing down, property prices are still increasing and there is undoubtedly profit to be made for the shrewd investor. Listed below are some figures, taken from the Global Property Guide showing ROI on rental apartments in Bangkok:
|Size||Purchasing Price||Monthly Rent||Yield (P/A)|
|40sqm||4.47m THB||23,000 THB||6.36%|
|60sqm||7.00m THB||33,000 THB||5.59%|
|85sqm||8.50m THB||43,000 THB||6.13%|
|120sqm||14.4m THB||60,000 THB||8.05%|
As you can see the average yield for apartments in Bangkok is between 5-8% – so if you rented a property worth 4.47m THB out for 5 years with an average rent of 23,000, you could expect a profit of 80,000 THB. This is a sizable short-term profit and this doesn’t account for property price increases or the final selling value of your property too. This is just a small snippet of info that covers a particular property type in Thailand’s capital – many other areas of the country have even better ROI both in the short and long term. The following are some other facts and considerations regarding Thailand property ROI.
– Medium to large-sized apartments can offer greater ROI than smaller properties
– Infrastructure is improving and expanding all the time in Bangkok
– Luxury properties in Bangkok also offer larger ROI’s.
– In previous years, condos, townhouses and detached properties have all increased in value by at least 5%
– Tourist destinations such as Phuket and Koh Samui can be prone to seasonal fluctuations
– Tourist destinations can achieve attractive short-term ROI’s of up to 12%
– Property in Chiang Mai is cheaper than in Bangkok but the market looks less promising than in the capital
Generally, short-term ROI’s are lucrative, but are limited by the overall cheaper prices of Thai property and rental income – 5% is not an unrealistic minimum target for a 5 year period. If you do want to make a sizeable profit in a shorter period of time, it is advisable to either invest in upcoming areas or tourist locations outside of Bangkok. Managing risk becomes more difficult with this strategy.
Long-term property investments also look favourable and while the Thai property market remains progressive. Popular areas with increasing infrastructure such as Bangkok, Phuket, Chiang Mai and Pattaya should all remain on the radar of property investors. As the government continues to promote foreign investment and improve foreigners’ accessibility to property, Thailand should remain a fantastic country to purchase property in.
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