Phuket Property: Transformers - Price Cuts In Disguise..

By Author: Rebecca Smith
Total Articles: 151
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A few days ago I was talking to a client. His name is Roger.

"I'm fed up with investing in the stock market. Every time I come away it seems to crash. I just want to make a good rental income and some capital appreciation. That way when I come to retire in a few years time I'll have something to fall back on" he said.

Roger told me he’d been offered an apartment in Patong, Phuket.

It had a bit of an ocean view and was close to the beach.

The asking price? 7.8m Baht.

So Roger offered 7.2m. It was immediately accepted. As you can imagine, he wished he’d offered less.

But he was pretty happy with his decision - so he asked the agent what he thought...

"You'll easily make around 10% rental income a year, probably more like 15%.
And the capital growth will be at least 10% a year” the agent replied.

Sounds good, right?

Roger decided to do some research.

He compared the rental prices of similar apartments on-line.

It seemed that after he'd paid all his monthly costs - he wouldn’t make much profit at all. And to make things worse - there ...
... was an electricity transformer right in front of his future living room window.

Of course, the agent and developer both insisted it would be moved.

Roger asked me what I thought. So I told him - I didn't think it was his best option.

The problem is there are lots of similar apartments in Patong.

This one is no different from most. It's not run as a resort. And he'd have to rely on agents to get him tenants - always a bit hit and miss. In my opinion, he'd be lucky to make a 3% rental return.

And capital appreciation will be low too. Because the project is complete so prices are at their highest.

The worst thing is, there is undeveloped land in front of the building. If it gets built on Roger will have no ocean view. And that will have a big effect on the value.

Obviously, the agent and the developer both said this could never happen. But do you believe them?

There’s also that transformer. It could affect the price when Roger wants to sell - assuming they don’t move it.

I suggested Roger looked at another development just outside Patong.

It took us less than 5 minutes to get to there.

All the apartments have unobstructed ocean views.

Roger was surprised that its 2 beaches were so quiet. After all, we were only 3km from Patong.

And because this place only launched about a year ago, the prices are still good. Even though it is due to be finished in May 2012.

The resort will be run as a 5-star hotel - so rental returns should be high - and the developer is offering a 5% rental guarantee for 2 years.

Interestingly both apartments are the same price. I left Roger to make his decision.

The sad thing is, Roger was right. The stock market did crash whilst he was here. I hope he got his money out in time.

If you'd like to know more about the place I took Roger to see go here:

http://www.phuketoceanvillas.com/propertydetail.asp?PropertyID=823

As always, if you have any questions - send me an email or give me a call.

Best,

Rebecca
Rebecca Smith is a real estate journalist and author with over 15 years’ experience. She has published 3 books to date:

'The Definitive Guide to buying property in Thailand'
http://blog.oceanvillasgroup.com/the-definitive-guide-to-buying-property-in-thailand/

'10 simple ways to slash your marketing costs and sell more property'
http://www.ovgmarketing.com/10-simple-ways-to-slash-your-marketing-costs-and-sell-more-property/

'The Definitive Guide to buying property in Phuket'
http://blog.phuketoceanvillas.com/the-definitive-guide-to-buying-property-in-phuket/

Rebecca is currently the sales director for Ocean Villas Group and Phuket Ocean Villas.