Should I buy a completed property or off-plan in Thailand?
Off-plan properties are investments that promise some very alluring benefits, particularly the opportunity to invest in a property at a considerable discount. Despite this, however, such opportunities are not without risk.
We have created a basic guide for you with the pros and cons of getting involved.
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What is the difference between off-plan and completed property?
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What are the advantages and risks of an off-plan property?
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Risks
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Advantages
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How to secure the purchase of an off-plan contract?
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Is it safe to buy off-plan?
What is the difference between off-plan and completed property?
An off-plan property is a property that has not yet been constructed. In many cases, the “property” will be little more than some land and plans, although it is also often possible to purchase off-plan properties at a later stage of their development.
Developers will often sell properties early during the development phase, to help raise funds in order to complete the project. The cheaper price when purchasing an off-plan property makes it a popular option in Thailand, and elsewhere in the world.
As you might expect, a ready to occupy property is one that has already been completed and is ready to move in to, and it could be a newly constructed property or an older one, but renovated.
This type of property will likely be more favorable to people who are looking for a home sooner. A lot of people will also prefer to invest in something that already exists as opposed to something that is not yet completed. While this method will be the preferred option for many people, it does have some disadvantages when compared to buying an off-plan property in Thailand.
What are the advantages and risks of an off-plan property?
Risks
Perhaps the main disadvantage of investing in an off-plan property in Thailand is that you are investing in something that does not yet physically exist and it means that there is a small possibility the building will not be constructed, leaving you with little or nothing left for your investment, that’s why it’s important to hire a real estate agent and lawyer to secure your investment.
Of course, laws in Thailand are in place to help protect potential investors against this to happen but investing goes with risks. You can also decrease your risk by taking precautions such as doing your due diligence on any developer you choose to deal with.
Another disadvantage is that it will often be some time before you get to use your investment. You will not yet have a property to live in and this will also likely mean that you will need to pay for another property in the meantime.
There is also the possibility of delays, leaving you having to pay rent for longer than you have anticipated.
Some people will be able to purchase an off-plan property and move in during the early stages of development. While this can answer the problem of having to pay for rent elsewhere, there are likely to be a lot of disturbances and inconveniences with workmen and equipment still operating.
Advantages
The main advantage is that when buying an off-plan property in Thailand is that you will get to negotiate a considerable discount with the developers. This will be a considerable advantage for people that are looking for property at low prices.
Purchasing an off-plan property sometimes give you the opportunity to have a say in the fitting of your unit. This means you can have it created to your personal preferences, within reason of course. It is also more likely that you can get a good deal on furniture and other fittings.
A lot of people invest in off-plan property in Thailand to profit in the short to medium term. When making the investment they can do so at a considerable discount and, when the property is completed, it can be sold at the normal price.
This method is also not without risk because the property value can decrease, although rarely. It is also possible that the owner of the unit will struggle to find a buyer.
How to secure the purchase of an off-plan contract?
When investing in an off-plan property in Thailand you might notice that the contracts are somewhat less detailed than you would have experienced elsewhere. This does mean less security for the buyer, but problems are still rare.
However, Thai contracts are becoming more detailed after considerable exposure to investors from overseas but there are also some things that you should expect to see in your contract as a minimum requirement.
When investing in a pre-construction contract you should expect the following to be included:
- Price: The price of the unit should be clearly stated on the contract, and it should be calculated per square meter of the unit you are investing in. It should also include the payment terms and you should make sure that you are made aware of any additional charges.
- Building specifications: An off-plan contract should always include details of the materials that are to be used. This includes the quality of materials, the quantity, and the model where applicable. The contract should also include a floor plan.
- Timescales: You should also expect the contract to have a timeframe regarding aspects of the construction. This will typically include the date construction is started, the date construction is completed, and it may also have dates for the various stages of the construction.
- Payment penalties: Contracts for an off-plan property in Thailand will typically include penalties if you default on payments. These will sometimes be quite draconian, including the possibility of you losing everything you have paid so far. This is not usually the case, but it is safer to check first
- Developer’s default: If the property is not completed, then you should expect a full refund on everything that you have paid so far. Check the contract to be sure that such a clause is included.
- Late completion: Delays to your off-plan property in Thailand can be costly to you, especially if you are renting another property while waiting for your investment to be completed. The contract should also include a clause for late completion compensation.
- Assignment: An assignment clause gives you the possibility of passing on your investment to a third party if required. It is advisable to ensure this clause is in the contract because it is difficult to be sure of what might happen in the future.
- Recitals: It is essential that the developer is the true owner of the land they are building on. A recital clause will allow you a full refund to anything you have paid should this not be the case.
- Substitution: A developer will often add a clause that allows them to deviate from the materials and specifications given in the contract. You should ensure that you are informed of any such changes and that you have a say in which substitute materials are used.
- Alternative dispute resolution: An alternative dispute resolution clause means disputes over an off-plan property in Thailand will go through arbitration rather than through the courts. This method will be faster and less costly than having disputes decided by the courts.
Is it safe to buy off-plan?
The advantages of buying an off-plan property in Thailand can be very alluring, and many people do take advantage. It is also true that it is reasonably safe, but there is still a risk that something could do wrong.
With this in mind, we at Samui Exclusive advice you to purchase a property that has already been completed like a house, a villa or a condominium. You will still be able to find properties at great prices and your investment will be a lot more secure.