Double Pricing For Foreigners Prevalent In Thailand Off-Plan Condo Market
Recently, there has been much hoo-hah about Foreigners or Farangs in Thailand paying as much as ten times the price that thais pay for entry into an attraction. So much so, that a facebook group, 2PriceThailand, was set up by a farang, Richard Barrow, who have lived in Thailand for many years and to date has garnered more than 99,000 likes, as outraged foreigners finally have an outlet to vent their pent-up frustrations. The number of likes and furious daily posts and comments showed what an extent the problem has become in this country known for their tolerance of foreigners, and friendly people, The so called “Land Of Smiles”. Now we know the real reason why they are smiling, as they welcome “Foreign Cash Cows” into the country to line their pockets!
This problem is not just limited to small attractions that wants to get a quick buck off the foreigners but really, on a sinister corporate level as well, especially prevalent in off-plan condominium housing projects all around Thailand. I had known this practise during my time in Thailand but usually on the assumption that foreigner prices were higher because they were getting a better deal until recently I visited an off-plan condominium showflat with a thai friend in Sukhumvit, Bangkok, near a BTS Station and was appalled at the double standards or double pricing levied on a foreigner for the same exact product.
The showflat was as glitzy and appealing as you would expect. It was recently launched by a somewhat new entry into the thai condominium market but is already an established giant in one of the biggest housing markets in the world. The showflat tour and conversation started innocently enough on the assumption that my thai friend was the buyer. Midway at the first show unit, I casually asked what was the actual sales price and remarked that I might want to buy a unit since everything fitted into what I liked about an investment product.
Upon hearing this, the salesperson replied in a somewhat cautious tone that the price would be “much higher than local price”. I thought fair enough, foreigners should pay more to contribute to the country’s economy right? Since in many countries foreigners are taxed more than the locals by the government but in Thailand, foreigners pay the same buyer taxes. But in return, I expected something different from a local’s price, such as more furniture or fittings.
“Everything is the same”, the salesperson quipped unapologetically.
“Then why do you charge more for the same thing?”, I asked.
“Because the view is better in this building, you can see the river” (As it turned out, the building he mentioned is “reserved” for foreigners)
“How much more are we talking about?”, I continued.
“about 700,000 baht.” was the reply.
Going on to the next show unit, the salesperson mentioned in thai to my friend that for this particular layout, she should get the corner unit as the high floor had the river view.
I thought to myself, “Didn’t you say the foreigner quota building gets the river view and the thai quota building doesn’t?” So I couldn’t help but blurted out, “This also has a river view too?”, and was met with a resounding “YES!” from the salesperson, conveniently forgetting what he previously said and proceeding on to tease our imagination with the breathing-taking views of the nature reserve and majestic Chao Phraya river.
The whole exercise left me with no doubt about the justification of a double pricing for foreigners. Simply, there is none at all. Its just alright for perceived richer foreigners to be fleeced without any valid reason in this country. And we are talking on corporate level where the higher management of the developer spins up a reason to inflate prices and let the salesperson do the sweet-talking to the customer.
Just to sum up this whole episode from the perspective of a property investment buyer, and a stark warning to all foreign buyers, if you sign on the dotted line, knowing well that you are paying 700,000 more than what your thai neighbours are paying. Before you even get your keys to your apartment, you have already lost 700,000 baht or in this case 20,000 THB/per square metre for a 35sqm apartment.
20,000/psm (USD 645) might not seem to be a lot for a typical foreign investor but the real problem comes when you want to dispose off your unit or attain the return of investment (ROI) on the rental market. Say several years down the road, you wish to sell this property to reinvest into another property, what happens? When you try to list it on the resale market, you find that you can’t actually list it at 20,000psm above the market because you bought at a “foreigner” price. The resale market has since evolved into a merged market where the resale buyers don’t give 2 hoots whether you are a foreign or local “title”, they only care whether you have listed it at the market price, or whether your unit is high/low floor, good or bad facing or whether they would need to spend more money on renovations. If you really want to sell, you’ll have to adjust your selling price in line with the market’s expectations.
This rule also applies to the rental market. Say you bought this property on the assumption that you will get a 5% yield. Upon receiving your keys, you find that the thai owners are listing a few thousand baht lower than your price because their figure of a 5% yield and your presumption figure of a 5% yield are different! Defiantly, you try to reason that your building “has the best view”, but eventually after a few months, you give up and adjust yourself to the correct rental market in line with the rest, losing both time and money (lost rental months) in the process. Simply put, prospective tenants do not care if you bought at a foreigner price or not! They care how much of their monthly salary is going towards paying the landlord!
So if you can’t recover this cost, where does all this money go? – To the happy developers pockets of course!
Now I think its fair to pay more if you are contributing to the country or government that you are buying a property in the form of taxes, as that gets funneled down to it’s people. Taxes also aid in further development of the country’s infrastructure, indirectly benefiting you as an asset owner in the country. But definitely it’s not ok if you are just making some business owner richer and even more so if the business is also owned by a foreign entity, a common thing nowadays with many overseas developers buying a stake in a local developer, or embarking on a joint venture.
This tale of 2 condo buyers, offered the same product but different pricing, is playing itself out, week after week, year after year in Thailand and I have seen a fair number of foreign property investors learn the hard way, being stuck in between a rock and a hard place, wanting to sell but still at a loss many years down the road. As the condo ages, rents fall and prices don’t appreciate to make up the price difference, a hole that is in fact harder to get out, but still clinging on because they are not willing to suffer the inevitable loss.
As buyers, foreign or thai, we all have the power to make a buying decision. If you find that you are being quoted a higher price than a thai for no other reason than just you being a foreigner, you can choose to walk away! There are many options for you in the resale market or even in the primary market where the developers don’t practice unfair double pricing.
** If you have learned something from what you read, please share it along so that one day in the near future, where foreigners refuse to buy from developers with double pricing standards, our combined buying power will change the way developers work in this country and one day, revert back to a fair pricing model.
Article Written By: Win
Khun Win operates a property agency serving thais and foreigners in their housing needs. Kedora Asia is also appointed by many foreign landlords to manage their properties.
Source: 88Property.com/Kedora Asia (If you wish to replicate or share this article, please keep this line)