For a company that mainly offers investments into real estate and that has only yesterday launched a new product: ETA Rental Guarantee; and with thousands of properties in Pattaya, this might sound a bit suicidal as the current Occupancy rate is Pattaya has dropped considerably in the past 4-5 years, hovering around 30%.
Emerging Trends Advisors (ETA) is only one of our companies that the message in this article does no favours to. Within our group of companies that are owned / part owned or managed by us, we have several local real estate agencies, a construction company, marketing companies of which all rely on a dynamic and buoyant real estate industry to survive.
But trust has always laid in the truth, and if the current situation is ever going to change, I think the prices we value real estate has to be corrected. Supply and demand should dictate the price of everything in life, I wrote about this in an article titled ‘Is Now The Best Time To Invest‘ back in September 2016, but I was wrong.
I based my opinions on logic, however logic is not coming into the local real estate market in Pattaya where there is continued development of new condominium projects when the occupancy rate is less than 30%, and you can buy for half the price it costs to build. This is a freak situation; please see this article for a more in-depth report about the oversupply.
The Real Estate market is entirely unregulated unlike most of the western world which means the agents are not required to have any knowledge of the industry, meaning the job isn’t being done to the standard it should be.
Lies are being told, some intentionally for sure, there are more than a few real estate agents in this town that would ‘steal the sugar out of their grandmother’s tea’, basically they will say anything to earn a commission. In the last couple of months, I have been explaining how I can give a guaranteed return of up to 8% yearly on our product – “ETA Rental Guarantee” and about why I have gone the extra mile to pledge further assets of mine to secure the returns. It is only the principle amount that’s secured by a title deed.
Being honest, this still does not adequately secure the principle because the market value is significantly lower than the value given by the banks.
I have been explaining it as such – “the truth is that, in the current market conditions, you can only really achieve a yield of between 2% and 4%, when buying and renting at the “market prices”. The smaller units in the right location being able to achieve higher returns. The reason I am confident enough to put my other assets on the line is that the price at which I am acquiring the units means that when selling at the bank valued price, I have a “font loaded profit” of which I can re-invest, to cover the deficit from the realistic, achievable rental return.
I am also fortunate enough to have many other resources of which I can leverage to increase both my occupancy rates and increase my NET income, to which never once, was I questioned or disagreed with by any of the local agents. As above, to “realistically achieve a yield of between 2% and 4%” may only be valid if you are 100% occupied but seeing as the average occupancy is under 30% then a real estate agent cannot and should not be quoting these figures.
Here is a simple, honest and realistic financial model for an investment into a rental property over a 5-year term in Pattaya (subject to the current conditions):
|Unit type||1 Bed||Condo|
|Market Price||3,000,000 THB|
|Market Rental||15,000 THB|
The table here shows the yearly Income and Outgoings on this example Investment and also accumulates the figures to show a 5-year projection of NET Income and Loss associated.
In conclusion and based on the figures in the above table, if you decide to buy direct from an owner or deal with the litany of agents that scour Pattaya looking for a deal, then I can assure you that you will only lose money buying property in Pattaya.
That is why I have built and developed our team at Emerging Trends Advisors (ETA). We have spent a lot of time and resource to create an improved, more secure method of investing in Thailand.
Please see information regarding our Rental Guarantee Product here.
Article Author: David Simpson (CEO)