Buying and renovating old condos in Chiang Mai
While new luxury condo developments compete to out price each other in Chiang Mai, a small group of shrewd ‘redevelopers’ have been snapping up the abundant older units, redecorating them and making some lucrative gains.
Despite the ambitious development going on around the city, there remains a suspiciously large number of mostly empty apartment blocks. They are a legacy of ’97 when a previous building frenzy came crashing down. Even out in the suburbs you will find half finished shells in the most absurd locations; ill-conceived projects from over-ambitious and inexperienced developers. These eyesores have been referred to by one local property advisor as ‘ghosts of the Asian crisis’, and they are good evidence of the unchecked and often bewildering building development that goes on in Chiang Mai’s largely unstructured property market.
But why, when the sector is so confident at present, aren’t these older buildings being occupied? This is a puzzling dilemma which few local agents can offer a tangible answer to. In many cases the management went bankrupt after ’97 and the buildings remain under bank ownership. Yet little is done to turn these into real equity. Many of them went up in a flurry of development in the early nineties when Chiang Mai first started emerging from agricultural backwater into a tourist hub. Poor forecasting meant many failed to sell in the rapidly flooded market. In some cases the developers failed to raise enough capital through initial sales and declare bankruptcy, since then upkeep of the buildings has lapsed. But units in these buildings typically go for a bargain and although many of them come as unfinished shells, the potential to decorate them and lease or sell at a profit remains good. Guide to Property in Chiang Mai
Galae Tong Tower is one such example. It sits at the bottom end of Chan Klan road, five minutes from the night market, yet away from the noise of the tourist centre. This 15 storey building is 80 per cent empty and despite falling into noticeable neglect, has a few residents who enjoy the unbeatable, near 180 degree, views from the corner lofts which boast sweeping balconies.
“Many of these are owned by the banks, and they don’t keep up with maintenance”, says Nai Youngfellow who is doing brisk business renovating shells and renting them out or selling them. “Thai people, they don’t understand about common ownership in the condos and don’t pay the common fee.
“When the building doesn’t look smart anymore no one wants to move in, but some foreigner don’t mind”. Together with her LATE husband Michael, a retired lawyer from the US, they had been gradually introducing many such apartments back onto the market through their business, Property4rentonline.com. Typically they will buy at 10,000 baht per square meter and invest 500,000 baht in quality fixtures and fittings, then sell with a 30 per cent profit less than six months later. Others they lease. In some cases the units are sold before the sub-contractors have even finished.
Getting the job is the crucial challenge, and can be a fun exercise or a nightmare. The city is well served by the building industry with allied services, suppliers and builders abundantly available. Decorating and construction costs are significantly cheaper than the south and the range of materials is impressive – from locally produced teak flooring to imported laminate. Whether you favour granite, marble or luxury tiles there is a colourful choice of materials sold at numerous suppliers around the city, many of them located on the Super Highway and Hang Dong road where the housing projects are generally found.
To complement the popular HomePro centre in the Carrefour complex a massive new home store is nearing completion on the southern section of the first ring road. This is where you’ll find your Grohe taps and luxury spa baths. But finding reliable and quality builders is the real challenge. There are few places for these companies to advertise other than the local Thai language Home Buyer’s Guide, and many foreigners rely on word of mouth or recommendations from others who have decorated. Dealing with builders can be a mine-field, especially when it comes to the latent quality and practical functionality.
The low risk answer is to commission one of the fitted kitchens, for example, that are on display at these home stores. And then there is the furnishing. Chiang Mai is perhaps the best place in the country to source affordable teak furniture, antiques art and décor, and you’ll be spoilt for choice at Baan Tawai artisans’ village in nearby Hang Dong. Living in Chiang Mai
One local developer, who asked not to be named, has off-loaded more than half a dozen such units to foreigners over the past two years. Several of these are in the popular Hillside 4 block on Huay Kaew road and were never previously lived in. With an eye for foreign tastes and plenty of experience in fitting and renovating, the developer has made handsome profits by fulfilling the role of ‘redeveloper’. His buyers have all been foreigners. They aren’t fussy about details that Thai buyers would fret over, such as security, prestige, grand entrances and a general community feel. Each of these units has been cleverly fitted with practical luxuries and appeal to foreigner preferences. The gains can be lucrative, but someone without local knowledge of contractors and suppliers might be at risk of exceeding time and money budgets.
Jon Sutcliffe is one such owner of a plush apartment in an undesirable building. His condo is in the City View building which is slightly dated and sorely neglected but enjoys a prime location between Chang Moi and Thapae roads. He bought the apartment from a local redeveloper for 1.6m baht, confident that the zen-like marble floors, mod-con kitchen and stylish fitted teak furniture would appeal to a foreigner. He now leases it out for 18,000 baht a month to a part-time Chiang Mai resident who wants style and convenience.
“There’s always going to be a steady stream of foreigners arriving in town who think nothing of dropping 15k on an apartment, unaware that you can rent a whole house for that”, says Sutcliffe. “Many of these tenants come and go a lot, they need something stylish, convenient and easy to acquire”.
Another company that has seen an opportunity in decorating and furnishing empty units is DomiDuca Asia which has bought up more than 60 studio condos in the similarly ‘quiet’ Riverside building beside the Sheraton. It shares the same trademark empty lobby lounge, but these nicely appointed units are a lot more affordable than the new condos going up in the city limits. They boast equally luxurious interiors but simply suffer from the stigma of being in a building that isn’t too prestigious. As an investment they might seem like a risk but, as the sales agent pointed out, there is a steady supply of foreigners arriving in town who aren’t looking for fancy lobbies, it’s the views and privacy that they find attractive. Their show unit was decorated in a modern style and had a fantastic uninterrupted view of the mountains on the east side of the Ping Valley. Situated just five minutes by bike to the city centre, this building enjoys both convenience and privacy.
But not all buildings are lucky enough to receive a new lease on life. Lily Valley is a 10 storey block well known to foreigners in the leafy Chan Khian suburb at the foot of the mountain. Rumour has it that the building has ghosts – a sure way to empty it of its Thai residents – but it’s another example of a repossessed building. It may look valuable on the balance sheet of the bank’s assets, but in reality has a poor real value. It has been empty for more than 10 years and was only ever occupied for less than two.
None-the-less, the grounds are maintained, including the pool and tennis court. Like Galae Tong Tower it has plenty of potential with foreigners if a large investor had the confidence to take it on, but it depends on the bank’s willingness to yield to a demand driven price. A local agent has twice set up a deal with foreign buyers but the sale has fallen through on both occasions due to unspecified last minute changes by the owner. A new offer is apparently under negotiation.
“Local consumers seems to favour new units and prestigious projects” suggests Amporn Changsao, a freelancing agent, “many of the old condo blocks have poor management and upkeep” she says. Evidently these buildings find themselves caught in the middle of the high end and middle market. Without a central location they are too risky for investors, while local Thais have too much choice with new, well populated buildings and house projects. The net result is a city with more high-rise buildings than it really needs. In theory this means that there is an over supply yet many of these excess apartments need upgrading first before they can enter the market successfully.
But, if you are thinking of buying some of these and hoping for some input from local real estate brokers in doing it up you might be frustrated. One of the key stumbling points might be finding an competent local broker to lease it out. Peter Coeshott, who has also invested in Chiang Mai as well as other locations in Thailand is slightly less upbeat about Chiang Mai’s property infrastructure.“Here you have to hunt fairly hard for a decent real estate broker, there are a few local ex-pat magazines with adverts of realtors but they aren’t terribly useful. In Pattaya there are loads. Of course Chiang Mai isn’t full of multi-national companies offering their staff generous housing allowances. There’s a small community of Japanese contract workers here but that’s about it.” He points out that the level of sophistication in Chiang Mai’s property market has a way to go before matching expectations set in Pattaya or Phuket.
“There are no decent condo’s I would live in at all in Chiang Mai, it looks like everything is now targeting the Japanese workers in town. “It’s not a stable market, there’s no guarantees or areas that are a sure bet”. He points to the city itself as the reason for his cynicism.“Chiang Mai needs to improve it’s infrastructure, sort out its public transport and get organised before it can be an attractive property market.” He says.
Condo landlords should be cautious to note that people who make Chiang Mai their permanent home soon move out to the suburbs where they get better value. For many, it’s on of the reasons they choose Chiang Mai. Ultimately the best deals are in houses , you can rent a decent sized house with garden for much less than a condo in town. A 60m2 luxury apartment in the bustling centre of the city rents for the same price as a three-bedroom house on half a rai of land within a 10 to 15 minute drive from the centre. The city isn’t like other property hotspots in Thailand where proximity to the beach or CBD is essential to tenants. Only the part-time Chiang Mai resident who has no interest in a high-maintainance pad is likely to be interested in a re-developed condo. Fortunately there appears to be a steady stream of them arriving in Chiang Mai.
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