Leasehold Condominiums: Worth Buying for Living or Investment

According to data from Nexus Property Marketing Co., Ltd., during the COVID-19 pandemic, customers who were already interested in purchasing condominiums made quicker decisions due to the reduced prices compared to normal conditions. This is especially true for customers buying condominiums for investment, who primarily look for key investment criteria: low unit prices, quick rental potential, and good returns. Leasehold condominiums priced under 5 million baht are the most sought-after products.

Today, Nexus has additional information regarding the selection of condominiums for long-term investment.

First, we should understand the differences between leasehold and freehold condominiums.

Leasehold condominiums are properties held under a lease agreement for a specified period, while freehold condominiums are owned outright by the buyer permanently. Leasehold condominiums are often located in CBD areas such as Ratchadamri, Pathumwan, Lang Suan, Silom, Sathorn, and Rama 4. Currently, there are 25 leasehold condominium projects in this area, with 21 already sold and only 4 remaining available. Notably, the average selling price of leasehold condominiums is typically 30-40% lower than that of freehold condominiums due to the limited ownership rights based on the contract duration granted by the landowner.

Leasehold condominiums are mostly situated in prime city locations, making them more affordable than freehold options, which has attracted more investors looking to rent out properties. These condominiums can be rented out immediately and continuously, yielding higher returns. The average rental yield for leasehold projects is as high as 6.2% per year.

Data collected by Nexus shows that freehold condominiums generally yield an average return of 4.5% per year, depending on the project's location. In contrast, leasehold condominiums can generate higher returns, with the latest data indicating that the Triple Y Residence project offers yields up to 8.6%. Compared to current fixed deposit rates at banks, which average only 1.2% per year, investing in condominiums provides significantly higher returns.

Owning a condominium is generally a safe investment, as it can be retained as an asset, and investors can also benefit from capital gains when selling the unit. For example, a leasehold project in the Sam Yan area, launched in 2012 at a price of 52,000 baht per square meter, now averages 82,000 baht per square meter, representing a 57% increase in just 8 years. In comparison, a nearby freehold project has seen only a 20% increase in price.

Thus, it is evident that choosing to purchase a leasehold condominium is a viable option for generating good returns for long-term investors.

Summary of the Benefits of Buying Leasehold Condominiums

1) The selling price for leasehold units is lower than that of freehold condominiums. For instance, if a leasehold project is priced at 3,600,000 baht, a nearby freehold project might sell for 6,000,000 baht due to the difference in land costs, allowing you to invest the 2,400,000 baht difference elsewhere.

2) Leasehold projects are typically located in CBD areas, where land is becoming increasingly scarce, ensuring that your investment is in a prime location.

3) The design of leasehold units tends to be more spacious due to lower costs, allowing for larger usable areas. This means higher rental prices and better rental opportunities compared to smaller units.

4) Developers of leasehold projects are usually well-established, reputable, and reliable.

5) After-sales service from the developer is crucial, ensuring that the project remains attractive and well-maintained throughout the lease period.

6) Foreigners can own 100% of leasehold properties since they are lease agreements, so there are no concerns about foreign ownership limits when reselling.