Buying Properties – A Global Comparator
A close friend of mine has just migrated lock stock and sheep barrel from the UK to New Zealand and has been reading the debates about the current issues pertaining to buying property here in Thailand. He loves the move he has made to NZ and he doesn’t
regret a thing about leaving good old Blighty, but he felt that now that he too is a migrant to new lands, albeit from one western country to another, that he would like to share a tale from the other side about his own house purchasing experiences
down in Sheepville, stating that it would be a good reminder and reality check to us all here on how things can be elsewhere. I have also included my own comments in this about the impact of foreign investments / property ownerships on the UK
property market as a comparator to Thailand as well as taking a little peek into other European destinations too as recently suggested as an alternative by holt-reality. I am by no means a property expert but I do know how to observe things that
are going on around me.
First of all, let me give you some very quick but boring background stuff to help you understand how things currently work down in NZ, and then we can get on with the story as my good friend told it to me. Apparently, there are 4 legal ways to buy a house in New Zealand. The first is by auction, second by tender, third by price & finally fourth as a mortgagee. There are also 2 processes attached to the above and that is you can either purchase conditionally or unconditionally. Now, most of us in the west (especially in the UK) would tend to purchase a property with a certain level of protection in place. In fact, if you are getting a mortgage, the banks actually insist on it, and your lawyer will almost certainly advise it, and these usually come in the form of land registry searches and building surveys and so forth and it’s actually quite difficult unless you have the ready cash available, to purchase a property in the UK (excluding Scotland) without conditions attached.
In New Zealand ‘you can’ also take this approach and choose to purchase a property with your own conditions attached and to have get out clauses such as a Lim (council land details etc), a builders report, finance and valuation. However, in New Zealand, you can also go and purchase a property totally without any conditions and as this is totally a legally and binding way to do things, if you as the buyer subsequently find that the house has financial debts attached, is falling down, has land that is not yours, has boundary disputes, is worth NZ$10 instead of the NZ$800k and the previous owners have ripped up the floors and run off with the kitchen sink then tough poopie for you.
Now, it appears that the main buyers in the New Zealand market are the Chinese and Koreans with some fuelling of the fire coming in from the Americans. According to another friend of mine who is native Kiwi born and bred and who owns and runs a vineyard in NZ, the Chinese and Koreans in particular are moving into New Zealand in droves and have been aggressively taking over and consuming everything they can get their hands on (Sounds familiar to Thailand’s history doesn’t it). In fact, it sounds no different to the UK as well, where it has been the Indians who have been predominantly taking over the lands for many years in the same manner (which our Empire and colonisation days are to be blamed for) and in their case, they do so by moving families of ten or more into each inner city house, to bringing some form of collective purchasing power into the buying process and as such almost all of the inner city properties are now Indian or foreign owned because they are just simply outbidding the native Brits who cannot keep up with the expanding cost of property. In the case of the Indians, if the street or property has a corner then even better because they can then go on and set up the old corner shop. In addition to this, as Indians tend to have larger families and far more kids compared to the average British family, it won’t be long before the native British are just bred out of their lands and the current bet is on how long it will be before we have an Indian prime minister. Sometimes I wonder what William Wallace would have thought about this had he lived today when the notion of breeding out the Scottish was decreed with an English lord sleeping with all the virgin brides on their wedding night. I know it’s not exactly the same but it is only a matter of time and sheer volume of numbers before it does eventually happen.
When you look at the impact of this foreign purchasing of properties back in the UK, it is not too difficult to see that all of the native Brits in places like London, Leicester, Birmingham, Bradford, Leeds, Blackburn and so forth are either being forced out into the more rural areas and towns to live instead and then having to commute into the cities for their jobs (I believe is often the case in Wellington in NZ too) or to just saying enough is enough and cashing in and moving to places like Oz, New Zealand, Spain, Italy, France, and occasionally Thailand too. It is no joke when we say ‘jokingly’ that the only way to counter this insurgency into our cities is to simply stop building streets with corners on them.
The Russians too are now getting in on the act. I was watching BBC news today and it was reporting that the Russians are now bringing in their new wealth into England (especially London), and if we use the same argument that the Thais are currently using with us coming here, then this foreign investment and wealth coming into London is great for the country, right? But in the same way that the Thais are asking for our investments and money without allowing us to really own anything or live here, well the British authorities are doing things in a sort of reverse order by allowing everyone and anyone in who has a hard luck story to tell and then paying them using tax payers money for the privilege, while in the mean time, they are making it harder for those who can afford to live there by questioning where on earth their money came from in the first place, assuming in a quite paranoid manner, that they all must be ex KGB and Mafia crooks and should be turned away at the airport gates and shoved back onto the Aeroflot flight back to Moscow. It doesn’t make much sense to me.
When these nice ‘rich Russians with new money’ do eventually find their way into the UK with their millions, it simply means that even more pressure is being applied to the local native inhabitants who find that their dream of owning a home is simply becoming just that, ‘a dream’ because the property prices just continue to creep up and up in order to keep up with the demand. When you apply this logic to Thailand, and I am sure the average Thai doesn’t realise this (or perhaps they do, hence why they won’t let us own anything) is that as more and more money comes into Thailand, that their own realisation of owning a decent property will just slip further and further away from them as well. At the moment prices in England and I guess in NZ too are just getting silly and it's all being fuelled by foreign money coming in. When you consider what GBP 100k in the UK gets you these days (not much is the answer) you will find that if you are lucky and not picky about where you want to live, I would guess that at best you could pick yourself up a half decent terraced house somewhere in an ex-council estate. If you want the kind of house that most professional people tend to own or want to live in, then you are looking at prices from GBP 180k to 250k and that’s me just being conservative with my numbers. Now add on top of that the exorbitant council tax fees, the TV licence fees, the increasing costs of gas and electricity, fuel costs, food costs and a 40% tax rate on the salary you need to afford it all, then I cannot understand how on earth why anyone would want to live back in the UK and own a property there.
When you add into this, that there are about 93 languages currently being spoken in London alone (I know this because a poster proudly told me so one day on the London underground provided courtesy of the Mayor of London Ken Livingstone) with communities consisting of just Polish, Russians, Albanians, Indians, Afrikaans, Jamaicans etc… and these same communities are all popping up all over the place with English not being the first language spoken either. So in this context, I can quite understand sometimes why the Thais are being neurotic about us all coming in with our multitude of languages and cultural ways and money as it would just cause all the same effects to those that we are seeing, complaining about and in many cases, escaping from back home.
In New Zealand, to compound the problem, it also appears that the majority of estate agents are being run either by the Chinese or the Koreans. One suspects that the intention here was to make it easier for their brethren to move in and take over the land and property that much quicker as well as making a fast profit too. You do also get kiwi estate agents but they have to compete very hard against these aggressively owned foreign ones in order to survive, and the only way to do so is for them to adopt the same underhand methods the Chinese and Koreans are using.
So let’s look at how the four methods of buying a property in New Zealand affects the way a house is purchased. If you are purchasing a property in New Zealand as an auction, then you can bid as per normal and if you win it’s yours. You are ‘meant’ to do the conditional checks prior to auction if you want the property, but some estate agencies do it for you as part of the auction. This method is simple and fine if you have a stack of cash in your wallet and can exceed the minimum threshold but who wants to really get into a competitive war unless the property is really a major steal, so let’s look at the next way to buy.
Let’s assume that doing an auction is not for you or the faint-hearted, so you choose to purchase by tender instead. This is where things can get complicated because along with everyone else who may be interested, you all are asked to put in a ‘sealed’ envelope (sealed bid) with your best offer and you can either state that your bid is conditional and go on to state what they are or you can state that your offer is ‘as is’ and therefore unconditional. Now, dependant on the vendor, they may decide to simply take the best price with conditions attached or a lower price without conditions, or indeed a combination of both of these, it’s up to them and each one depends on their circumstances. Ok, this all sounds very simple, but when you put in your tender, it is ‘meant’ to be legally binding with no gazumping allowed or further negotiation expected, and if your offer is accepted then great, you have a house, but if it's rejected then you just start all over again and if everyone gets rejected then you just go back to square one and ‘everyone’ re-submits a closed bid again. But, oh but no, this it appears is not quite the case in New Zealand, especially when you get an aggressive Chinese or Korean estate agent involved. They tend instead to flaunt the law of closed bids and offer a value added service to the vendor with a "shall we see if we can squeeze any more money out of the parties" – and thus increase my commission sort of line. The vendor quite humanly and maybe unwittingly knowing he is breaking the law says "ok then", and this is when the fun begins.
Estate Agent: "Can you give any more money?"
My Friend: "Err… yes but I don't want to, why?"
Estate Agent: "well you are close to what they are after, and another $5k should secure it!"
My Friend: "ok then I'll give another $5k"
5 minutes later………..
Estate Agent: "Can you give any more money?"
My Friend: "Err, why you just said….."
Estate Agent: "I know but another party has just offered $10k more……"
My Friend: “f'off you robbing twat…"
Brrmmmm as he slams down the phone. What has just happened is totally illegal under the conditions of this particular sealed bid, and no doubt he will follow it up with an official complaint later, but he loses house No.1 as a consequence
So he finds another property, this time with a Korean estate agent. The method being offered this time is based on price. This is very similar to the UK, where the price is set for the sale, you then view the house, and if you like it, you can make an offer, and if accepted with conditions you get only 10 days in which to get your conditions done and then you have to go unconditional. So you pay the deposit to secure the property and the price… Yahoo job done, you'd think. So in reality my friend puts things in place and spends some money on getting the conditions in place.
2 days later…
Estate Agent: "We have accepted an unconditional offer on the house you are buying"
My friend: “Err, excuse me, but I thought the process was…"
Estate Agent: "You are right, but if someone offers an unconditional then you have 1 day to get the money and conditions completed if you want the house"
My friend: “Really! Can you show me this particular clause in your contract of sale because I am not prepared to do that …”
In other words, forget your common sense and buy the house which we know is about to cave in and you don't, unless you get your checks done and we are trying to prevent this and now that a gullible fool is willing to buy it anyway, I have nothing to lose…
Estate Agent: "ok then, as you are not prepared to do that, I have to inform you that the house has been sold to a third party. While you are on the line, can we interest you in this $1 million dollar shed overlooking the sea instead?"
My friend: "f'off you prick"
So he loses house No.2
He then goes out and finds yet another house on what is now appearing to be an endless search. Apparently, there are many houses for sale in NZ, and contrary to popular belief about the market being a sellers' market (it’s not, it’s a buyers market) finding a property for sale is not the main problem, the problem is that most of these houses are sheds and it’s finding a ‘good quality decent’ home that appears to be the challenge. So he finally finds one, and in this case the current owners have over extended themselves, and as such are in default with their mortgage. Great, at last he has sellers who are sitting on an expensive, mortgage laden house and who have been given a few weeks to get out and sell before the house is repossessed and forced to auction by the banks. This latter option means that the couple will be left homeless and no-doubt with a debt for the difference so they need to get out and sell. One man’s plight is another mans delight – it’s the way of the world.
My friend makes an offer (a conditional one where he wants a Lim report and so forth) and it’s a good offer and it’s snapped up and accepted by the bank and the vendors. He sets things in motion, gets all the reports done and submits it all to the estate agent who is happy that things are going through smoothly.
The next day…
Estate Agent: "Hi there, we have a couple of changes on the contract we have already agreed with you, can you collect and present it to your solicitor?"
My friend "You want me to re-negotiate terms on a contract we have already agreed, sign…ok not a problem"
The revised contract arrives and my friend reads it diligently. Now that they have the offer on the table, what they have now basically done is insert the following clause: "you may purchase the house, but we can not be held responsible for the state of the building, the contents (chattels), the moving in date, or the fact that we may sell it to another third party after this contract has been accepted".
Or in other words the current owners can if they please, take the kitchen, the bathrooms, security gates, keys, doors, floors and anything else nailed down or otherwise etc… and they don' care, the estate agent doesn’t care and will you kindly PLEASE SIGN HERE…”
My friend: “What the [email protected]*&! This is not worth the shite paper it's written on, f'off you robbing bastard"
And this was the case a few days ago. Basically he is standing there waving a cheque around going "NZ$1 Million worth of house wanted, must be in good condition, anyone?"
He is appalled! It appears that the estate agents want the money in New Zealand but will not give anything back in return to the buyer (does any of this sound familiar to anyone?) so at the moment he is absolutely gob-smacked with the state of housing affairs in NZ, and in his words he says that ‘‘it's just f'ing awful”. Put it this way, the gold coast of Australia was looking promising to him a few days ago.
After a few days thinking about all of this, he suspected however that the main problem was more to do with the estate agents manipulating things along with the Koreans and the Chinese who were not helping things by just wading in and buying all of the property unconditionally and at risk. So he decided to contact the bank direct and told him of the underhand activities of this particular estate agent. The bank quite rightly went off on one and gave the estate agent a right old rollicking for acting in a way that could lose them their purchaser stating that to go to auction could lose them ultimately more money. Even the current owners are declaring that they where not aware of the estate agents underhand activities… so it seems things may be back on track but don’t hold your breath just in case. He could of course buy any old house if he wanted tomorrow in a place called Albany, but as he states, why would he want to buy a house that has no resale value with your neighbours shouting pardon when you have a fart on the toilet.
Now for those of you (me included) who are looking to make an investment killing by purchasing elsewhere (as holt-reality recently pointed out) in places such as Bulgaria, Poland and Croatia and all those other Eastern block states that are either in or are vying to become part of the EU… well I just want to say that even there you should just be as careful as you would be in Thailand. All of these places are generally unregulated markets that have huge land ownerships issues and similar laws to Thailand in that you are required to set up a company if the land and the property are to be owned by the one and the same person. I did an investigative property hunt in all these three areas and visited each country in turn couple of years ago before coming to Thailand and although the property was dirt cheap, I can assure you that in all these places, it was very similar in many ways (if not worse) to some of the pitfalls we see here in Thailand and some of these places also had a few extra ones thrown in for good measure too.
For example, in Poland, you can buy a castle (quite literally and quite legally for a pittance) but should a family emerge from the gutters claiming to have Jewish descendants who where ushered gently out of your now new abode sometime back in 1942 and were waiting for a mug like you to come along before revealing themselves, well you will be simply asked to hand over the keys and to get out in the politest manner possible and out you must go without any legal recourse.
Similar issues also arise in Croatia and especially so in some of the border line areas where you may be unwillingly and unknowingly cashing in on the houses left behind after the wars in the former Yugoslavia of some usurped ethnic Albanian family, or
that the new rendering on the front of the house, which you thought was quite cute and the result of a recent refurbishment makeover, actually turned out to be a mask for the 1000 bullet holes that had been previously ricocheting of them. No doubt
questions of who now owns these sort of properties and land after the previous owners left in a slight hurry is a huge doubt to have on your mind as you hand over 150,000 Euros. As for Bulgaria, well if you want to buy an apartment to rent out
or to use especially in downtown Sofia, be prepared for the old Soviet system (which is still also in place in apartments across Moscow) of controlling when the heating system and water is turned on/or off throughout the day and throughout the
different seasons in your apartment block for which you have no control over whatsoever (well not unless you get a back up water tank and heating system installed inside your apartment at extra cost that is) and that is just one of the minor issues
you need to consider. When you add into this issues of maintaining visas, the state of the nation (economically) and that you are unlikely to get a good rate of return on your investment in terms of rent, as well as it being generally more dangerous
to walk down the street there than it is here in Thailand, well I guess you get the picture.
So things in Thailand aren’t always as fraught as they seem when done in comparison to other sunnier climes and although we do have other issues here when buying a property, it appears that no matter where you are in the world buying property, it is just going to be one major hassle after another. Let’s face it, when you enter into an industry dominated by estate agents and lawyers, it’s not just the locals you need to be aware from coming after your wallet and trying to fleece you.
Hey, at least in these other countries you can actually get the property put in your own name. And who wouldn't check out a property first?