What are Bangkok’s Rental Yields on Investment Property? 

Bangkok offers a spectrum of investment opportunities for those looking to build a portfolio of rental properties. In this article, we will delve into the rental yields on investment properties in the Capital...

Bangkok, the bustling heart of Thailand, has emerged as a hotspot for property rental investors seeking a dynamic and enticing real estate market. The city’s status as a commercial and business hub has made it a magnet for both Thai nationals and expatriates, leading to a robust and stable rental market. Amidst this urban transformation marked by expanding mass transit networks, the development of commercial centers, and neighborhood revitalization, property prices have been on the rise, presenting lucrative opportunities for capital appreciation.

With its vast expanse encompassing diverse neighborhoods catering to distinct demographics and markets, Bangkok offers a spectrum of investment opportunities for those looking to build a portfolio of rental properties. In this article, we will delve into the rental yields on investment properties in Bangkok, shedding light on the Gross Rental Yields and their significance for prospective investors.

Understanding Rental Yields

Before we delve into the specifics of Bangkok’s rental yields, let’s establish a clear understanding of what rental yields entail. Simply put, rental yield represents the income generated from a property minus related expenses, expressed as a percentage. There are two primary types of rental yields:

1. Gross Rental Yield: This metric measures the rental income generated over a year relative to the purchase price of the property and is expressed as a percentage. The formula for calculating Gross Rental Yield is as follows:

   (Rental Income x 12 Months) / Purchase Price of the Property x 100

2. Net Rental Yield: Accounts for rental income over a year after deducting property-related expenses, such as rental agency fees, common area and management fees, and property maintenance costs. Like Gross Rental Yield, it is also expressed as a percentage. The formula for Net Rental Yield is as follows:

(Rental Income x 12 Months) – Property Related Expenses / Purchase Price of the Property x 100

Why are these rental yields crucial for rental investors? 

In essence, they provide valuable insights into the attractiveness of forecasted rental income from a property. Both Gross and Net Rental Yields play pivotal roles in helping investors gauge the potential profitability of a real estate investment. 

Gross Rental Yield aids in making quick assessments of an investment’s allure, especially when compared to other properties. Conversely, Net Rental Yield helps investors evaluate the profit they can expect after covering all associated expenses. 

It’s worth noting that these two metrics are interlinked – a higher Gross Rental Yield typically translates into a larger Net Rental Yield!

Bangkok Rental Yields on Investment Property 

Bangkok’s vastness is matched only by its property diversity, each offering unique characteristics and catering to specific rental markets. For the purpose of this article, we will primarily focus on Gross Rental Yields, as Net Rental Yields require a case-by-case assessment.

In general, Bangkok’s Gross Rental Yields typically fall within the range of 2% to 6%, with most properties falling in the 3% to 5% range. It is important to emphasize that rental yield is influenced by both rental income potential and the purchase price of the property. Consequently, the price you pay for a property can significantly impact the rental yields it generates.

Central Business District

Rental Yields: 2-4%

The Central Business District, often referred to as Central Bangkok, boasts some of the city’s priciest real estate. These neighborhoods are packed with luxury residences and new developments, which come with a hefty price tag and consequently yield slightly lower rental returns.

However, this should not be seen as a drawback. The Central Business District enjoys strong rental demand, leading to lower vacancy rates compared to other areas. Moreover, Central Business District neighborhoods such as Phrom Phong, Asoke and Silom are lifestyle and business hotspots making them highly likely to benefit from continuing capital appreciation.

Outer Bangkok

Rental Yields: 4-6%

In contrast, Outer Bangkok offers more affordable options with housing complexes and condominium projects priced relatively lower. As a result, rental yields in these areas tend to be higher when compared to the Central Business District.

Yet, there is a trade-off. Investing in Outer Bangkok may mean dealing with potentially lower rental demand or challenging tenants. This could pose a more significant challenge for expat or overseas investors when managing and overseeing property rentals.

Rental Investment Yield Examples in Bangkok

To illustrate these rental yields, let’s explore some case studies of condo projects in Bangkok:

Millennium Residence

Estimated Price Per Square Meter: 177,500 THB

Estimated Gross Rental Yield: 3.86%

Project Overview:

Millennium Residence, a residential condo complex completed in 2009, consists of four towers and 604 units. Located in Asoke, a bustling business and office hub in the heart of the Central Business District, it offers a convenient lifestyle close to the BTS Skytrain, shopping malls, and various leisure venues. 

The spacious condo layouts ranging from 2-4 bedrooms, coupled with amenities like a sunny pool, gym, tennis court, garden space, and a playground, make it an attractive residence for working professionals and families. Consequently, Millennium Residence experiences lower vacancy rates and enjoys strong, stable rental demand.

Ideo O2

Estimated Price Per Square Meter: 106,841 THB

Estimated Gross Rental Yield: 4.63%

Project Overview:

Ideo O2, developed by Ananda, a well-established developer, comprises three towers and 1,569 condo units. Completed in 2017, it is situated in Bangna, an Outer Bangkok neighborhood crucial to the city’s eastern economic corridor. 

Ideo O2 targets young working professionals with compact studio, 1-bedroom, and 2-bedroom layouts. Its suburban location, coupled with affordable pricing per square meter, translates into higher rental yields, making it an enticing investment opportunity.

28 Chidlom

Estimated Price Per Square Meter: 406,631 THB

Estimated Gross Rental Yield: 3.1%

Project Overview:

28 Chidlom is an ultra-luxury residence developed by SC Asset, a renowned listed developer. Comprising two buildings and 425 luxury condo units, it is nestled in the prime Chidlom neighborhood, a leisure and retail hub within the Central Business District. The area offers an enviable lifestyle with luxury malls like Central Chidlom and Central Embassy, along with an array of restaurants and hangout spots. 

28 Chidlom commands premium selling prices per square meter and provides an opulent living experience with comfortable condo layouts and a range of luxury amenities.

In conclusion, Bangkok’s rental yields on investment properties offer a diverse range of opportunities for investors. Whether you prefer the allure of the Central Business District with its strong rental demand or the potential for higher yields in Outer Bangkok, understanding Gross Rental Yields is essential to making informed investment decisions. 

Each condo project showcases the nuances of Bangkok’s real estate market, demonstrating that there are appealing options across the spectrum of rental yields and property types. As an investor, carefully weighing the pros and cons of different areas and developments will help you navigate the vibrant and evolving landscape of Bangkok’s real estate market with confidence.

Exploring Factors Impacting Gross Rental Yields in Bangkok

When it comes to investing in rental properties, the quest to maximize Gross Rental Yield takes center stage for savvy property investors in Bangkok. The city’s real estate market is a thriving and dynamic landscape, offering a multitude of avenues to secure real estate investments with robust rental yields. To shed light on this pursuit, we delve into the factors that exert a significant influence on Rental Yields in the Thai capital.

1. Location

In the realm of real estate, the mantra is clear – it’s all about “location, location, location.” The location of a property wields a substantial impact on its potential yields, and this correlation is often tied to property prices. Generally, prime areas within the city, known as the Central Business District, command higher real estate prices, resulting in relatively lower rental yields. Conversely, Outer Bangkok tends to offer slightly higher rental yields.

This trade-off is often mitigated by the potential for rental investments to appreciate in value. Furthermore, Central Bangkok typically boasts a robust rental market, further reinforcing its appeal.

However, it’s worth noting that prestigious addresses and projects situated in close proximity to mass transit lines, such as the BTS or MRT, often exhibit above-average rental yields. This is attributed to the convenience these locations offer to residents, especially in a city plagued by constant road traffic congestion.

2. The Real Estate Developer

Much like designer clothing or luxury cars, certain developers in Thailand have crafted prestigious brands and reputations for delivering high-quality residential properties. Notable luxury Thai developers like Sansiri, Raimon Land, and AP (Thai) are recognized for their residential development experience. 

Projects associated with renowned developers often command higher rental rates. Beyond the allure of their brand, these developers typically boast a track record of successfully completed projects. Their experience translates into properties constructed with higher-quality materials, superior lifestyle focused facilities (think pools, gyms, co-working spaces and greenspaces), and more efficient facilities management teams. These attributes invariably lead to higher rental yields, as they offer a more appealing living experience to potential tenants.

3. Completion Date of the Real Estate Development

In Bangkok’s real estate landscape, a general rule of thumb prevails – new projects, whether condominiums or houses, tend to be more expensive on a per-square-meter basis compared to their older counterparts. This is primarily due to the escalating cost of developable land plots and construction inflation.

As a result, older projects, typically those aged over 5-10 years, often yield higher rental returns compared to newly completed developments. However, it’s imperative for investors eyeing older condos to carefully evaluate the cost of maintenance or modernization to ensure it does not outweigh the potential for robust rental yields. Additionally, ensuring the efficient maintenance of the project and its common areas by the Juristic Person or Building Management is crucial.

4. Property Specifications & Interiors

The specifications of a property, including the number of bedrooms, bathrooms, and its size, are significant factors influencing rental yields. Beyond these specifications, property details such as layout, floor level, view, interior design, and decor play pivotal roles in attracting tenants willing to pay higher yields.

In the quest for the perfect investment, it is vital to analyze the lifestyle and living aspects of a property. Ultimately, the end user or resident of the property should feel comfortable and at home. A well-decorated, convenient, and comfortable property translates into stronger rental returns.

5. Purchase Price and Sales Negotiations

Whether calculating Gross or Net Rental Yield, the acquisition price of the property looms large in the equation. Achieving high rental yields hinges on securing a property at a fair value or even at a discounted under-market price.

In the Bangkok real estate market, transparency is not always guaranteed, making it possible to uncover attractive properties with favorable deals or substantial discounts. Prospective investors should exercise patience while exploring the market, collaborating with multiple agencies to review investment options. Aggressive negotiations with both real estate agents and sellers are standard practice. Buying below market price is a surefire strategy to generate significantly above-average rental yields.

Property Expenses Impacting Net Rental Yields in Bangkok

Now that we’ve dissected the factors affecting Gross Rental Yields, it’s essential to turn our attention to Net Rental Yields. These are the property maintenance and general expenses that landlords and property investors inevitably encounter while maintaining their real estate portfolios in Bangkok.

1. Common Area and Management Fees (CAM Fees)

CAM Fees are annual or bi-annual payments made by property landlords to the Juristic Office, responsible for building management and maintenance services. These fees cover the maintenance and upkeep of common areas such as facilities (pool, gym, library, corridors) and resident support services like cleaners, security guards, and handymen.

2. Land and Building Tax

The Land and Building Tax is an annual tax imposed on property ownership. It ranges from 0.02% to 0.1% of the Government Appraised Value of the property. For properties valued at less than 10 million baht, this tax typically amounts to a marginal annual expense.

3. Building and/or Property Insurance

Condominium projects generally include building insurance within the CAM Fees or charge it separately. This insurance covers emergency situations such as major fires, flooding, or structural issues. 

Some landlords may opt to purchase separate condo or house insurance to safeguard the interiors and contents of the property. This additional insurance is especially useful in cases of tenant damage or unforeseen weather conditions like heavy rain or wind affecting the property’s interiors.

4. Rental Agency and/or Property Management Fees

In the quest for rental tenants, landlords commonly engage rental agencies to market their properties and find suitable tenants. These agencies typically charge the equivalent of one month’s rent for a one-year lease. International or overseas-based landlords may opt to delegate property management to a property management company, which oversees all aspects of property and tenancy management, providing a hassle-free ownership experience.

5. Utilities (MEA Electricity, Water, Others)

When a property is vacant, it falls upon the property owner to settle utility bills, including MEA Electricity and Water. Landlords who have subscribed to additional services such as internet WIFI or cable TV are responsible for these costs. Once a tenant occupies the property, they assume responsibility for their utility bills based on their usage.

6. Cleaning and Property Maintenance

Bangkok’s tropical climate and humidity necessitate periodic cleaning and maintenance, even when a property is vacant. It’s essential to note that electrical appliances require regular checks and usage to prevent faults from disuse. Modern condos, constructed with durable materials, typically require minimal maintenance, primarily focused on fittings and fixtures.

The factors influencing Gross Rental Yields and property expenses affecting Net Rental Yields are instrumental in shaping investment returns of a real estate portfolio. Savvy investors should understand that optimizing rental yields requires a comprehensive understanding of these factors, meticulous property management, and prudent financial planning. With a keen eye on the market and a commitment to providing desirable living spaces, property investors can navigate Bangkok’s vibrant real estate scene with confidence, reaping the rewards of their investments.

Bangkok Rental Investment: Final Thoughts

In conclusion, Bangkok’s real estate market offers an enticing landscape for rental property investors. As the economic epicenter of Thailand, the city boasts a steady and resilient rental market, fueled by a diverse population of both locals and expatriates seeking career, business and commercial opportunities.

Bangkok’s ongoing development, with expanded mass transit systems, commercial hubs, and neighborhood modernization, has been driving property prices upward. This not only provides the potential for capital appreciation but also makes the city an attractive destination for rental property investment.

When considering rental yields, it’s crucial to grasp both gross and net rental yields. Gross rental yield offers a quick glimpse of a property’s attractiveness, while net rental yield accounts for expenses like agency fees and maintenance costs, giving a more accurate profitability assessment.

Typically, Bangkok’s gross rental yields range from 2% to 6%, with most properties falling within the 3% to 5% range. These figures depend on rental income potential and property purchase price, so investors should carefully weigh these factors in their decisions.

Different Bangkok neighborhoods offer varying rental yields, with the Central Business District providing yields of 2% to 4%, while Outer Bangkok offers 4% to 6%. Each area has its own advantages and trade-offs, appealing to different investment preferences.

Factors like location, developer reputation, property specifications, purchase price, and property expenses all play significant roles in shaping rental yields in Bangkok. By understanding and leveraging these factors, investors can make well-informed decisions and navigate the dynamic and promising Bangkok real estate market!

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