Experts Warn: Don't Judge Guaranteed Return Condos by Yields Alone
Property experts caution that guaranteed-return condos shouldn't be evaluated on yields alone, warning buyers to scrutinize a project's ability to generate rental income and meet payment obligations. COVID-19 exposed serious risks, with man
Surachet Kongchip, research head at Cushman & Wakefield Thailand, notes that guaranteed-return condominiums remain a key sales strategy for developers, particularly as the condo market slows and inventory piles up. Unlike discounts or free transfer fees—short-term measures—these projects offer 5-9% annual returns over 2-7 years or longer, providing strong incentive for investors.
However, buyers should not focus solely on promised returns. They must assess the project's operational capability, since returns depend on rental income. If a project fails to meet revenue targets, it cannot pay guaranteed returns on schedule.
COVID-19 exposed serious risks. Many projects launched between 2017-2020 stalled mid-construction when tourism collapsed and rental income vanished overnight. Some developers still cannot operate normally; projects in secondary locations far from beaches or attractions underperform expectations, falling short on rental revenue and threatening return payments.
Phuket dominates the guaranteed-return market with over 6-7 major projects, followed by Pattaya, which has slowed due to excess inventory and reduced foreign investment, especially from Russians. Other markets like Hua Hin, Cha-am, Bangkok, and Chiang Mai have fewer such projects.
Buyers typically sacrifice unlimited access to rooms—usually limited to 14-30 days annually—in exchange for guaranteed returns. The rest of the year, developers rent units daily or monthly, with daily rentals preferred for higher income. This rental revenue funds the guaranteed returns and covers operating costs.
