Baloney pony

How much would these boxes have to depreciate before becomong a solid investment? My hunch is 55-65%.

I look at those 3m boxes and think I personally would not touch that for more than 1.25 with taxes and fees paid.

I mean, these are hot, lifeless boxes stacked atop one another. No garden, no pool, often no parking attached to the unit itself. Often too few or the wrong types of windows. Most have really crappy balconies. No gas cookers.

There are small 32-35 sqm studios within your 1.25 m price range available with developers like LPN or grand udelight. They are small but they tend to have well taken care of facilities, security, and pool. I would never buy a small condo unit from a no name developer though. They turn into slum tenants pretty quickly.

So what does EST taste like? I'm assuming a super sweet version of pepsi.

And who said sticker price = value? There can be a huge amount or relatively modest amount of margin 'filler' in new build (and presale, off plan, etc.) pricing.

Except i've done enough research the past few months to learn the actual purchase price for those units and a lot of them are being resold at original purchase price. The owner's condos in those cases did not have any appreciation. I have seen the appreciation you're talking about but they tend to be truly exceptional units. A lot of sellers try to tack on their own "appreciation" estimates and put it on the market but those units remain unsold and sitting empty.

Maybe that's the appreciation you're thinking about..the ones that sellers post up with no actual takers?

A few factors to consider for foreign investors in real estate.

The Thai Baht isn't far from the historically strongest levels in history.

An investment in thai real estate is also an investment in Thai Baht. Thai baht is very strong at the moment if it weakens you stand to lose a lot of value very quickly if you purchase with western currency and hold real estate now.

Interest rates in the U.S. or elsewhere in the western world are at historical lows right now. 5-7% theoretical rental yields in Thai property looks tempting but they will look very mediocre compared with future bond or cd yields once interest rates rise again. Let's just say that betting that interest rates will never rise again in the U.S. is a pretty bad bet. There is also probably some sort of larger economic relationship between western interest rates and real estate markets in Asia too. Various funds hedge abroad with international REIT investments when U.S. real estate is not performing well. U.S. real estate bottomed out around 2010- Q1 2011 in most major cities and has been rebounding as well.

I haven't seen anyone make a strong case that most condo properties in major Thai markets actually appreciate regularly. I can go out at this very moment and bring up properties along the bts/mrt route purchased and sold at the same price as a few years ago. The units that do appreciate seem to be in the minority and have the attributes I mentioned before..one of a kind location and facilities.

Once again an anecdotal bit..

A friend of mine bought a large 100sqm 3 br condo in the ekkamai area at around 60k psqm back in late 2009. Similar sized fully furnished units in duplex or units identical to his floorplan can be bought furnished for the same amount today. The location is not bad. Proximity to BTS is reasonable. The building is decently maintained for its age. Where is the appreciation?

Prices keep rising with minimum wage requirements, shortage of land and. Inflation. Don't assume prices will come down. Many I know kick themselves for not buying and seeing their funder diminish with rising costs and wasted tent

The minimum wage requirements only effect the lowest end of Thai society. It doesn't have much of an effect on inflation or the upper tier rental market that expats are involved in. Not to mention i'm sure most companies will find various ways to game the wage requirements anyways.

When you're uncertain of value always do a little translating on prakard to see what thais are offering each other in the same building then adjust your offer downward from there. Get a thai person to make an initial inquiry as well. The price often gets "inflated" when you ask in the english language or appear as a foreign person.

First thing first. What is the value of a unit?

Only after you have this reference point can you then start negiotiation from a price lower than its value.

How do you calculate value from rental? I have seen you post on this before, but forgot. Let's say 10k per month rent, its value should be at about......

Actual rent should be 4-6% of a unit's realistic sale cost. So a unit renting for 10,000 baht probably costs 2,000,000 or less to buy. A unit that costs 3 million baht will usually rent for around 15,000 baht and so on..You will see some owners asking for 7%-10% for units no matter the market which is why those units stay empty. That premium only makes sense if it's at an amazing location or has access to one of a kind facilities.

As mentioned, it's all relative. I would say the market is much more fluid... there's an endless cycle of people losing or giving up on their land/buildings/condos/etc. And there's an endless line of people waiting to take those properties off their hands. Just look at the growth of the legal execution department auction system.

Growth is probably due to the increase in built area (esp in Bangkok) from the burst bubble of 2007-8. Will take at least 4-5 years from litigation to auction. Not all properties have bidders during auctions, only those that are better located.

In my experience the auctions have been steadily growing in popularity, as for the auction inventory (and in this I'm limited to Bangkok and Chonburi in experience), it's a pretty diverse mix of properties, old and new... haven't noticed any particular trend of 'time period' origin. I'm not aware of the bubble you mentioned, we've been steadily building for the last 7-8 years now. As boom and bust isn't limited to those who can't meet their mortgage requirements, there are endless permutations of failed business ventures and personal issue type seizures as well. There's plenty of 'junk' on the market, but I rarely see a 'no bid' as if individuals or vested parties don't take the property, the finance companies do to sell it to less informed customers or to simply wait for appreciation (although surely, some of the experts around here seem to 'know better' and these silly companies are just buying into steadily depreciating assets).

You realize that REO sales aren't anything new in the world and not invented by Thais right? It happens all the time in the U.S. too. That doesn't mean there isn't lots of distressed property on the books or a bubble in the works. In fact it's impossible to tell for certain because a lot of banks and financial companies hold onto property to keep their financial sheets intact.

Also, if appreciation was such a certainty why am I finding so many 3-5 year old condos close to the bts/mrt selling literally at plan cost or at a discount in many cases? These aren't shoddy crap boxes but 2 br units in luxury developments.

Just got back from thanksgiving buffet at Bourbon St. I have to say i'm really disappointed. They had two pre carved turkeys in a heat platter and both were dry as a bone. Several dishes seemed overcooked including the hot wings. The other dishes were decent but still fell short of what i've had at other places. Service was decent though and dessert was ok but again..not great.

I hate to say that about Bourbon St because it's one of my favorite places to eat at on other days. Their tuesday night buffet has always been good and I think it may actually be better than the thanksgiving buffet for quality control. Their ala carte menu is top notch too.

Not sure what that tangent/borderline rant was for, but yeah, to simply look at average incomes from some fact book, or worse yet, to assume most locals or foreigners one associates with are an accurate representation of the entire market, and to assume that these people are also the bulk of property owners is IMO/IME erroneous. These 'bubble/imminent crash' threads are a staple of any Thai related forum, and they are all very similar in that they seem to be more like outlets to vent one's frustration about market forces (which exist here like anywhere else) and prices. "There's no way these small numbers of elite locals and foreigners are going to sustain the market for much longer. Reality surely is going to set in soon!" "The guy who didn't accept my offer surely just made the worst mistake of his life... I'm surely the last cash paying customer for the next 100 miles or years even!" And yes, no doubt... reality does set it, just not the one they are ranting and wishing for.

The only 'generalization' people can ever seem to come to is...."these people don't know what they are doing!" or "ah, they must be cheating the system some how." Neither is a particularly rational or logical conclusion.

Actually, to be honest most of your replies seem to be coming from someone who has a chip on their shoulder and is uncomfortable with people pointing out real economic concerns in real estate here. You're probably interpreting things through an ethnocentric lens i'm afraid. Not everyone who is saying it could be a bubble is out to get Thai people or harbors some personal financial insecurities like you say either. I've actually been seriously looking to buy but there are an awful lot of red flags in this market.

In fact my "rant" is just an illustration of the economic reality here, Thais aren't exceptional or different from the rest of SEA. All the countries here are developing and have similar issues with the exception of Singapore.

So put away your flags and war paint, culture warrior.

Didn't say they all were. I'm speaking from my own observations and experiences like everyone else here. Of course there are people out there that are on payment plans and probably are struggling to make their mortgage payments and are hurt by vacancies.... and there are indeed plenty of people that pick up real estate like most people would pick up groceries though and probably don't count how many grains of rice are left in the pantry. Most of the latter that I have encountered are all of late 1st or 2nd generation 'wealth,' hardly 70-80 year legacy type wealth, although they are out there as well, the extended extremities of these families are fairly well represented all over the country and often reap the benefits of their lineage. I deal with both types on a daily basis and neither are in short supply.

You may encounter these people daily in your life and perhaps you are part of them as well but if you look at the country as a whole they are a tiny percentage of the population. Thailand's wealth inequality is tremendous. Social mobility is also far below that of the developed world still. So you may be right in saying they are late 1st or 2nd generation wealthy but most likely they had connected family members in government to get into that position of success anyhow. I wouldn't put most of them in the self made category because nepotism, corruption, family connections etc.. plays a huge role in who gets to be the plantation owner and who gets to be the peon in the fields in a feudal society.

Btw, you're basically not so subtly bragging that the Thais you know are so rich that basic investment principles are irrelevant. I'd say that's more troubling from an efficient markets point of view because it means that the income streams are more from economic rent seeking and monopolistic activity.

Again, IMO holding costs are minimal. The whole argument is whether you believe those holding costs are unacceptable or trivial. There are plenty of people to fill both groups. Not sure why folks keep insisting on trying to make it all one way or the other.

From what i've seen most condos in Thailand behave like depreciating assets/liabilities however you want to class them. There are a few that actually do appreciate but generally their location value is already priced in. Putting them on a portfolio as a rental investment seems very iffy especially if they are sitting empty most of the time. The only way this is worthwhile is if you can get a guaranteed 2-3% appreciation. I don't see that happening for most 1 br condos. I see a lot of condos being flogged at plan cost still, even those built just a few years ago close to mrt/bts locations.

Holding costs might be minimal but the lost opportunity cost isn't. During the same time period where people were talking about how great investing in condos were 2006-2009, 2009 onward was the great bull bounce for the equities and bond market in the U.S. Just about any decent index weighted like Vanguard mutual funds have had 10-30% returns during that period.

No doubt there are opportunity costs, but in my experience it's not an 'either or' issue in terms of one's assets/portfolio as a whole. For me, when I've found friends or family with unused resources, it usually means that they have so much redundancy in other areas of their revenue streams that it's trivial to get to excited about it. It's all relative and it seems like a lot of folks want to make it sound like 'if only' these people who own swaths of property and businesses had access to their 'business acumen.' Sometimes vacant properties are just those few pairs of sandals in your shoe closet that you let collect a little dust and don't bother to wear. It's not like they are going anywhere.

I realize that someone like Warren Buffet isn't losing sleep over empty factories somewhere on his company roster but i'm referring more to the investors who do buy into 1br condos with the full expectations of 7-9% yield. Not all the people holding empty units are the <1% aristocratic rich descended from SEA family legacies.

Again, IMO holding costs are minimal. The whole argument is whether you believe those holding costs are unacceptable or trivial. There are plenty of people to fill both groups. Not sure why folks keep insisting on trying to make it all one way or the other.

From what i've seen most condos in Thailand behave like depreciating assets/liabilities however you want to class them. There are a few that actually do appreciate but generally their location value is already priced in. Putting them on a portfolio as a rental investment seems very iffy especially if they are sitting empty most of the time. The only way this is worthwhile is if you can get a guaranteed 2-3% appreciation. I don't see that happening for most 1 br condos. I see a lot of condos being flogged at plan cost still, even those built just a few years ago close to mrt/bts locations.

Holding costs might be minimal but the lost opportunity cost isn't. During the same time period where people were talking about how great investing in condos was around 2006-2009, 2009 onward was the great bull bounce for the equities and bond market in the U.S. Just about any decent index weighted fund like Vanguard mutual funds have had 10-30% returns during that period up until now.

I long ago gave up trying to understand why Thais and farangs hang onto the sort of decaying wrecks that seem to be on every street and beachfront here. Unused, unrented, costing them money in common fees, producing little or no income and depreciating in value daily due to lack of maintenance.

I don't think these people are totally irrational, they are probably still hoping for future appreciation or value based on location. Except that the value was probably priced in by the developer long ago and it will take a really long time for the demand to catch up with the supply.

Plus Thailand doesn't really have the magic of gentrification. You have upper class trendsetters buying into certain areas but it's really the same set of wealthy people doing the same things. It's not a fresh batch of hip young upwardly mobile types with professional skills bringing life into an area.

I have observed the same phenomenon of 1br and studio units just sitting empty in many areas. These are "entry" price units that are easy for laymen speculators to purchase for about 1-3 million apiece. In most cases it averages around 70k-90k psqm which is very pricey for a closet. Even units close to the MRT/BTS that are tiny shoeboxes in "luxury" developments aren't guaranteed to have renters either. The multitude of IDEO developments sitting empty around the lad prao and Huay Kwang route comes to mind.

People need to stop comparing Thailand with Japan, the U.K., U.S. etc.. Thailand is a developing world country where city wage stats look like a deformed bell curve with all the wealth concentrated at the very lowest percentage of the population. The relatively small Thai middle class simply can't support a growing real estate market into maturity like U.K., U.S. etc.. cities.

BKK real estate is getting VERY pricey now as it is. If you break it down to sqf costs it's right up there with downtown Miami but not quite San Francisco levels. It'll certainly never reach London unless someone waves a magic wand and your average BKK Thai starts making 20-30x their current median wage.

This is another scenario that shows why it's risky to buy a condo off plan. I can't imagine the nightmare that will ensue if they do end up blocking development then the people who put substantial down payments down for units are screwed. I imagine even when this thing gets built the conflict with the residents could boil over into daily vandalism, possible violence, and sabotage.

You should read the Thai elite card's webpage. There's a little asterix when talking about the visa benefits for the "special entry" it's subject to immigration bureau approval each time. The immigration bureau is a huge pain in the a$$ when it comes to these things so it wouldn't surprise me at all if someone paid 1.5 million for this piece of worthless junk then on top of that they were refused a long stay visa by immigration anyways.

There's virtually no benefit to paying 1.5 million for this thing. It makes no sense whatsoever especially when the maximum fine for overstay is 20,000 and there are many options for visas.

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Normally the quote "But McDonalds of all franchises seems to have broken in their Thai staff well." applies to horses, but maybe you see the staff more as cattle.

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I don't know if I'm the only one but after reading the OP, I can't help but feel a deep antipathy for the poster. The service he receives most probably reflects the reaction of the service staff to his attitude.

OP, try treating waiters and waitresses with the respect they deserve and see how the service improves. Just a suggestion ...

Pure nonsense assumptions. I tip 15% over in sit down restaurants here even when it's not customary if I receive better than average where even "average" is quite poor in Thailand.

Another place where I have received better than average service is in MK. So it's not just western franchises but Thai franchises can do the same thing it's just that most have poor management principles and don't weed out the feckless layabouts.

I am always impressed by how efficient Thai employees are at Mcdonalds. They seem to get the order together in a timely manner and usually at least bother to smile. The attitude problems also tend to be minimal. I don't eat "Mac" that much but I have had the chance to sit in their cafe sip a coffee and observe the behavior in quite a few branches around the kingdom.

Normally Thai service on the lower (and higher) end is abysmal in its incompetence and attitude issues. This is especially true in big dept stores like Central or supermarkets where you have loads of staff texting on their phones, smirking and giggling like jerry's kids, or indolently shuffling about doing nothing.

But McDonalds of all franchises seems to have broken in their Thai staff well. How did they manage to do this where so many other businesses and government depts in Thailand have failed?

This is one of those tests of honesty that will probably end up saving you a lot of money later on. Your fiance's father led you blindly into it without warning you. You obviously couldn't trust them enough to handle the paperwork in their name. So maybe it's better to just write off that 100k and move on from everyone involved.

I remember being able to find their holiday schedule on their website before but it mysteriously disappeared or is buried somewhere under all the terrible jumbled Thaiglish translation links.

So is the immigration office open on the 29th or not?

Then I see Thais in a village with a new pickup and I have to wonder what percentage of their income that costs. How long is the loan, and what's this I hear about loan rates and terms? How much did that pickup cost in LOS?

I simply have no idea how they buy it without eating up most of their income.

I'm not trying to make a statement, other than I don't get it.

A Toyota Hilux is actually cheaper in Thailand than it would be in Australia or a similar model in the U.S. You answered your own question already. The dealerships and property developers collude with banks to offer special loan terms based on promotion schemes etc.. Not all the loans are at rip off interest rates either some of them are actually decent because most banks are smart not to kill the goose that lays the golden egg. They want consumers to be able to pay back debt rather than going through the hassle of repo.

It's already been said that a lot of Thais live in the same shabby house or plot of land that multiple generations have resided in. Many don't pay rent and there's no incentive to move out. If a household pools their meager income even if it only adds up to a monthly household income of 30,000 a month they can still afford a car.

On the low end of things i've seen how lower income Thais can afford iphones and such and it's not some grand mystery.

The latest iphone 4s only costs about 19k new. You can buy a second hand stolen one for around 13-15k at MBK. Your average lower income Thai persons makes about 6,000-12,000 a month in service or office peon jobs. They probably live with their parents or grandparents or other assorted relatives rent free. That means with just a few months of meager saving and maybe a little borrowing they can easily purchase an iphone, big screen tv, or whatever.

Thai car loans and such are available with extremely long terms so the monthly payment seems reasonable unless you actually do the math. A lot of lower income and even middle class folk couldn't care less about the bigger picture as long as they can afford the basic payments. It's short sighted for sure but they do get to drive around in a nice car. Banks like AEON make out big time here for this reason.

So your lower income Thai is probably making all sorts of payments from their meager salary but it's doable especially in multi-income families who aren't paying anything for rent, health care, insurance, etc..

I've become increasingly skeptical about prognostications of CRASH! in the BKK property market, purely because (anecdotally) I notice that most purchases are done in cash. In which case the need to sell during distressed times isn't a real factor for most. They are happy to leave them empty if not in use.

I foresee a problem with Thailand's condo market that does impact future appreciation and that's the low % growth of the middle class relative to the population and the effect of stagnant real wages. Thailand's current easy credit seems to be based off of domestic bond markets. You're right in saying that it's not like the asian crisis where a lot of outside money was flowing in and being speculated on property. However the people you see buying loads of condo units for flipping are all rich to upper middle class Thais which is a tiny % of the overall population. I assume you know many people like this and they are sticking their money into property. I bet the regular middle class people are more into fixed savings accounts rather than property speculation. If you're a regular middle class family with a few million spare baht lying around it's much better to stick it into a 3% account with no tax withholding rather than gamble on property for a marginally better but much higher risk non liquid 5-6% return. The lower income people are probably net borrowers and carry debt so I won't even mention the large majority of Thailand's population who can't afford condos at all.

That means a lot of condo units aren't being sold to people who are living in it. What this means in the long run is hard say. Thailand does lack other growth drivers such as a robust growing educated immigrant population etc.. too. Foreign investors and long stay individuals in Thailand's real estate market is still tiny.

I don't think there will be a major crash since most of the money being locked into Thai real estate are from wealthy individuals in Thailand anyways. This is fairly different from bubbles in let's say the UAE where a lot of the money was from foreign investors in other gulf states and western banks.