Thailands Real Estate May Drop 20% In 2007

[jimbabe]

I find Thai history to be quite interesting. The list of kings associated with various geographic regions (Lan Na, Nan, Chiang Mai, Ayuthaya, Thonburi & Bangkok) is quite long. Although succession is nominally patrilineal, this has often not been the case in the past. A considerable amount of scheming (er, "palace intrigue") has gone on behind the scenes, with this son being bumped off, that uncle, and so on and so forth. Power has often transitioned to someone completely unrelated to the previous king, or only marginally so. A half dozen of the kings of Chiang Mai were actually Burmese, and at least one was "a rebel." King Taksin (1767-1782) was the son of a Chinese man and a Siamese woman, adopted by a royal family. Although he did a great deal to help Siam recover after the Burmese invasion of Ayuthya, he was not considered to be a "real Tai," or to have any true nobility, and so he was overthrown in the end, followed by Rama I.

I also find it quite interesting that so many Thais, here and there, profess to be of a noble lineage. This branch in Bangkok, tracing its history back to one or another king, or that extended family in Chiang Mai. I do not know if Thaksin can make a claim to royalty, but it would not surprise me at all. Perhaps a claim to nobility can come with a bit more than bragging rights.

Of course, Thailand is now a "constitutional monarchy," and the military gained much power in the early 20th century. From 1932-1957, Thailand was almost without a king, with King Prajadhipok succumbing to a military coup.

So there are these "three lenses" through which the Thai government/power structure can be viewed: the monarchy, the military, and the parliamentary system of government. Power waxes and wanes in each of these groups, and it is not always so clear as to which wields the most power at any given moment.

King Bhumibol has been a grand king in so many ways. He has done so much to improve and empower the monarchy of Thailand, and has represented a stabilizing factor not one bit less than enormous. I admire the man greatly, for all that he has done for and given to Thailand. In my mind, the man represents all the good that royalty ever can. (It is he who has made any foreign real estate speculation even possible, since such cannot occur without stability.)

Alas, all things come to an end... It seems that King Bhumibol has been in power almost forever. But he is old now, and he is not getting any younger.

Although not the first or most obvious analysis through which to view recent events, that there has been a coup at this point in time is really unsurprising when viewed against the backdrop of Thai history. That there could be another (two or three) is equally unsurprising. That the recent bombings could also be related to various groups of power in Thailand "seeking an improved understanding" also seems quite plausible, whether or not this is the case in fact. Understand -- it isn't really that anyone is unhappy with the current king, or wishes him overthrown. Rather, it is simply that the future power structure of Thailand is undecided/undefined. Or, if you prefer, "subject to renegotiation" at this moment in time.

It is certainly possible, indeed likely, that the prince will become king. The degree to which any future king will have power remains to be seen, however. Survival of the monarchy has been demonstrated as unnecessary, in the past. By the same token, survival of the parliamentary system of government must also be unnecessary.

History suggests that anyone who truly rules in Thailand will be charismatic, will be a skillful tactician and strategist, will have various kinds of "solid" connections to others representing power, will have ties to one or another faction of the Thai military, will be capable of =representing the interests= of one or more of the various factions representing power in Thailand, and will hardly be liked by all of those various factions. He will also have his own interests that he wishes to pursue, of course, which may sometimes be at odds with the interests of others. And so he will know how to watch his back, or, if not, will represent a temporary distraction in leadership, at best. (Really, Thaksin should have known that periods in which leaders are "out of town" are very popular times for coups in Thailand. By the same token, I'm sure the leaders of the coup know NOT to turn their backs on him. He does represent power, over and above his own interests.)

The next king =will= have power. Of one kind or another. The Thai military will also retain power. Of one kind or another. The parliamentary system will have all the power the king, the military, and the power elite choose to give to it, which may be more or less at any point in time (how many constitutions have there been in Thailand?).

There is a fourth force of power, of course, that being organized crime. The degree to which this is a "separate power" from the others often seems debatable, but it is there, nonetheless.

The point of all this? For those living in Thailand, it is reasonable to expect to be living in "interesting times" for the next several years, possibly even decades. Sure, it may all sort itself out quite quickly and for the good. But there should be no surprise if it does not. Regardless, the interests of various farangs who might want to own a condo or house aren't too near the top of the list.

In all seriousness, I love Thailand. It is a far more magical kingdom than anything Disney could dream up, and I am quite happy with the life represented by, and in, Thailand. What? You want to live in London, instead? Chicago? Good lord, why? Magic kingdoms are so much better.

Be brave. Buy land. Happy serfing!

[Heng]

I think alot of farangs seriously overestimate their impact on the market. Even the upscale units are mostly Thai residents. Some of the resort areas may suffer, but the Thai middle class will keep expanding and filling most of the spaces left by any precieved exodus of forgieners.

And ALL! these rich Thais live in a vacuum? None of them make money from property? None of em work in the tourist industry, the export industry etc. None of them have mortgaged property and use income from the above fields to make the repayments?

There's virtually no holding cost for land here for those who aren't leveraged... and compared to other economies that have larger segments that buy into the Finance 101 'you're not maximizing your capital if you aren't in debt' way of thinking, the foundation here is based on cash holdings. That's why you'll never see any serious drops in land prices. When the market of mortgagers 'suffers' here, that's as far as it goes, as there's a segment more than willing to hold or takeover that foreclosed property that only "feels" the pinch of having to scrape a little icing off the cake.

[SeanBangkok]

The idea of 20% being a worst case scenerio is laughable. Personally, I think the BKK condo market is already inflated, especially the costs of New Condos.

It is not abnormal for a real estate market anywhere to drop 10% in a year. With all the nonsense going on in Thailand, 30% drops are not in anyway impossible for the condo market. If these bombings begin to happen with any sort of regularity, you can bet your ass that people are not going to want to buy anything.

[SeanBangkok]

there are hundreds of farang run real estate sites, many of which advertise on TV who list absurdly inflated prices. Someone should do something about these con artists.

[SeanBangkok]

Whatever happens, Im sure that one small group of people will retain all of the wealth and power. That seems inevitable when all of the groups fighting for power are completely uninterested in those who they do not believe to be their equals.

As long as Thai people continue to refute the notion that all men are created equal, there does not appear to be much hope for a true democracy in the kingdom.

"King Bhumibol has been a grand king in so many ways. He has done so much to improve and empower the monarchy of Thailand, and has represented a stabilizing factor not one bit less than enormous. I admire the man greatly, for all that he has done for and given to Thailand. In my mind, the man represents all the good that royalty ever can. (It is he who has made any foreign real estate speculation even possible, since such cannot occur without stability.)"

[RedQualia]

Whatever happens, Im sure that one small group of people will retain all of the wealth and power. That seems inevitable when all of the groups fighting for power are completely uninterested in those who they do not believe to be their equals.

As long as Thai people continue to refute the notion that all men are created equal, there does not appear to be much hope for a true democracy in the kingdom.

"King Bhumibol has been a grand king in so many ways. He has done so much to improve and empower the monarchy of Thailand, and has represented a stabilizing factor not one bit less than enormous. I admire the man greatly, for all that he has done for and given to Thailand. In my mind, the man represents all the good that royalty ever can. (It is he who has made any foreign real estate speculation even possible, since such cannot occur without stability.)"

I mispoke somewhat at the end of my original post, when I said "Happy serfing."

There is a level at which Thailand is a democracy: poor people are equal to one another, and are largely free to fend for themselves. Anything resembling a middle class is a similar "democracy." It is the same in the USA, and in many other countries.

On a more fundamental level, however, Thailand is a monarchy. It is more appropriate to think in terms of the old European monarchies, their relationships with the military, and so forth.

I have no way of knowing, but it is not inconceivable that the king viewed Thaksin as a threat to the future of the monarchy, and that the coup is really a result of this line of thinking. One can wonder, for example, at why a Muslim general is at the head. Why not a more "nominal Thai?"

This begins to be off-topic. The point is simply that one should not think of Thailand as a democracy in any way, any more than the USA is (while it may more closely resemble a democracy, Bush is hardly responsive to the citizenry). Thailand is not a "true democracy," and will not be in our lifetimes, regardless of statements to the contrary. You seem to recognize that. It is not unreasonable to expect power to remain fluid and likely contested for some time.

Foreigners who might think about owning anything in Thailand, settling down with the little woman on 3-4 rai somewhere, should keep this firmly in mind. No matter what may be going on in the foreground, this is a country in which very much goes on in the background.

[kurtgruen]

there are hundreds of farang run real estate sites, many of which advertise on TV who list absurdly inflated prices. Someone should do something about these con artists.

I agree with you, but the buyers are also to blame, for not doing their proper research. In many cases, they want to pay too much, even though they don't know it....

For example, my wife bought a house recently in the town we live in. We were thinking that maybe her parents might want to move out into it or that we would keep it for a rental. Then we found a property that we really fell in love with and bought that one. Now, we put the house up for sale. Here is where reality sets in....

If we would have listed it for the approx. 375000 Baht we have into it right now (300 000 Baht plus transfer fees, building the wall, fence, renovations, etc.),...

1. we wouldn't even get any bites, because most foreigners would think it's a dump, if it is realistically priced, because they are used to paying a million or more for the same house. They wouldn't even come to look at it.

2. Why should we, when people are stupid enough to pay that kind of money (you can tell that I really don't care if I sell it or not right now ;-)

3. It's all about supply and demand. Westerners praise it so highly all the time....the great God of capitalism.

4. If I am smart enough to find a good deal for my wife, why shouldn't she be able to turn a profit from it. After all, we speak the language, we have put in our time here and we know what to look for.

I would say...buyer beware in this country. Not everything is what it seems. Some Western countries have many safeguards against flipping real estate. Usually, high taxes are a big deterrent.

Myself, I am not a gambler. I buy something, only because I think I will have personal use for it....a car, a house, a piece of land to build on, etc. If I get tired of it or my needs and wants change, I might sell it and try to turn a profit in the process.

A lot of investors and currency speculators to me are gamblers. Up to them, if they make it or not. Doesn't affect me one way or another.

As for Real Estate Agents, some people use them, some find their own deals. Up to them. If you don't like them, don't use them. If you look hard enough for a good deal, you will find it, even in an highly inflated market place like Thailand.

I agree with one of the previous writers. There are no big deterrents to just hold on to land, for Thai people. If they had high yearly property taxes for unused land (taxes that actually get enforced), you would see a lot more land for sale, that is currently just sitting there. Same goes for my wife and I... if there were high property taxes to be paid every year, we would probalby only own the land we live on, not three extra pieces. We don't really want the extra land, but up until now, there hasn't been enough motivation to sell it and to me, it is a good insurance for my wife, in case anything ever happens to me.

I also think, that you will never get a good deal from a foreigner or anyone who speaks decent English, in this country. That includes me, as I am not giving our land or house away either, when we sell it.

If you want a good deal, I suggest learn the language, spend a few years in the area where you want to buy, talk to the locals and then act quick when the right deal comes up. Often locals come around now to tell us reposession scenarios or quick divorce sales, etc. Once you speak some Thai and they know you are interested, you will get more than enough offers and if you sit back for a year or two, eventually, the prices will come down when they get desperate and you will have your good deal.

Now, i am talking the North of Thailand, Chiang Mai City and sourounding area. I have no idea how things work near the ocean or down in Bangkok. That could be a totally different ballgame.

My general rule is... never buy anything from a foreigner or if a foreigner is in any way involved in the scenaria. That goes for imports, shipping, real estate, cars, bikes etc. If you do, you WILL pay more. It would take a lot to convince me different.

I have one execption to my rule, that is Sunbelt Asia. The person I talked to (Thai Man who spoke very good English), didn't lead me down the garden path. When I asked the right questions, he confirmed my suspicions about various ways of leasing or buying property as a farang. That I really respected. I will probably deal with them on my next lease/purchase.

As for buying anything...as they say in Thailand ... cha cha (slowly)

Kurt

[dogleg]

Great Thread! I cannot really argue with any of the posts here, all of which are worrying!

Perhaps the current powers that be are deliberately lowering the cost of their turn at the speculation trough? (and sod anybody else).

Note also there HAS to be MORE "conflict" to allow the the disbanding of TRK party before any future elections. Also to allow more top-down control of the general population.

I have a job and long term GF here, and dont want to move but realise that I was already delaying decisions about investments - which I will need to provide retirement income - and looking tentatively around elsewhere...

[kurtgruen]

As long as Thai people continue to refute the notion that all men are created equal, there does not appear to be much hope for a true democracy in the kingdom.

All men are not created equal. I am not Thai, but even as a Canadian, I know that. LOL

Kurt

I love it when wishful thinking gets displayed as facts.

[Naam]

If we would have listed it for the approx. 375000 Baht we have into it right now (300 000 Baht plus transfer fees, building the wall, fence, renovations, etc.),...

1. we wouldn't even get any bites, because most foreigners would think it's a dump...

let's be reasonable Kurt. i am sure you are talking about a house for your dog(s) and not a house in which people would like to live.

[cdnvic]

The idea of 20% being a worst case scenerio is laughable. Personally, I think the BKK condo market is already inflated, especially the costs of New Condos.

No arguement there. I can't understand why people pay the same prices in Bangkok as they do in western cities that have far better infrastructure, more stable government, and better building standards.

For those who have discovered that a Thailand exists outside the Sukhumvit green zone, I think the market will be alot more stable.

[quiksilva]

Its far too early to speculate on what impact the bombs will have on property values. 20% downwards is utter rubbish. Real estate is by its nature very illiquid. The aftershocks of news headlines takes a long time to affect the real estate market, its not the SET.

At most all that will happen in the short term is that transactions will die off, whilst people wait and see what happens. It could just be a one-off event.

All this fear mongerring is like Bangkok after SARS, 9-11 and Bali. Everybody (including 'old Bangkok hands') was scared running around saying how we ought to avoid crowded places frequented by foreigners etc - what actually happened? What were the effects on real estate / economy here? Nada, nothing, zilch!

Okay a prolonged bombing campaign would be a worry, but who'd do that without taking responsibility for the attacks?

Word on the street has it that its quite unlikely to have anything to do with the southern insurgency, very different MO in terms of how the bombs were made, which was very professionally. They were the size of a small tissue box using digital watches as opposed to mobile phones which are favoured by the southern terrorists. Plus look at how they picked their targets, in the south they target one street, or one specific area, whereas these bombs were seemingly planted at random spots in the capital. According the American Embassy there have been absolutely no indications that Western interests have been targetted at all.

That doesnt sound like Muslim extremists to me. A one-off political thing, seems much more likely.

Now if you really want something to worry about today, worry about the proposed ammendments to the Foreign Business Act. If what has been proposed sees the light of day many major MNC's here could be in a for a real bumpy ride and the after shocks of that could have far greater consequences that will last much longer than any single night of bombs.

[kurtgruen]

If we would have listed it for the approx. 375000 Baht we have into it right now (300 000 Baht plus transfer fees, building the wall, fence, renovations, etc.),...

1. we wouldn't even get any bites, because most foreigners would think it's a dump...

let's be reasonable Kurt. i am sure you are talking about a house for your dog(s) and not a house in which people would like to live.

See, that is exactly the point I am trying to make. List it too cheap and people will think it's garbage.

Kurt

[Mid]

As long as Thai people continue to refute the notion that all men are created equal, there does not appear to be much hope for a true democracy in the kingdom.

All men are not created equal. I am not Thai, but even as a Canadian, I know that. LOL

Kurt

I love it when wishful thinking gets displayed as facts.

care to expound on this ...................

[Bruce1]

Interesting thread, which confirmed some things and showed me some others.

My attitude is that there's obviosuly going to be a power struggle going on for at least a year minimum, assuming they do produce a workable constitution and do hold democratic elections and they do result in a credible government. Some power source will control that government, and that will have some effects, but it's too early to say what, I think.

As for investing in Thailand, I looked into it a while back but the property nominee stuff scared me off, since I figured it was basically a scam and eventually some govt. would stop turning a blind eye and decide to clean it up, which would cause a lot of problems for a lot of people. Unfortunately, Thaksin's Shin deal has cruelled it for a lot of people. Plus, why would you pay 100% to only get 49% ownership of anything? Crazy.

That only leaves condos as a viable alternative, but they seem to be overpriced. I would be buying for accommodation, not for speculation.

Observing the real estate market reveals heaps of empty, unsaleable properties whose prices are falling. WIll they keep falling? If the political uncertainty continues, yes. How long? Who knows.

So I'll be applying a very large does of "buyer beware" for the medium term future, at least.

[bkkandrew]

Interesting thread, which confirmed some things and showed me some others.

My attitude is that there's obviosuly going to be a power struggle going on for at least a year minimum, assuming they do produce a workable constitution and do hold democratic elections and they do result in a credible government. Some power source will control that government, and that will have some effects, but it's too early to say what, I think.

As for investing in Thailand, I looked into it a while back but the property nominee stuff scared me off, since I figured it was basically a scam and eventually some govt. would stop turning a blind eye and decide to clean it up, which would cause a lot of problems for a lot of people. Unfortunately, Thaksin's Shin deal has cruelled it for a lot of people. Plus, why would you pay 100% to only get 49% ownership of anything? Crazy.

That only leaves condos as a viable alternative, but they seem to be overpriced. I would be buying for accommodation, not for speculation.

Observing the real estate market reveals heaps of empty, unsaleable properties whose prices are falling. WIll they keep falling? If the political uncertainty continues, yes. How long? Who knows.

So I'll be applying a very large does of "buyer beware" for the medium term future, at least.

Good and thoughtful post... Wish some powers-that-be would read it and call a halt to their mad schemes...

[LOS4words]

So all of the sudden middle class western Europeans arent welcome anymore? I promise i wont buy your property and "ghetto-fy" your housing projects with my trashy European lifestyle.

I guess you have to be ten times as rich as the average BKK educated Thai to be considered a "quality tourist"

[Dupont]

So all of the sudden middle class western Europeans arent welcome anymore? I promise i wont buy your property and "ghetto-fy" your housing projects with my trashy European lifestyle.

I guess you have to be ten times as rich as the average BKK educated Thai to be considered a "quality tourist"

They wern't specific enough in their aims.

They should have targetted STOOOPID people with money rather than rich people in general. Cause that's all they could ever get.

Think they managed Elton John and Sven Goren Eriksen last year. Not a great haul and thats if they followed up on it.

[kurtgruen]

As long as Thai people continue to refute the notion that all men are created equal, there does not appear to be much hope for a true democracy in the kingdom.

All men are not created equal. I am not Thai, but even as a Canadian, I know that. LOL

Kurt

I love it when wishful thinking gets displayed as facts.

care to expound on this ...................

No, I think I better leave that one alone

[Bruce1]

Thinking about this a bit more, if I were to marry a Thai and at some point we decided it might be a good idea to buy a house here, I might say the following to her:

"Thai law only allows me to buy 49% of land, so how about I put up my 49% in cash up front. You have a job so you borrow the other 51% and concentrate your income into paying it off, and meanwhile I'll pay the household running expenses out of my income. Deal?"

How do those of you already in a similar situation think such an offer would have been received?

Edited January 8, 2007 by Bruce1

[quiksilva]

It depends on your wife, but if she has the means to buy I dont see why this would be a problem.

From a legal perspective if the local partner can prove that they have the means to purchase the other 51% (via loan or otherwise) then the partner can not be classified as a nominee, providing that she also has 51% of the voting rights.

[zacatecas]

One can buy a home in beautiful Florida or Hawaii for less than in Krabi! With infrastructure! Garbage service, clean water, city planning, etc. The prices here are super inflated, pay a loy for little.

[accesscitrix]

Why is the baht strong? no idea but it makes housing more expensive for foreigners. House prices in Thailand are not that cheap and you need to be very careful when buying, a lot of developments never get finished or may take a lot longer than the date you have been given. it is also not easy to live in Thailand, if you plan to move there you need to be living there at least 3 years on a temporary visa until you can apply for permanent residency. When you apply for permanent residency visa it costs around 100k baht! not cheap and a lot more than most countries. As the previous poster said property else where such as in florida you get much more for your money. 6 million baht in florida will get you a 3 or 4 bedroom house with a swimming pool and a more stable and developed environment. Thailand is great for a holiday but have fun being ripped off in ever aspect if you move there permanently...

[dgarmaise]

"An estimated of 60,000 new units are projected to be constructed in 2007"

Baloney - this is 10 times the number of units that will be built. Where does the Thai media get this "information"?

From walking around Pattaya these days, I get the impression that 59,000 of these new units are being built here now!

[Scott123]

Foreign investors delaying their buying? They are being prevented by new rules on company formation/nominees, witholding taxes and visa regulations (buy it but don't come here)..

Why should Thai government make it easy for foreigners to form small bussiness and claim residency in Thailand? Any western country and most of the asian countries have more strict policy, why should Thai makes it easy?...just because you like to move to Thailand?

If I were the Thai goverment, I would do the same thing, I welcome big corporation investment, but I kick out those individuals who buy/form small bussiness (many of them are one or two men shops) only for the purpose of living in Thailand. Try do this in the U.S. or any other western country, they will laugh at you...

Edited January 8, 2007 by Scott123

[johnnyk]

They should have targetted STOOOPID people with money rather than rich people in general. Cause that's all they could ever get.

Think they managed Elton John and Sven Goren Eriksen last year. Not a great haul and thats if they followed up on it.

They did target STOOOPID people. Sven turned up, didn't he?

[johnnyk]

Its still easier for less-than-rich falang to come and live in Thailand than in most western countries.

Let's say an Asian wants to come and live in Canada.

No pompem, show up with documented net assets/cash of about CDN$500,000 and buy a business with four or more employees.

You must keep the employees with no layoffs (no matter if business goes down), and hold the business for minimum three years. Otherwise you are into the 6-month maximum stay routine and after a certain number of one-day runs to the US they may start looking a little more closely at you and say "no more".

I guess its the cost of the infrastructure.

Basically, they seem to be saying that apart from refugees Canada doesn't want dregs only solidly middle-class people/professionals.

Edited January 8, 2007 by johnnyk

[LoveDaBlues]

One can buy a home in beautiful Florida or Hawaii for less than in Krabi! With infrastructure! Garbage service, clean water, city planning, etc. The prices here are super inflated, pay a loy for little.

Land prices are too high all over Thailand IMO. However, home building is super cheap if you do your homework. You can have a home built with a decent finish (granite floors and countertops) for less than 8K baht per sq. meter. This DOES NOT include the land price or A/C.

I'll never understand the people paying 130K baht per sq. meter for a home in Thailand (unless their business situation forces it).

[bkkandrew]

Foreign investors delaying their buying? They are being prevented by new rules on company formation/nominees, witholding taxes and visa regulations (buy it but don't come here)..

Why should Thai government make it easy for foreigners to form small bussiness and claim residency in Thailand? Any western country and most of the asian countries have more strict policy, why should Thai makes it easy?...just because you like to move to Thailand?

If I were the Thai goverment, I would do the same thing, I welcome big corporation investment, but I kick out those individuals who buy/form small bussiness (many of them are one or two men shops) only for the purpose of living in Thailand. Try do this in the U.S. or any other western country, they will laugh at you...

If you bothered reading the original OP, together with the accompanying article, you would realise that the Thai analyist was bemoaning the "delay" is foreign investment...

My comment was based on that.

Moral - if you don't want people at your party, don't invite them!

[SeanBangkok]

Whatever happens, Im sure that one small group of people will retain all of the wealth and power. That seems inevitable when all of the groups fighting for power are completely uninterested in those who they do not believe to be their equals.

As long as Thai people continue to refute the notion that all men are created equal, there does not appear to be much hope for a true democracy in the kingdom.

"King Bhumibol has been a grand king in so many ways. He has done so much to improve and empower the monarchy of Thailand, and has represented a stabilizing factor not one bit less than enormous. I admire the man greatly, for all that he has done for and given to Thailand. In my mind, the man represents all the good that royalty ever can. (It is he who has made any foreign real estate speculation even possible, since such cannot occur without stability.)"

I mispoke somewhat at the end of my original post, when I said "Happy serfing."

There is a level at which Thailand is a democracy: poor people are equal to one another, and are largely free to fend for themselves. Anything resembling a middle class is a similar "democracy." It is the same in the USA, and in many other countries.

On a more fundamental level, however, Thailand is a monarchy. It is more appropriate to think in terms of the old European monarchies, their relationships with the military, and so forth.

Sadly, I cannot continue this conversation without breaking Thai law.