And if you add Western countries in the yield looks even worse.

 

Has Thailand always had oversupply in many of its cities or is this a recent phenomena?

 

I'm interesting in possibly migrating to the Phils in the future and it would be interesting to know if Asian countries tend to have a supply explosion as they get wealthier (driving down yields)

Rent is paid from income whereas the condos are purchased with ever more risky/questionable (negatively amortizing) loans.  Simple math.

Not sure how you can average out a whole country and give an accurate representation. Different price ranges or different areas could have fantastic returns only to be adjusted down by an oversupplied overpriced area.

 

Thailand has very high home ownership so there is a less overall rental market, 40 million tourist a year, some doing daily rents, would skew the figures as well.

 

I have a condo in Pattaya gives a solid 8% net yield, wife has a house in Bangkok returns 4 %.

The country matters a lot in these things. In China there is a shortage of safe places to put one's money and an upper class with a ton of it. As a result property prices go up, but rents do not necessarily follow.

 

My hunch living in Pattaya is that the resort areas tend to overbuild hoping for expats to come in and buy up the foreigner allotments. Maybe policies around borrowing for construction also encourage this.

 

 

Over-inflated sale prices!

Sweeping generalizations but.. 

 

A cultural affinity against renting (desire for new ownership, never sell / cannot sell mindset), weak resale markets, a lack of planning consent holding back inventory, lower quality building (this shouldnt effect % returns I admit) standards. etc etc etc... 

 

On the flip side, there are parts of the market in some areas which are very underserved, eg in chiang mai its possible to rent a lower end / mid end house, moobaan style but not unliveable for as low as 6 - 10k, far cheaper than any liveable options on Phuket, hua hin, etc.. However look for a clean, modern, smallish place with a pool, and suddenly they are all 40 plus where (especially hua hin) these are 25 - 30k. My gut is that the market in CNX is and has been a thai dominated market and the farang features of pool, outdoor areas, BBQ zone etc dont get considered like they do in HH / Jomtien / etc etc. Someone in CNX who built thinking of farang (or non Thai generally) renting, could be easily beating that 5% target. 

I think you should take a look at Hua Hin again. There's hundreds of new-built, Thai destined property between the bypass and town, where 6500 baht for 3 bedrooms is the norm. 4500 is not unheard of. Thai's buying, but cannot aford to live there so they buy to let, so to speak. Even in town now, town houses 2-3 bed, and furnished rarely get more than 12000. Of course, you *can* opt for the pool villa if you want, and will pay more, but probably still only half of what you might have 8 years ago, for long term rent. Mine (off 88) was 4500 for 10 years, though only 1 br.

 

What causes it? Oversupply, pure and simple. Exchange rates don't help, but it is the oversupply (and increasingly desperate landlords) that ratchet the prices down.

1. The overall economy.

 

Investors place themselves on a risk - return line depending on their situation. The investment choices and the risk involved will tend to be roughly proportional. i.e. the greater the risk, the more the potential return should be. Savings rates may be higher in Indonesia than in Japan.

 

2. The method used to arrive at the data

 

Does the return include the effects of taxation, renter default, hassle of government bureaucracy, insurance etc. Is the data comparing apples with oranges?

 

 

Easy to see the empty condos, I rent in Jomtien, and my condo was nearly empty by mid January last. Those huge towers on 2nd rd  are empty. A few Russians at Christmas holidays,  that’s all. The cheaper condos have the long stayers.

 

My sister-In-law has an older style house she rents out. Has been empty more often than let. Never had a tenant who stayed more than 6 months. It doesn't generate enough income to cover maintenance costs. Unless you are poor, there are always plenty of options. And when it comes to selling, there are 10 year old Moobaans with houses that never sold ….. we are not a tourist area, which doesn't help.

Over-Inflated real estate prices.

The higher the prices, the lower the yields.

Mostly caused by low interest rates on loans and lots of money seeking safe investment.

You nailed it with 'over supply'. Which has been exacerbated by market downturns. There're just so many vacant properties nowadays.

 

Likely the same will happen in The Philippines. If not already. Outcome is dependent on when you participate in the cycle.

 

 

On 9/21/2019 at 10:20 AM, spw888 said:

Over-inflated sale prices!

correct , also supply out way demand. 

I think Thais are willing to pay higher prices vs rents because they plant to keep the property for a long time. They don't look for a great return.

 

The beach towns in California in general offer a very low rate of return. The property is very expensive and the rents are cheap in comparison.

On 9/20/2019 at 5:50 PM, Hal65 said:

The country matters a lot in these things. In China there is a shortage of safe places to put one's money and an upper class with a ton of it. As a result property prices go up, but rents do not necessarily follow.

 

My hunch living in Pattaya is that the resort areas tend to overbuild hoping for expats to come in and buy up the foreigner allotments. Maybe policies around borrowing for construction also encourage this.

 

 

Your graph in the 1st post, are those percentages gross yields or net yields of those asian countries?