New Condo Speculators

[thaigene2]

Since IMHO we can't really trust the Post or Nation to report on the true state of the condo/property market (newspapers too tied to the developers' adverts to p+ss them off), how will we know if the credit-crunch has arrived and speculators who bought to flip prior to completion (and re-payment of loan to the bank) are against the wall?

What will this mean in terms of building completions? What will this mean to those Thai families who guaranteed the loans to speculate on flipping? (think this is different to last time in the mid-90's when Thai families used their own money to finance - rather than 'easy credit' from the banks in recent years).

Edited March 25, 2007 by thaigene2

[bingobongo]

here are some BOT numbers...... the horror

http://www.bot.or.th/Bothomepage/databank/...Econ/Tab06E.asp

Edited March 25, 2007 by bingobongo

[Gary A]

My guess is as good as anyones and I predict that MANY of these overpriced developments will never be completed. Projects with prices of 90,000 baht and up per square meter have priced themselves out of the condo market. Anyone who buys pre-construction has WAY more nerve than I have. There are still empty developments left over from the last glut.

I would advise anyone who wants to buy a condo to buy one that they can physically see and can look at the grounds and how the grounds are maintained. You can then see exactly how much money is in the maintenance fund and if the funds are there to take care of any major emergencies.

[thaigene2]

Gary A

Agree with you totally...but that doesn't answer the question - thanks anayway.

Bingobongo

I have no idea what those numbers mean - especially since the commas are in the wrong places. Can you please interpret?

tks.

[SiriusBlack1]

I believe what the numbers are saying is that, while housing starts have slowed dramatically since the start of the boom a few years ago, debt associated with property speculation is mounting. A classic property bubble.

Do I win?

[backflip]

The projects will be completed, and offered as serviced apartments. This scenario has already been played out several times.

[MarcHolt]

My guess is as good as anyones and I predict that MANY of these overpriced developments will never be completed. Projects with prices of 90,000 baht and up per square meter have priced themselves out of the condo market. Anyone who buys pre-construction has WAY more nerve than I have. There are still empty developments left over from the last glut.

I would advise anyone who wants to buy a condo to buy one that they can physically see and can look at the grounds and how the grounds are maintained. You can then see exactly how much money is in the maintenance fund and if the funds are there to take care of any major emergencies.

Gary A

Agree with you totally...but that doesn't answer the question - thanks anayway.

Bingobongo

I have no idea what those numbers mean - especially since the commas are in the wrong places. Can you please interpret?

tks.

The question is not really relevant. What is important is to act on Gary A's advice. I always advise my clients to be very wary when considering buying off-plan. I've seen too many projects fail to recommend anything else.

Although the developer is paying my commission, at the end of the day the buyer is the person I always work to protect. A happy buyer will tell their friends and coleagues. A happy developer will smile all the way to the bank without a thought for the agents who brought in the money.

The only way to be reasonably sure of what you are buying into is to vet the project and the developer very thoroughly first. Get top-notch legal advice. It's worth paying a little extra for a very good lawyer, especially if it saves you millions as a result.

The BOT Numbers (BOT Report)

If you look at the numbers for Juristic Act and Right Registration Fee 2% (normal case) ^2/ you can see that the numbers have remained fairly constant. Averaging the 2006 numbers, 11,096/12 = 924.66, you can see that the amount of fees paid each month has remained fairly constant.

Land transactions nationwide averaged out at 51,253 in 2006, so looking at the last few months of the year we can see the figures have actually remained fairly stable.

The number of condominium registrations nationwide has also remained fairly stable, with an average of 1,625 per month in 2006, with slightly higher numbers in Oct and Nov: 1,806 & 1,974.

When you look at these figures it is clear that the amount of transactions and new building permits have remained fairly steady throughout the crises caused by the 30% rule and the announcement of the new FBA rules.

What has changed however, is the number of people coming to Thailand to invest in property. Sales have dropped alarmingly.

In addition, the Thai mortgage system is not handing out loans to Thais very easily, and virtually none to foreigners, so housing sales have plummeted; so much so that big companies like Land & Houses have announced they will no longer target the high end market. They are concentrating on low to medium budget housing now.

So, to answer the question about whether it is safe to buy 'off plan', my advice stands. Before you buy, do your due diligence, just as you would anywhere else in the world. Just because the price is cheaper than back home doesn't make it safer. Quite the reverse, in fact, because there are no safeguards built into the industry here.

The guiding rule in all financial transactions in Thailand should always be, You get what you pay for and Buyer Beware!

Cheers!

Marc Holt

[bingobongo]

My guess is as good as anyones and I predict that MANY of these overpriced developments will never be completed. Projects with prices of 90,000 baht and up per square meter have priced themselves out of the condo market. Anyone who buys pre-construction has WAY more nerve than I have. There are still empty developments left over from the last glut.

I would advise anyone who wants to buy a condo to buy one that they can physically see and can look at the grounds and how the grounds are maintained. You can then see exactly how much money is in the maintenance fund and if the funds are there to take care of any major emergencies.

Gary A

Agree with you totally...but that doesn't answer the question - thanks anayway.

Bingobongo

I have no idea what those numbers mean - especially since the commas are in the wrong places. Can you please interpret?

tks.

The question is not really relevant. What is important is to act on Gary A's advice. I always advise my clients to be very wary when considering buying off-plan. I've seen too many projects fail to recommend anything else.

Although the developer is paying my commission, at the end of the day the buyer is the person I always work to protect. A happy buyer will tell their friends and coleagues. A happy developer will smile all the way to the bank without a thought for the agents who brought in the money.

The only way to be reasonably sure of what you are buying into is to vet the project and the developer very thoroughly first. Get top-notch legal advice. It's worth paying a little extra for a very good lawyer, especially if it saves you millions as a result.

The BOT Numbers (BOT Report)

If you look at the numbers for Juristic Act and Right Registration Fee 2% (normal case) ^2/ you can see that the numbers have remained fairly constant. Averaging the 2006 numbers, 11,096/12 = 924.66, you can see that the amount of fees paid each month has remained fairly constant.

Land transactions nationwide averaged out at 51,253 in 2006, so looking at the last few months of the year we can see the figures have actually remained fairly stable.

The number of condominium registrations nationwide has also remained fairly stable, with an average of 1,625 per month in 2006, with slightly higher numbers in Oct and Nov: 1,806 & 1,974.

When you look at these figures it is clear that the amount of transactions and new building permits have remained fairly steady throughout the crises caused by the 30% rule and the announcement of the new FBA rules.

What has changed however, is the number of people coming to Thailand to invest in property. Sales have dropped alarmingly.

In addition, the Thai mortgage system is not handing out loans to Thais very easily, and virtually none to foreigners, so housing sales have plummeted; so much so that big companies like Land & Houses have announced they will no longer target the high end market. They are concentrating on low to medium budget housing now.

So, to answer the question about whether it is safe to buy 'off plan', my advice stands. Before you buy, do your due diligence, just as you would anywhere else in the world. Just because the price is cheaper than back home doesn't make it safer. Quite the reverse, in fact, because there are no safeguards built into the industry here.

The guiding rule in all financial transactions in Thailand should always be, You get what you pay for and Buyer Beware!

Cheers!

Marc Holt

Marc Holt, great interpretation thanks.

Thaigene2, Marc Holt beat me to the interpretation, but he is spot on

[bingobongo]

some excerpts that stood out for me were..............

RISKY BUSINESS

Clouds on Thailand's horizon

March 27

"The Bank of Thailand has in recent months spent more than a trillion baht to keep the currency weak. "

"Thailand's instability-driven collapse of domestic demand is also plainly discernible in sliding real investment growth. "

"Moreover, further devaluation of the US dollar could lead to the depreciation rather than appreciation of the Thai baht, as investors are forced to unwind their yen carry trades. That means that in the months ahead both Thai asset prices and the military-led government could tumble in unison. "

http://www.atimes.com/atimes/Southeast_Asia/IC27Ae02.html

[MarcHolt]

some excerpts that stood out for me were..............

RISKY BUSINESS

Clouds on Thailand's horizon

March 27

"The Bank of Thailand has in recent months spent more than a trillion baht to keep the currency weak. "

"Thailand's instability-driven collapse of domestic demand is also plainly discernible in sliding real investment growth. "

"Moreover, further devaluation of the US dollar could lead to the depreciation rather than appreciation of the Thai baht, as investors are forced to unwind their yen carry trades. That means that in the months ahead both Thai asset prices and the military-led government could tumble in unison. "

http://www.atimes.com/atimes/Southeast_Asia/IC27Ae02.html

That would a relief! Anything but this stagnation and uncertainty. The problem this government made was thinking it could implement any meaningful changes. They forgot that their mandate was to take care of the country until democratic elections can be arranged.

When the next government comes in, I am sure they will review the messes left by this government and change or throw them out entirely. What a waste of time this has all been.

Meanwhile, the Thai people continue to suffer. Many have lost their jobs. The Thai farmers are very unhappy but were unable to air their grievances because the military turned them back at Korat. The southern terrorism is getting worse and threatening to spread outwards. Of course they are taking advantage of the current political mess. And now the Village Scouts are making noises about going down there to help their southern Buddhist brothers. Sounds like a vigilante mob to me.

Oh, for the days of good old corrupt government under Thaksin....and I never thought I'd say that!

Despite all this, it's a good time to buy property. Prices have flattened out, as they always do when there is a financial crisis. Buy a condo now, rent it out, and wait for the next boom. It may take as long as 5 more years for conditions to improve, but improve they will.

[thaigene2]

Not so sure about buying now Marc. And who knows whether we'll even be allowed to LIVE HERE five years from now? At least not year round for most withouth Work Permits.

That Village Scouts thing sounds worrying...weren't these the same little stormtrooper gangs who took part in the October 75 carnage at Thammasat?

[bingobongo]

the real estate noose is tightening while supply is increasing........

PROPERTY

Check buyers' credit, firms are urged

Banks reject 30% of presales purchasers, seminar is told

Property firms must inspect home-buyers' financial status before making a purchase agreement, since commercial banks are now rejecting their presales home-buyers at a rate of up to 30 per cent , said speakers at a recent seminar jointly organised by the Thai Condominium Association and the Housing Estate Association.

Thai Condominium Association president Atip Bijanonda said bank rejections of up to 30 per cent of total home-buyers have had a negative impact on the property market, because firms must resell the projects again. As a result, the property market has had more supply than demand in this year's first quarter.

http://www.nationmultimedia.com/2007/03/29...siness_30030520

[swanks]

I agree with backflip -- A property developer in South Pattaya is building three blocks -- they were all going to be condo's. The first is near completion and a show condo is available but the laters reports say that although he has been trying to sell condo for 4 months only one has sold. He has stopped work on the middle block and the third block is being finished as apartments. The promised swimming pool is partly completed but seems to have been washed in OMO as it has shrunk considerably from its planned size and instead of many people working on the site there are only a couple of score

I personally hope the speculators get there fingers burned and prices stop rising in such a silly way!

We are seeing silly prices over the last year and I hope people will not pay them .

I am very interested in what you said about the condo development above , R , which one is it ?

As a coincidence , there was a post on another thread about a developer that showed small villas between a condo block and the sea then seems to have sold that land on to allow another condo to be built in front of them !

[sunshine13]

"Projects with prices of 90,000 baht and up per square meter have priced themselves out of the condo market."

I dont know about outside BKK, but those priced around this range are all sold out. Go to skyscrapercity.com and you will see.

[backflip]

Andaman Place (Soi 11) has just been renamed "Fraser Suites", the 3rd condo development (taht I know of) to do so. Guess what?! The construction has continued - no one went bankrupt, no one lost his or her investment, the owners will get their respective condos, and the unsold units will become apartments. Ohhhh noooo!

Edited April 1, 2007 by backflip

[chownah]

Andaman Place (Soi 11) has just been renamed "Fraser Suites", the 3rd condo development (taht I know of) to do so. Guess what?! The construction has continued - no one went bankrupt, no one lost his or her investment, the owners will get their respective condos, and the unsold units will become apartments. Ohhhh noooo!

Ohhhh noooo! indeed, now there are three condos all called "Fraser Suites"!!! How will the taxi drivers know which one I mean since I'm planning to buy a reduced price unit in each of them!!! (for those who are slow on the uptake, I'm just kidding)

You have a really good crystal ball being able to see that everything will go fine now that the names have been changed.

[VegasVic]

some excerpts that stood out for me were..............

RISKY BUSINESS

Clouds on Thailand's horizon

March 27

"The Bank of Thailand has in recent months spent more than a trillion baht to keep the currency weak. "

"Thailand's instability-driven collapse of domestic demand is also plainly discernible in sliding real investment growth. "

"Moreover, further devaluation of the US dollar could lead to the depreciation rather than appreciation of the Thai baht, as investors are forced to unwind their yen carry trades. That means that in the months ahead both Thai asset prices and the military-led government could tumble in unison. "

http://www.atimes.com/atimes/Southeast_Asia/IC27Ae02.html

Bingo, I am glad that I had some time on my hands tonight to look back at some of the TV posts of the last month or so, because it is the first time that I have come across this article, thanks! This is a very insightful and astute piece of business journalisim about the current situation in Thailand. I think the telling figures will be the numbers from the 2nd and 3rd quarters of CY 2007. Government numbers of the macro economy often are lagging indicators of how the economy was doing 6 months prior, the reality of what has been going on in the Thai economy over the last 6 months will likely not show up in the figures until October when Q3 CY07 numbers are made public. On the micro economy front, the farmers, construction workers, taxi drivers, business owners, tour operators and realtors can tell you right now what is happening to the Thai economy and it isn't very pretty. The weakening U.S. dollar is the fuel that feeds the robust U.S. economy and the record levels that most of the major stock exchanges in the U.S. have hit in recent days, and while U.S. treasury officials say in public that they want a strong dollar, the reality is that behind closed doors they are ecstatic about the current dollar valuation especially against the euro and the pound, so I would imagine that unless the european central banks intervine on behalf of their exporters, that the weak dollar will be here for a while. I want to take this opportunity to thank you for taking the time to post this article as well as the many other business articles that you regularly post on this forum. The articles that you post here give the readers a far more accurate picture of what is going on in the Thai economy than the plethera of posts from the rose colored glasses brigade, many of whom actually think that the strong Thai baht is a good thing and an indicator of a strong Thai economy.

[palm]

The articles that you post here give the readers a far more accurate picture of what is going on in the Thai economy than the plethera of posts from the rose colored glasses brigade, many of whom actually think that the strong Thai baht is a good thing and an indicator of a strong Thai economy.

Can you please give us some examples of these posters who have actually said this?

[thaigene2]

The articles that you post here give the readers a far more accurate picture of what is going on in the Thai economy than the plethera of posts from the rose colored glasses brigade, many of whom actually think that the strong Thai baht is a good thing and an indicator of a strong Thai economy.

Can you please give us some examples of these posters who have actually said this?

Well, Backflip above said the unsold units would be rebranded as rentals..and someone else said most of the 90,000 ++ psm places were 'sold out'.

Anyway, my original post was questioning what happens to those 100% 'sold out' buildings when/if it becomes clear that speculators were the buyers, but had no plan to ever complete the purchase (rather just pay small deposit then low monthly payments for 24 months while under construction - gambling that they could re-sell (flip) to someone before the final 90% comes due).

Will we see construction stop when the building is nearly completed and the bank stops giving money to the developer because the 'buyers to flip' have dropped out at the final hurdle?

Only a developer with deep pockets or a reluctant banker/financier would enter the rental market in this way IMHO.

[quiksilva]

Who's to say that the speculators will not proceed? I think the majority bought to rent, not to flip.

I think the real question here is what will their returns be like? The answer to which is dependant on the amount of inward bound farangs.

So will our ever increasing numbers be sufficient to support the rental market?

Its been good recently but I suspect that this will fall off (FBA is scaring off start ups in the commercial market) and that sub-prime condo yields will therefore soften over the next 2-3 years.

[bingobongo]

some excerpts that stood out for me were..............

RISKY BUSINESS

Clouds on Thailand's horizon

March 27

"The Bank of Thailand has in recent months spent more than a trillion baht to keep the currency weak. "

"Thailand's instability-driven collapse of domestic demand is also plainly discernible in sliding real investment growth. "

"Moreover, further devaluation of the US dollar could lead to the depreciation rather than appreciation of the Thai baht, as investors are forced to unwind their yen carry trades. That means that in the months ahead both Thai asset prices and the military-led government could tumble in unison. "

http://www.atimes.com/atimes/Southeast_Asia/IC27Ae02.html

Bingo, I am glad that I had some time on my hands tonight to look back at some of the TV posts of the last month or so, because it is the first time that I have come across this article, thanks! This is a very insightful and astute piece of business journalisim about the current situation in Thailand. I think the telling figures will be the numbers from the 2nd and 3rd quarters of CY 2007. Government numbers of the macro economy often are lagging indicators of how the economy was doing 6 months prior, the reality of what has been going on in the Thai economy over the last 6 months will likely not show up in the figures until October when Q3 CY07 numbers are made public. On the micro economy front, the farmers, construction workers, taxi drivers, business owners, tour operators and realtors can tell you right now what is happening to the Thai economy and it isn't very pretty. The weakening U.S. dollar is the fuel that feeds the robust U.S. economy and the record levels that most of the major stock exchanges in the U.S. have hit in recent days, and while U.S. treasury officials say in public that they want a strong dollar, the reality is that behind closed doors they are ecstatic about the current dollar valuation especially against the euro and the pound, so I would imagine that unless the european central banks intervine on behalf of their exporters, that the weak dollar will be here for a while. I want to take this opportunity to thank you for taking the time to post this article as well as the many other business articles that you regularly post on this forum. The articles that you post here give the readers a far more accurate picture of what is going on in the Thai economy than the plethera of posts from the rose colored glasses brigade, many of whom actually think that the strong Thai baht is a good thing and an indicator of a strong Thai economy.

VegasVic,

thanks for the note. I like to add a does of reality to the actual situation in Thailand as opposed to the "Thailand is only the land of rainbows and lollipops mentality". Thailand is going nowehere quite quickly and will worsen as the global economy worsens. Thailand is a fine country, but not right now and will not for the forseeable future (as far as economically and politically). I will keep posting relevant business articles and let the dreamers flame away as opposed to posting useless rhetoric as some of the dreamers and those in denial.

[VegasVic]

some excerpts that stood out for me were..............

RISKY BUSINESS

Clouds on Thailand's horizon

March 27

"The Bank of Thailand has in recent months spent more than a trillion baht to keep the currency weak. "

"Thailand's instability-driven collapse of domestic demand is also plainly discernible in sliding real investment growth. "

"Moreover, further devaluation of the US dollar could lead to the depreciation rather than appreciation of the Thai baht, as investors are forced to unwind their yen carry trades. That means that in the months ahead both Thai asset prices and the military-led government could tumble in unison. "

http://www.atimes.com/atimes/Southeast_Asia/IC27Ae02.html

Bingo, I am glad that I had some time on my hands tonight to look back at some of the TV posts of the last month or so, because it is the first time that I have come across this article, thanks! This is a very insightful and astute piece of business journalisim about the current situation in Thailand. I think the telling figures will be the numbers from the 2nd and 3rd quarters of CY 2007. Government numbers of the macro economy often are lagging indicators of how the economy was doing 6 months prior, the reality of what has been going on in the Thai economy over the last 6 months will likely not show up in the figures until October when Q3 CY07 numbers are made public. On the micro economy front, the farmers, construction workers, taxi drivers, business owners, tour operators and realtors can tell you right now what is happening to the Thai economy and it isn't very pretty. The weakening U.S. dollar is the fuel that feeds the robust U.S. economy and the record levels that most of the major stock exchanges in the U.S. have hit in recent days, and while U.S. treasury officials say in public that they want a strong dollar, the reality is that behind closed doors they are ecstatic about the current dollar valuation especially against the euro and the pound, so I would imagine that unless the european central banks intervine on behalf of their exporters, that the weak dollar will be here for a while. I want to take this opportunity to thank you for taking the time to post this article as well as the many other business articles that you regularly post on this forum. The articles that you post here give the readers a far more accurate picture of what is going on in the Thai economy than the plethera of posts from the rose colored glasses brigade, many of whom actually think that the strong Thai baht is a good thing and an indicator of a strong Thai economy.

VegasVic,

thanks for the note. I like to add a does of reality to the actual situation in Thailand as opposed to the "Thailand is only the land of rainbows and lollipops mentality". Thailand is going nowehere quite quickly and will worsen as the global economy worsens. Thailand is a fine country, but not right now and will not for the forseeable future (as far as economically and politically). I will keep posting relevant business articles and let the dreamers flame away as opposed to posting useless rhetoric as some of the dreamers and those in denial.

Bingo, Even those in denial will have to face the music very shortly here. There will be global slowdown by years end as you point out and the hinge point as to if this actually leads to a worldwide recession is the U.S. consumer. The numbers from Wallmart this past week show that the U.S. consumer is already tightening their spending. The key point that isn't often spoken about is the indebtedness of the average U.S. consumer, which is at record levels. Should the high risk home mortgage market (which is currently in a meltdown in the states) bleed over to the regular market then I fear that the U.S. consumer would be forced to pull back even further in their spending habits and this could definately lead to a worldwide recession, and given the weakened state of the current Thai economy this could be an absolute nightmare for Thailand. On a positive note I do feel that the rhetoric from the board of governers of the BOT on friday could mean some substantial rate cuts in the very near furure which will weaken the TB to a degree, but even this is just a stop gap measure. It will be interesting to see how this all plays out.

[VegasVic]

The articles that you post here give the readers a far more accurate picture of what is going on in the Thai economy than the plethera of posts from the rose colored glasses brigade, many of whom actually think that the strong Thai baht is a good thing and an indicator of a strong Thai economy.

Can you please give us some examples of these posters who have actually said this?

Well, Backflip above said the unsold units would be rebranded as rentals..and someone else said most of the 90,000 ++ psm places were 'sold out'.

Anyway, my original post was questioning what happens to those 100% 'sold out' buildings when/if it becomes clear that speculators were the buyers, but had no plan to ever complete the purchase (rather just pay small deposit then low monthly payments for 24 months while under construction - gambling that they could re-sell (flip) to someone before the final 90% comes due).

Will we see construction stop when the building is nearly completed and the bank stops giving money to the developer because the 'buyers to flip' have dropped out at the final hurdle?

Only a developer with deep pockets or a reluctant banker/financier would enter the rental market in this way IMHO.

Thaigene2, We have already seen construction stop and developers cancell future projects. A good example of this is in todays issue of the Nation, the article on TCC Capital Land that states that TCC had planned and approved 10 billion worth of projects this year, but due to the sluggish demand in the real estate sector the are scraping 7 billion worth of their projects and only going through with 3 billion worth. This is not an isolated phenomenon, as the year goes on you will see other large developers like TCC cancell future projects as well. As you so insightfully put forth in your earlier post a good portion of the puchases in the upscale condo sector are speculators and when they compute what their actual return is likely to be, given the current state and near term prospects of Thai real estate I would imagine that you are correct that a good many of them will cut their losses and move on leaving the developer with a lot of empty 90,000-100,000baht/sqm condos. It would be difficult to imagine that these condos will be turned into serviced apartments as a few posters have indicated, because to get any sort of decent ROI they will have priced themselves out of the market. It will be interesting to see what happens to some of these projects that are in mid-construction or just getting underway.