Housing demand remains but buyers hesitant

[ExpatOilWorker]

On 6/1/2021 at 4:08 AM, Airalee said:

You’ve definitely got the right attitude.  It’s a home, not an investment. 
 

Too many people think they are getting rich off of housing inflation but unless you are an investor with multiple  properties (hopefully income producing) or a fix and flip investor, it’s just a more expensive roof over your head and if you sell, whatever you buy will have appreciated along with it.  After commissions/fees/taxes to sell and rebuy, you’re actually worse off.  People talk about getting on the “housing ladder” and using the appreciation to upgrade....but does that really work?  
 

Let’s look at the math (figures just for illustrative purposes)

 

Let’s say your income will allow you a $100k home and someday you want to upgrade to the $200k home.  Currently, you’re $100k away.  Then, property values double.  Your home is worth $200k (lets assume you’ve only paid off half the mortgage....a generous assumption) so you sell for $200k and after 5% commission (ignoring all other fees etc.) you net $190k...pay off the remaining mortgage and are left with $140k.

 

But....the previous $200k dream home has also doubled and is now $400k.  So, instead of being $100k away, you are now $260k away from realizing that dream.  Bzzzzzt....you lose.

 

Try getting a real estate agent to wrap their heads around that concept.  It’s impossible.  
 

 

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”. 
 

-Upton Sinclair

Brilliant post.

[ExpatOilWorker]

On 6/1/2021 at 9:14 AM, onekoolguy said:

If you want a nice property at a bargain price this is a good time to buy! There are very few buyers and some people just need to sell right now. While most properties are not good deals a few are. Over a period of a couple of months I looked at maybe 15 properties and all were overpriced. Then in two days I found 2 large pool villas in good neighborhoods. Both were priced at 4 million baht. Other similar homes were twice that. My wife made a full price offer on the first one but didn't want to pay a 30,000 baht charge for something. This was the first day of listing and they sold it to the next person in line that same day. The other house had been listed for awhile and had been in escrow several times and kept falling out? The problem turned out to be a relative of the out of town owner who was killing the sales by making terrible conditions for potential buyers such as asking for non refundable million baht deposits before inspections etc.  My wife is pretty experienced at working out real estate problems and ended up purchasing that one.  A lot of housing developments are mostly empty due to out of country owners not coming back because of the covid situation. Some of these people really need to sell and the people who get out there and make offers will get some great deals over the next several months!

Do you mind share where in Thailand?

Bangkok?

[placeholder]

On 6/1/2021 at 4:08 AM, Airalee said:

You’ve definitely got the right attitude.  It’s a home, not an investment. 
 

Too many people think they are getting rich off of housing inflation but unless you are an investor with multiple  properties (hopefully income producing) or a fix and flip investor, it’s just a more expensive roof over your head and if you sell, whatever you buy will have appreciated along with it.  After commissions/fees/taxes to sell and rebuy, you’re actually worse off.  People talk about getting on the “housing ladder” and using the appreciation to upgrade....but does that really work?  
 

Let’s look at the math (figures just for illustrative purposes)

 

Let’s say your income will allow you a $100k home and someday you want to upgrade to the $200k home.  Currently, you’re $100k away.  Then, property values double.  Your home is worth $200k (lets assume you’ve only paid off half the mortgage....a generous assumption) so you sell for $200k and after 5% commission (ignoring all other fees etc.) you net $190k...pay off the remaining mortgage and are left with $140k.

 

But....the previous $200k dream home has also doubled and is now $400k.  So, instead of being $100k away, you are now $260k away from realizing that dream.  Bzzzzzt....you lose.

 

Try getting a real estate agent to wrap their heads around that concept.  It’s impossible.  
 

 

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”. 
 

-Upton Sinclair

Except that soi3eddie bought his home when the economy was functioning normally. Now it's not and demand is reduced. A lot of people presumably are strapped for cash and can't find buyers for their homes at the previous prices. They're going to have to sell cheaply. When the economy and demand returns to normal, eventually so should prices. In other words, "Buy cheap and sell dear."

[Airalee]

8 minutes ago, placeholder said:

In other words, "Buy cheap and sell dear."

If only it were so simple.

 

If it’s your home (rather than additional investment property), what do you do after selling? 

[BritManToo]

7 minutes ago, Airalee said:

If it’s your home (rather than additional investment property), what do you do after selling? 

Move to Thailand?

 

If you're already in Thailand, rent one of the poor houses for 1,500bht/month.

[Airalee]

1 minute ago, BritManToo said:

Move to Thailand?

Sure, geo-arbitrage can work quite well in some situations, but what if you plan on staying in the same area?

 

If staying in the same area and downgrading from a 2br to a 1br (at half the price) then it’s good to sell high.  If upgrading from a 1br to a 2br (at double the price) then it’s better to make that move at the bottom.  Unfortunately, prices don’t move in tandem and timing the market is pretty tough.

[BritManToo]

6 minutes ago, Airalee said:

Sure, geo-arbitrage can work quite well in some situations, but what if you plan on staying in the same area?

My Brit wife divorced me, kept the house, and then an exclusion order ......... I never had any choice about staying in the same area.

[Pravda]

3 hours ago, newnative said:

    Not the end of the World.  Two years of rent at 15,000 baht a month would have cost him 360,000 baht.  Lost a little but he got to live in his own space for 2 years without the headaches of a landlord.   If the sale was forced he must have needed money so now he has a big chunk of change in his pocket that he didn't blow already on wine and women.  Onward!

 

That's not how it works. 

 

He paid land transfer tax on that 2.3 million. 

 

He paid common fees. Not a lot but some. 

 

He paid more tax once he sold, especially since didn't hold the property very long. Thats additional 100,000 minimum. 

 

Also not a chance a 2 million house gets rented for 15,000. More like half that. 

[timberpond]

3 hours ago, ThailandRyan said:

That's called dumping a property and moving because there was either a need, a want or he was just escaping the location and did not want to be tied there anymore.  

 

Then where is the demand this news is suggested? 

 

3 hours ago, newnative said:

    Not the end of the World.  Two years of rent at 15,000 baht a month would have cost him 360,000 baht.  Lost a little but he got to live in his own space for 2 years without the headaches of a landlord.   If the sale was forced he must have needed money so now he has a big chunk of change in his pocket that he didn't blow already on wine and women.  Onward!

 

He took out a business loan and now having problems paying and arrange to be sold before the prospect of foreclosure. Couldn't find a buyer to match the market price and thus accepted a lost to settle his loan.   

[placeholder]

2 hours ago, Airalee said:

If only it were so simple.

 

If it’s your home (rather than additional investment property), what do you do after selling? 

Well, if you paid 2 million baht for a home that is more than you could otherwise afford, then when the time comes to sell, then with the proceeds you should still be able to buy a home that is worth more than you otherwise could have afforded. 

[Airalee]

46 minutes ago, placeholder said:

Well, if you paid 2 million baht for a home that is more than you could otherwise afford, then when the time comes to sell, then with the proceeds you should still be able to buy a home that is worth more than you otherwise could have afforded. 

That makes absolutely no sense.

[onekoolguy]

18 hours ago, ExpatOilWorker said:

Do you mind share where in Thailand?

Bangkok?

This is in Hua Hin, But the deals are available in most areas. You just have to know values in the place that you are interested in. Then get out there, do your research and start making offers that are good for you! Look at a lot of properties, take a Thai with you and talk to neighbors. After awhile you will get a feel for what is a good deal. If you look at a lot of properties and don't buy, some realtors will get tired of taking you around. Don't worry about it, just move to another one. You have to do your research and that involves looking at many properties.

[onekoolguy]

19 hours ago, ExpatOilWorker said:

Do you mind share where in Thailand?

Bangkok?

This was in the Hua Hin/Cha Am area

[ExpatOilWorker]

24 minutes ago, onekoolguy said:

This is in Hua Hin, But the deals are available in most areas. You just have to know values in the place that you are interested in. Then get out there, do your research and start making offers that are good for you! Look at a lot of properties, take a Thai with you and talk to neighbors. After awhile you will get a feel for what is a good deal. If you look at a lot of properties and don't buy, some realtors will get tired of taking you around. Don't worry about it, just move to another one. You have to do your research and that involves looking at many properties.

Thanks. I have already made an offer and got the money lined up, but so far I have mostly seen pasiviness from sellers. 

It is a bit frustrating sitting on 6 million wanting to buy and still being offered pre-Covid silly pricing. 

[1FinickyOne]

On 5/31/2021 at 8:37 PM, BritManToo said:

There's a couple of guys in my MooBaan (Chiang Mai) that commute to Bangkok to work.

weekly? weakly? 

[onekoolguy]

On 6/3/2021 at 9:24 AM, ExpatOilWorker said:

Thanks. I have already made an offer and got the money lined up, but so far I have mostly seen pasiviness from sellers. 

It is a bit frustrating sitting on 6 million wanting to buy and still being offered pre-Covid silly pricing. 

Good luck with your purchase!

Most Sellers are not motivated to make a fast sale. Easy to give up and say that there are no wholesale deals? I always said that I have to talk to 20 People to find one who really needs to sell? 

[spidermike007]

This is likely very fake news. Only a few in a position of authority are facing the music. Courageous of BAM chairman Bunyong Visatemongkolchai to state the truth. The pain will be felt for many years to come. I anticipate condo prices to drop by half. And rental price will drop too. They are already dropping in Samui and Phuket. 

 

A friend of mine recently moved to Pattaya. He looked at condos in Jomtien. He walked into one of the nicest towers, looked at a 36th floor unit with panoramic views, and when he was quoted 28,000 a month, he offered 10,000. They settled on 13,000. He said the agent more or less admitted the building was nearly empty, and they could not rent to sell anything, at this time.

 

Another friend was in contract long before Covid broke, on a 16 million baht condo in BKK. He has put down roughly 2 million baht on it. They are expecting him to close, as the building is finished now. He told them to drop their price by 8 million baht, or he will seek legal remedies to get his deposit back. He told me he would rather walk away from that 2 million baht, than invest in something that has already gone down in value, by many millions of baht. How many others feel that way? He also told me that another friend of his works as a senior level manager for one of Thailand's biggest developers. She told him that they have reduced their building by 90% of what it was pre-Covid, which was around 100 developments a year. 

Of course there are the stubborn developers and homeowners, who refuse to embrace reality. A friend of mine recently offered a homeowner 15% less than she was asking, and in exchange offered to pay a years rent in advance. She refused. Now, the home has been vacant for four or five months already, as it is an extremely soft rental market. I am not a math professor. But the 15% would have represented less than two months rent. So, unless her phone was ringing off the hook, with potential renters, his offer was a good one. 
 
Pride? Lack of common sense and reason? She just does not need the money, and is not sincere about renting the house? One can often rack the mind trying to figure out the reasoning here. Or lack thereof. 


Demand is way down. The Chinese market is nearly gone, as they cannot even get into Thailand to inspect the units they have put deposits down on. The Russians and others are very hesitant to commit. And the long term tourists are gone too. So, who does that leave? Wealthy Thais, many of whom see the market collapsing, and would rather wait and see how all of this shakes out, and ex-pats, many of whom are smart enough to be shopping for bargains right now.

Anyone interested in buying a condo right now, would be better off waiting awhile. Timing is on your side. Time is now your ally. The economy is going remain devastated here, for a very long time to come. And the longer this goes on, the more people are going to be affected by it, and the more desperate some will become. For the wealthy it barely matters. But, there are many middle class who have money invested, and there are alot of Chinese and Russians who bought, and cannot even visit Thailand. Some of them will want to unload their properties. Wait. The condo market is severely overbuilt. And demand is low, for all but the top buildings.

[chalawaan]

Bangkok will never be a bad investment, unless they do something really dumb e.g. xenophobic and nationalistic, which right now will serve no-one.

 

Chiang Mai with its hectares of decades-old EMPTY condo towers and private Mc Mansion estates (probably a vast golden triangle laundry scheme because otherwise - just why?)

Is going to be a headache until and unless they open up the overseas market like other nations have done, of course then, you end up with prices like Singapore, Hong Kong, Sydney, and Vancouver! 

They're greedy AF here -but they hate and fear foriegners getting ahead on any metric even more!

[ExpatOilWorker]

59 minutes ago, onekoolguy said:

Good luck with your purchase!

Most Sellers are not motivated to make a fast sale. Easy to give up and say that there are no wholesale deals? I always said that I have to talk to 20 People to find one who really needs to sell? 

Thanks for your encouragement. It is so frustrating when agents and sellers are hanging on to lofty pre-Covid dream like prices, but of course owners have the right to price their property anyway they wish. All I can do is vote with my feet.

After a lot of haggling I got a house that was listed at 8.5 million down to 7.25 million,  but that doesn't feel like a good deal after seeing ur numbers. 

I am looking at one of the islands, so the selection of available villas is smaller.

[Mr Meeseeks]

26 minutes ago, ExpatOilWorker said:

Thanks for your encouragement. It is so frustrating when agents and sellers are hanging on to lofty pre-Covid dream like prices, but of course owners have the right to price their property anyway they wish. All I can do is vote with my feet.

After a lot of haggling I got a house that was listed at 8.5 million down to 7.25 million,  but that doesn't feel like a good deal after seeing ur numbers. 

I am looking at one of the islands, so the selection of available villas is smaller.

Illegally owned in company name or putting it in the wife's or gf's name?

[chalawaan]

1 hour ago, ExpatOilWorker said:

Thanks for your encouragement. It is so frustrating when agents and sellers are hanging on to lofty pre-Covid dream like prices, but of course owners have the right to price their property anyway they wish. All I can do is vote with my feet.

After a lot of haggling I got a house that was listed at 8.5 million down to 7.25 million,  but that doesn't feel like a good deal after seeing ur numbers. 

I am looking at one of the islands, so the selection of available villas is smaller.

I visited a friend in a Chiang Mai estate populated by upper middle class Thais mostly. 

The shenanigans are epic!

 

First, there's a six storey concrete hulk on land that the developer promised would be a private park for the residents. Unfortunately for the shonky devs, the new neighbour was a hi-profile lawyer who took them on -and won- an order to cease and demolish.

Well they ceased. But we reckon after almost ten years, the 'demolish' will never happen, it will become CM's vertical "Angkor Wat" centuries from now. 

 

But wait it gets better!

 

Said lawyer sold the mansion with the hi-rise hulk out front somehow, moved on, but then decided, without authorizaetion, to renovate another McMansion in the estate he just left, as a "party house" on Air BNB, of course this went down like a lead zep among the elderly wealthy neoighbours around the house, but not before a few other clowns in the baan decided to copy him, and spend crazy money on renovation, CCTV, landscaped pools, and even fleets of scooters for the guests!

 

Well, the cops were dragged in by the unimpressed and wealthy wrinklys, they ended up raiding every party that the mostly Chineses tourists, or the owners Thai hangers-on, had, and also the salim neighbours put up huge banners in Thai next to each illegal Air BNB that said renting them was illegal and would attract instant police visits.

 

You gotta love when the salim vs salim, but anyhoo, these selfish inconsiderate Air BNB Rs wipes have also been hit with covid, so there's totally no one to rent to, even if they tried every trick in the book. They are up to their cloaca in reno debt, and the new pools are slowly turning into green swamps.  Ironically, the upgrades have made the homes even less attractive to buyers, they're not really configured as true "homes" on the inside, come with cheap furniture an owner would have to dump, and who in their right mind takes on a pool as a private rental unless they are swimming fanatics?

 

Many there have cars worth more than the mansions, one bloke has two late model Porche, one black, one white. One of those would be RRP several times more than the impressive two storey they are parked under.  To me that signals someone who does not understand money, even tho they have (borrowed) lots of it.

 

My friend says the other side of the buy/sell coin, is that in CM prices have barely moved in real terms over the millenial decades, so his investment plus all the maint and upgrades, like a huge wet kitchen/entertaining area, mean he's just breaking even if he gets 5 million. He's asking six in anticipation of haggling but will sell at five, with all existing appliances thrown in.  He's not leaving LoS, the plan is to downsize in his old age to a quieter one-level seaside villa, and reno-to-rent an existing BKK apartment that is his forever investment.

[Pravda]

2 hours ago, spidermike007 said:

Another friend was in contract long before Covid broke, on a 16 million baht condo in BKK. He has put down roughly 2 million baht on it. They are expecting him to close, as the building is finished now. He told them to drop their price by 8 million baht, or he will seek legal remedies to get his deposit back. He told me he would rather walk away from that 2 million baht, than invest in something that has already gone down in value, by many millions of baht.

 

Your friend can kiss 2 million baht goodbye and is lucky if he avoids any legal issues.

 

This stupidity is entirely on him. If the value of the building went up many million baht, would he complain? I know in the west developer can sue you even if you walk away from deposit. This is the best case scenario.

[chalawaan]

10 minutes ago, Pravda said:

 

Your friend can kiss 2 million baht goodbye and is lucky if he avoids any legal issues.

 

This stupidity is entirely on him. If the value of the building went up many million baht, would he complain? I know in the west developer can sue you even if you walk away from deposit. This is the best case scenario.

Yes, I was thinking that anywhere, this is just a case of "tough luck/buyer beware". I can't see how in any jurisdiction this would be seen as improper, he's victim of market moves/history, and that's that. 

Any non Thai here needs to learn the golden rules, don't invest what you cannot afford to lose, and don't ever expect litigation to go your way, especially if your opponent has deeper pockets, and is a native.

The other fun thing is that your passport is taken away once you get involved in the legal system as a foriegner, and then you have the monthly nightmare of special extentions with immigration -you cannot leave the kingdom whatsoever- until the case makes it's way through the years and the system. I'd just sit tight and accept a decade of price doldrums on that condo, Bangkok will shine again, but crying foul in this case is the absolute worst possible move to make IMO.

[ExpatOilWorker]

1 hour ago, chalawaan said:

I visited a friend in a Chiang Mai estate populated by upper middle class Thais mostly. 

The shenanigans are epic!

 

First, there's a six storey concrete hulk on land that the developer promised would be a private park for the residents. Unfortunately for the shonky devs, the new neighbour was a hi-profile lawyer who took them on -and won- an order to cease and demolish.

Well they ceased. But we reckon after almost ten years, the 'demolish' will never happen, it will become CM's vertical "Angkor Wat" centuries from now. 

 

But wait it gets better!

 

Said lawyer sold the mansion with the hi-rise hulk out front somehow, moved on, but then decided, without authorizaetion, to renovate another McMansion in the estate he just left, as a "party house" on Air BNB, of course this went down like a lead zep among the elderly wealthy neoighbours around the house, but not before a few other clowns in the baan decided to copy him, and spend crazy money on renovation, CCTV, landscaped pools, and even fleets of scooters for the guests!

 

Well, the cops were dragged in by the unimpressed and wealthy wrinklys, they ended up raiding every party that the mostly Chineses tourists, or the owners Thai hangers-on, had, and also the salim neighbours put up huge banners in Thai next to each illegal Air BNB that said renting them was illegal and would attract instant police visits.

 

You gotta love when the salim vs salim, but anyhoo, these selfish inconsiderate Air BNB Rs wipes have also been hit with covid, so there's totally no one to rent to, even if they tried every trick in the book. They are up to their cloaca in reno debt, and the new pools are slowly turning into green swamps.  Ironically, the upgrades have made the homes even less attractive to buyers, they're not really configured as true "homes" on the inside, come with cheap furniture an owner would have to dump, and who in their right mind takes on a pool as a private rental unless they are swimming fanatics?

 

Many there have cars worth more than the mansions, one bloke has two late model Porche, one black, one white. One of those would be RRP several times more than the impressive two storey they are parked under.  To me that signals someone who does not understand money, even tho they have (borrowed) lots of it.

 

My friend says the other side of the buy/sell coin, is that in CM prices have barely moved in real terms over the millenial decades, so his investment plus all the maint and upgrades, like a huge wet kitchen/entertaining area, mean he's just breaking even if he gets 5 million. He's asking six in anticipation of haggling but will sell at five, with all existing appliances thrown in.  He's not leaving LoS, the plan is to downsize in his old age to a quieter one-level seaside villa, and reno-to-rent an existing BKK apartment that is his forever investment.

Brilliant story and insights.  It just shows how unpredictable the Thai real-estate market is, especially when you mix in some self-centered greed.