The sharks are getting hungry

[Yellowtail]

52 minutes ago, Boarn said:

Agreed, but there is no incentive for people to sell unfortunately, the only good land deals you may find are when people need to sell at all costs, they don't want to sell but need to. Usually inflated prices are received, at least in my area, by people buying land that is strategically beneficial for themselves, ie you're more likely to pay way over the odds for the lot next door then the one down the road. This happens a lot here.

 

I know it's not going to change and my views my be slightly obscure but land prices in Thailand really annoy me, can't help it.

Do you really think it unfortunate that people are not desperate to sell their property?

[Ralf001]

3 hours ago, elgenon said:

Sounds much worse than when the government promoted cheap credit for vehicle purchases to stimulate the economy. People were new to the idea of credit and had to sell the vehicles.

Got a link to that Government promotion?.

 

Or are you thinking of the  first time car buyer scheme that provided tax rebates to those buyers who qualified.

[Yellowtail]

33 minutes ago, Boarn said:

Yes, this would be a lot better, land prices in Scotland are reasonable, as low as 3k GBP an acre in some places.

You think it would be better if "...95% of the land is owned by 20 people and the other 5% get to squabble over a council flat in possill  park ?"

 

I'm guessing you're planning on being one of the twenty people, yes?

[Boarn]

15 minutes ago, chrisandsu said:

Where are you seeing that ? A reasonable building plot about a 1/4 of an acre is around £50 k I know as I have been looking for a while .

Non building land in the highlands is rather cheap.

[Boarn]

14 minutes ago, Yellowtail said:

Do you really think it unfortunate that people are not desperate to sell their property?

Well no, unfortunate that people have a mind set that land is the be all and end all and hoard it at the detriment of others.

[Boarn]

11 minutes ago, Yellowtail said:

You think it would be better if "...95% of the land is owned by 20 people and the other 5% get to squabble over a council flat in possill  park ?"

 

I'm guessing you're planning on being one of the twenty people, yes?

Using Scotland as an example, land distribution is very unequal but you can buy land cheaper than in Thailand so yes this can only be a good thing.

[Yellowtail]

5 minutes ago, Boarn said:

Using Scotland as an example, land distribution is very unequal but you can buy land cheaper than in Thailand so yes this can only be a good thing.

Fertile, working farmland is cheaper in Scotland than fertile, working farmland in Thailand? 

[Boarn]

12 minutes ago, Yellowtail said:

Fertile, working farmland is cheaper in Scotland than fertile, working farmland in Thailand? 

About 8k GBP per acre including a very nice house, less than 200,000 THB per Rai;

 

https://www.uklandandfarms.co.uk/rural-property-for-sale/scotland/highlands-and-islands/50722_rpe210101/

 

1.6 million THB per Rai and no house, more than 80,000 GBP per acre;

 

https://www.thailand-property.com/land-for-sale-in-chiang-dao-chiang-mai_7161715

 

I know this is a random example but just shows lunacy beyond bounds.

 

Farmland in the UK is also not subject to taxes such as inheritance tax etc.

 

Yes, I hate the UK and what it's become but I still see more value in the Scottish farm than that piece of land in Thailand on a per rai or acre basis.

 

 

[chrisandsu]

37 minutes ago, Yellowtail said:

You think it would be better if "...95% of the land is owned by 20 people and the other 5% get to squabble over a council flat in possill  park ?"

 

I'm guessing you're planning on being one of the twenty people, yes?

No I’ll be one of the 5 million that will will own the 5%. 

[chrisandsu]

16 minutes ago, Boarn said:

About 8k GBP per acre including a very nice house, less than 200,000 THB per Rai;

 

https://www.uklandandfarms.co.uk/rural-property-for-sale/scotland/highlands-and-islands/50722_rpe210101/

 

1.6 million THB per Rai and no house, more than 80,000 GBP per acre;

 

https://www.thailand-property.com/land-for-sale-in-chiang-dao-chiang-mai_7161715

 

I know this is a random example but just shows lunacy beyond bounds.

 

Farmland in the UK is also not subject to taxes such as inheritance tax etc.

 

Yes, I hate the UK and what it's become but I still see more value in the Scottish farm than that piece of land in Thailand on a per rai or acre basis.

 

 

Surely the Scottish harvest is a lot shorter then Thailand’s ???? I have 10 acres in the pnw mostly marketable timber that is worth about the same as a one rai plot I have in rayong . It’s madness for sure . 

[Troy Tempest]

On 9/2/2021 at 2:10 AM, kwak250 said:

We have noticed land going for sale but its double the price of what it was before the covid outbreak.

Thai "LOGIC" ???? 

 

[Yellowtail]

1 minute ago, Troy Tempest said:

Thai "LOGIC" ???? 

 

Yeah, people spending more time at home influences them to want nicer homes, crazy huh?

[elgenon]

21 hours ago, Yellowtail said:

I thought the policy was to waive the excise tax for first time car buyers making them more affordable, no? 

My memory could have failed me but I remember it as easy credit. Thais also used it on motorbikes. Yes, for first time buyers. Excise taxes are for imported goods aren't they? This program was to stimulate the economy so domestic manufacturing would be important.

[elgenon]

19 hours ago, Ralf001 said:

Got a link to that Government promotion?.

 

Or are you thinking of the  first time car buyer scheme that provided tax rebates to those buyers who qualified.

Don't have a link and you could be correct. The effect was to get people who didn't have experience with credit in a debt situation they couldn't handle. 

[Henryford]

Not connected to village land but i was shocked when i saw an advert for land for sale recently in Jomtien. It was the piece of land where they were going to build Ocean 1, yes the biggest in Asia ! The asking price was 660 million baht about $20 million for 4 acres !! I am not familar with land prices but even in a western city $5 million an acre must be pushing it.

[jomtienisgood]

3 hours ago, Henryford said:

Not connected to village land but i was shocked when i saw an advert for land for sale recently in Jomtien. It was the piece of land where they were going to build Ocean 1, yes the biggest in Asia ! The asking price was 660 million baht about $20 million for 4 acres !! I am not familar with land prices but even in a western city $5 million an acre must be pushing it.

I don't even want to dream about the price of  Oceans 12... ????????????

[Yellowtail]

10 hours ago, elgenon said:

My memory could have failed me but I remember it as easy credit. Thais also used it on motorbikes. Yes, for first time buyers. Excise taxes are for imported goods aren't they? This program was to stimulate the economy so domestic manufacturing would be important.

No. While they are often confused with import duties, excise taxes are taxes on products produced domestically. 

[elgenon]

13 hours ago, Yellowtail said:

No. While they are often confused with import duties, excise taxes are taxes on products produced domestically. 

You are correct of course. I misread mr google.

[rcuthbert]

I have a view of a massive hotel to the North, and 6 Wong Amat beach condos to the West. In the evenings, there are very few lights on. When I walk along the  Northern stretch of Wong Amat, there are very few Farangs coming and going from said condos. At the same time, there are two massive construction projects on the southern end of Naklua road. Does 'Big Money" know something that we don't? Surely, it is not blinded by false hope.

[dinga]

35 minutes ago, elgenon said:

You are correct of course. I misread mr google.

To be clear, in addition to Customs Duties and VAT, imported goods are also subject to the same excise taxes that apply to similar, locally manufactured goods

[Walker88]

My experience, limited as it may be, tells me that neither borrowers nor banks ever did any sort of credit analysis or even began to consider any sort of return on investment. Folks wanted to own, and banks wanted to lend. That is a recipe for what is now happening. Loans exceed both any reasonable return on investment, plus loan value exceeds the ability to repay.

 

I lived in Japan during the Bubble Economy and the subsequent Dai Boraku (big crash). Banks had lent, not against actual value or even the fantasy value assets had in the late 1980s, but against the future fantasy value, as "they're not making any more land, so prices can only go up".

 

Well, prices didn't go up. RE fell in some areas as much as 90%.  Yes, ninety-percent.

 

One story I recall is that there was a woman in Osaka who owned a noodle shop. The shop had about ten tables. She was able to borrow, from the Industrial Bank of Japan (which I think needed a rescue and merger eventually) over USD 2 billion. When she applied for the massive loans, putting up her ten table noodle shop as collateral, she put as her reason for borrowing "to buy stocks the gods tell me to buy".

 

For those who don't remember, in late 1989 the Nikkei closed at 38,915.87, 'obviously' on its way to 50,000.  I think, unless I am mistaken, the gods played a nasty trick on the noodle shop owner as well as the Industrial Bank of Japan. 38,915.87 was top tick. In the subsequent years the Nikkei saw a low of around 8000. So many folks had levered up both stocks and real estate that the only direction for prices was down, and down big.

 

Thailand is not as levered up as Japan was in 1989, but Thailand households currently hold record debt levels---and that from legitimate sources of funding. Toss in the borrowings from loan sharks and the leverage looks even worse. The entire Thai economy only grew via debt since 2011, with bank lending and corporate bond issuance growing by a factor of 3-4 over actual GDP growth.

 

At present, Thailand has even shifted into running a current account deficit. Despite the supposed $340 billion in FX reserves, the current govt is issuing a huge amount of bonds to fund whatever it is they fund, whether that is submarines or social safety nets. Maybe many western govts are also acting as spendthrifts now, but large markets draw capital, because large markets (e.g., the US and EU) allow easy entry and exit for large capital amounts. Small markets do not. Large capital movements in small markets move prices, so there is no easy entry nor exit.

 

Prices for assets are set on the margin, and that margin tends to be established by the weakest hands. The weakest hands are the most levered. Weak hands can start avalanches.

 

Banks currently can pretend their NPL situation is not too bad, because the debt moratorium allows them to ignore non-performing loans. Banks can also book imputed interest and run it through their P&L, even though borrowers are not actually paying the interest.

 

Economic crises often lead to construction of Potemkin Villages. it seems likely Thailand has built such a village now. it will take more skill than the current govt seems to possess to navigate these troubled waters and allow Thailand to steer clear from the iceberg its asset markets are heading straight toward.

 

Enough metaphors and idiomatic expressions.  Okay, one more...batten down the hatches (just in case).

[zzaa09]

On 9/1/2021 at 7:29 PM, spidermike007 said:

There is bound to be a major reckoning here. You cannot sabotage the economy, destroy tourism, put millions out of work, and not face consequences. It is likely to be far worse than 1997, and several economists have already stated this. It will take years to sort out. Condos are bound to drop significantly, possibly as much as 50% or more, except in the best buildings. Land? Anyone's guess. Likely less than condos, which were way overbuilt to begin with.

 

Build it and they will come. I do not think so. Sheer hubris. 

Can't grow agricultural/horticultural things in a condo.

 

[CrunchWrapSupreme]

On 9/2/2021 at 11:41 AM, Andycoops said:

People just can't afford to pay the monthly amount anymore so are having them repossessed.

Indeed. My motorbike is nearby done being paid off. Every month my wife sends the finance lady the transfer receipt. She's got her on Line. Right away she gets a confirmation. Why so quickly, my wife asked? Because we're one of the few still paying, she replied.

 

Someone else asked about finance companies. There often is none with the motorbike dealerships, because they're so small. The dealerships themselves handle finance and do repos.

 

We found this out when we went to buy our car. We thought the years of making good payments on the motorbike boosted my wife's credit, but since it was through the dealer and not a real finance company, they did not. Hah. Luckily, the banks are desperate for business and blasting out car loans now, so it wasn't a prob.

[CrunchWrapSupreme]

On 9/1/2021 at 2:52 PM, patongphil said:

Lots of land going up for sale around the village.

Apparently unemployment means loans cannot be paid and with hungry sharks circling the only possible source of monies is the family land!!

Can confirm. Out here in Issan, the wife and I saw a vacant house on a pretty decent plot of land. Right on the main road. Eventually a for sale sign popped up, and we soon had dreams of our own little garden and opening up a shop. But soon the for sale sign disappeared. Then she heard through the gravevine the selling price. 300k baht, or $9000 USD. Man. I actually had that cash a few years ago. If you do, now's the time to snap up some property.

[jomtienisgood]

1 hour ago, dinga said:

To be clear, in addition to Customs Duties and VAT, imported goods are also subject to the same excise taxes that apply to similar, locally manufactured goods

And all these taxes apply on the cost of transport too....

[dinga]

7 hours ago, jomtienisgood said:

And all these taxes apply on the cost of transport too....

Again - to be clearer - import duties and taxes are payable at the CIF level (ie. Cost + Overseas Freight + Overseas Insurance)

[greeneking]

15 hours ago, Walker88 said:

My experience, limited as it may be, tells me that neither borrowers nor banks ever did any sort of credit analysis or even began to consider any sort of return on investment. Folks wanted to own, and banks wanted to lend. That is a recipe for what is now happening. Loans exceed both any reasonable return on investment, plus loan value exceeds the ability to repay.

 

I lived in Japan during the Bubble Economy and the subsequent Dai Boraku (big crash). Banks had lent, not against actual value or even the fantasy value assets had in the late 1980s, but against the future fantasy value, as "they're not making any more land, so prices can only go up".

 

Well, prices didn't go up. RE fell in some areas as much as 90%.  Yes, ninety-percent.

 

One story I recall is that there was a woman in Osaka who owned a noodle shop. The shop had about ten tables. She was able to borrow, from the Industrial Bank of Japan (which I think needed a rescue and merger eventually) over USD 2 billion. When she applied for the massive loans, putting up her ten table noodle shop as collateral, she put as her reason for borrowing "to buy stocks the gods tell me to buy".

 

For those who don't remember, in late 1989 the Nikkei closed at 38,915.87, 'obviously' on its way to 50,000.  I think, unless I am mistaken, the gods played a nasty trick on the noodle shop owner as well as the Industrial Bank of Japan. 38,915.87 was top tick. In the subsequent years the Nikkei saw a low of around 8000. So many folks had levered up both stocks and real estate that the only direction for prices was down, and down big.

 

Thailand is not as levered up as Japan was in 1989, but Thailand households currently hold record debt levels---and that from legitimate sources of funding. Toss in the borrowings from loan sharks and the leverage looks even worse. The entire Thai economy only grew via debt since 2011, with bank lending and corporate bond issuance growing by a factor of 3-4 over actual GDP growth.

 

At present, Thailand has even shifted into running a current account deficit. Despite the supposed $340 billion in FX reserves, the current govt is issuing a huge amount of bonds to fund whatever it is they fund, whether that is submarines or social safety nets. Maybe many western govts are also acting as spendthrifts now, but large markets draw capital, because large markets (e.g., the US and EU) allow easy entry and exit for large capital amounts. Small markets do not. Large capital movements in small markets move prices, so there is no easy entry nor exit.

 

Prices for assets are set on the margin, and that margin tends to be established by the weakest hands. The weakest hands are the most levered. Weak hands can start avalanches.

 

Banks currently can pretend their NPL situation is not too bad, because the debt moratorium allows them to ignore non-performing loans. Banks can also book imputed interest and run it through their P&L, even though borrowers are not actually paying the interest.

 

Economic crises often lead to construction of Potemkin Villages. it seems likely Thailand has built such a village now. it will take more skill than the current govt seems to possess to navigate these troubled waters and allow Thailand to steer clear from the iceberg its asset markets are heading straight toward.

 

Enough metaphors and idiomatic expressions.  Okay, one more...batten down the hatches (just in case).

Thank you. Informative and measured.

[Airalee]

17 hours ago, Walker88 said:

My experience, limited as it may be, tells me that neither borrowers nor banks ever did any sort of credit analysis or even began to consider any sort of return on investment. Folks wanted to own, and banks wanted to lend. That is a recipe for what is now happening. Loans exceed both any reasonable return on investment, plus loan value exceeds the ability to repay.

Your whole post was one of the must succinct regarding economics.  I studied the US housing bubble in depth from 2004 until the big crash in 2009(ish).  I feel that it was set up to fail with the stated income (“liars loans” as we housing bubble bloggers called them) and negative amortization.  As soon as the loan documents were signed, the borrower was in trouble as the loan would recast into a fully amortizing payment before the loan prepayment penalty would expire which would have required the borrowers to bring money to the table before the loans were allowed to be paid off.  And being that many borrowers were mortgaging 100-120% LTV, there was no way they had those additional funds.

 

Subsequently, the help that was given to the now underwater borrowers was just another scam to convince the owners to refinance out of a non-recourse purchase money mortgage (in many states such as California) to a full recourse loan.

 

So, going beyond the banks wanting to lend and the borrowers wanting to own a home…I feel that the banks gave the borrowers enough rope with which to hang themselves (purposely?) and then, rather than letting said borrowers die, they just loosened the noose just enough to ensure that the borrower was now hooked into a lifetime of debt servitude.

[Yellowtail]

6 hours ago, Airalee said:

Your whole post was one of the must succinct regarding economics.  I studied the US housing bubble in depth from 2004 until the big crash in 2009(ish).  I feel that it was set up to fail with the stated income (“liars loans” as we housing bubble bloggers called them) and negative amortization.  As soon as the loan documents were signed, the borrower was in trouble as the loan would recast into a fully amortizing payment before the loan prepayment penalty would expire which would have required the borrowers to bring money to the table before the loans were allowed to be paid off.  And being that many borrowers were mortgaging 100-120% LTV, there was no way they had those additional funds.

 

Subsequently, the help that was given to the now underwater borrowers was just another scam to convince the owners to refinance out of a non-recourse purchase money mortgage (in many states such as California) to a full recourse loan.

 

So, going beyond the banks wanting to lend and the borrowers wanting to own a home…I feel that the banks gave the borrowers enough rope with which to hang themselves (purposely?) and then, rather than letting said borrowers die, they just loosened the noose just enough to ensure that the borrower was now hooked into a lifetime of debt servitude.

You do not think the federal government guaranteeing the loans and interfering with loan approval processes had a lot to do with the US housing bubble? 

[Airalee]

3 hours ago, Yellowtail said:

You do not think the federal government guaranteeing the loans and interfering with loan approval processes had a lot to do with the US housing bubble? 

That’s certainly a major part of it.  Just like with educational loans.  I just didn’t feel like writing a thesis.