Baht Strengthens- Real Estate Suffers

[highdiver]

SET News No. 150, 2007

August 17, 2007

Thai listed companies record over THB 220 billion in profits for H1/2007

Listed companies on The Stock Exchange of Thailand (SET) posted their H1/2007 profits at

THB 229,403 million (about USD 6.75 billion) and total sales at THB 2.86 trillion (about USD

84.26 billion). About 78% of firms recorded profits. The top three most profitable industry

groups were Resources, Property and Construction, and Financials. The top five most

profitable firms were PTT PCL (PTT), Siam Cement PCL (SCC), PTT Exploration and

Production PCL (PTTEP), Thai Oil PCL (TOP), and Bangkok Bank PCL (BBL).

seesm there are still mmany making huge profits from property and construction...

[bingobongo]

here you go........i know some prefer pictures over thinking........for those who dont get it, it is for those who are "upside down" on their mortgage (their mortgage costs more than their home is worth, which of course gets worse as more supply comes on line)

Edited August 20, 2007 by bingobongo

[fletchsmile]

here you go........i know some prefer pictures over thinking........for those who dont get it, it is for those who are "upside down" on their mortgage (their mortgage costs more than their home is worth, which of course gets worse as more supply comes on line)

haha. quite good.

Other interpretations for the more visionary:

1) The hare and the tortoise: The tortoise struggled at first and stuck with it. He won out long term vs the impatient hare who thought he was clever and rushed into the short term win, while telling everyone how clever he was. Long term the hare sold out too soon, never finished the race, sold himself short and lost.

2) Maybe he's just rolled over so his wife can get on top. Get yourself a home and mortgage and your partner will climb all over your most tender parts as a token of appreciation

3) The tortoise has at least got his shell on his back. One day he'll roll over. Now for the tortoise who sold the shell off his back, what will he do when he finds out they're no longer making quality shells for the place he wants his shell to be, and he can't get "back" in the market?

Think time in the market, not timing the market. That's where the long term money is

Edited August 20, 2007 by fletchthai68

[pkrv]

common sense would dictate less building when there is oversupply, but given the oversupply and liquidity.........build more.......genius I tell you, pure genius....

one more time, all together now, when supply is greater than demand, prices go down........i love the sales pitch from the developers......genius again

High-end projects still have potential despite speculation

''In the condominium market, units that are priced between one million and 1.5 million baht are witnessing an oversupply, which can be scary for the overall market,'' Mr Adisorn said.

Mr Chen's views reflected recent data released by the Bank of Thailand that showed the property market slowed during the second quarter of this year, with new land registrations down more than 50% from the same period last year.

The central bank said property transactions also slowed due to weak consumer confidence and uncertainty over mass-transit expansion plans. New property registrations in Greater Bangkok fell 30.9% year-on-year in May

http://www.bangkokpost.com/Business/20Aug2007_biz30.php

You've obviously picked up a few basic economic theories when I look at all your posts on this thread. Yes as a general rule if supply exceeds demand prices will fall. What you say may hold true for much of the market, particularly the lower end. But there are a fair few gaps in your statements: You've missed out the bit about a "perfect market" being part of these theories, which Thailand obviously isn't. There are also barriers to entry (and exit). There is not one market but many sub-markets. The high-end / luxury market is different. Luxuries are not as price elastic, and for certain products even, the more expensive they are then the more sought after they are, i.e prestige. Don't forget wealth concentrations, in that much of Thailand's high end wealth (and property) is in a few small hands.

So while I'd agree the mid-low end may have issues. I'd also agree that "High-end projects still have potential despite speculation". BTW 1.5mio is not "high-end" in my view.

On the higher end - let's say THB 10mio+ or THB 100k/ m2, below are just some of the following factors which will come into play in the Thai market to lend support:

- Supply in this bracket for CBD is limited long term. There is only so much space in CBD. There is only one of Bangkok and only one of Sathorn, (lower) Sukhumvit and Silom. Sure there are substitutes in the suburbs for other areas, but these are not substitutes for the central areas at the heart of Bangkok

- Buyers in these high end markets are not middle class Thais and definitely not low class. They are wealthier Thais or foreigners, i.e international players. They have money to spend. They compete with each other internationally. Not Somchai the moto taxi guy

- Wealthy Thais often hate to sell or rent at a loss. They would rather their property was empty, or wait for prices to rise before selling. This maintains more of a floor than normal in other "perfect" markets. Logical? Maybe not in your eyes. But given a choice between losing face or losing money a Thai answer will not alwys be the same as whiteys like yourself. Of course Somchai living hand to mouth, needs to sell or drop his price on his low end pad when things take a downturn. These rich guys can ride it out tho'.

- Buyers in these markets also consider other Asian capitals, eg Singapore, HK, Tokyo, as well as other global capitals eg London, Sydney. In comparison to other cities, for prime CBD area, Bangkok is cheap. i.e as far as international money is concerned BKK is cheap

- Quality condos in Singapore start at SGD 1mio up. That's THB 20mio up. That market is booming at the moment. Once it becomes too high people will look for alternatives. THB10mio is a bargain. THB10 mio would just about buy a garden shed in London (if you could afford a garden).

- Infrastructure is being upgraded all the time in BKK. Skytrain, Underground, BRT. This will make the city more desireable in the future to international demand

- GDP growth in Thailand once the current political situation passes smoothly, means wage growth and growth generally will exceed developed countries'. That's increase in local demand, as well as international demand.

- How many people are there in US, UK, Germany, France, Japan, Scandanavia, Switzerland etc. Add in similar countries and around a billion. To all these people Thailand is cheap. There have been more and more people coming to live in Thailand in the last 20 years. The trend will continue. Indians, Chinese are growing in wealth. Their elite will also spread their wings to other capitals.

- mortgage markets are gradually opening up if you look at the long term picture. eg much easier now than a few years ago for a foreigner to get a mortgage in their own name. eg BKK Bank Singapore, UOB Singapore didn't offfer a service 10 years ago

- For people with real money. What are the alternatives? Most will always want some part of their portfolio in property. STock markets are volatile at the moment. Rich people want diversification and can afford a long term view. Over a longer time frame, it's not timing in the market that counts but amount of time in the market.

So while there may be something in your gloom and doom analysis for the low end. Be careful not to make wide sweeping assumptions...

Yes I generally agree - However I would add that I am peeing my pants for my future condominium - I hope it's soon....

Edited August 20, 2007 by pkrv

[fletchsmile]

Yes I agree - However I would add that I am peeing my pants for my future condominium - I hope it's soon....

Think I'd put The Park in the higher end bracket. Nice location, large % already shifted. When will it be completed? That seems the big question with many projects. T.I.T so probably late. As long as you can afford what you're buying, relax and enjoy the ride. Besides that: delays just give you more time to save up, and more time when your money is earning a return somewhere else for you. Unless of course you're a tortoise who has sold the house off his back and has nowhere to live until it's ready

[pkrv]

Yes I agree - However I would add that I am peeing my pants for my future condominium - I hope it's soon....

Think I'd put The Park in the higher end bracket. Nice location, large % already shifted. When will it be completed? That seems the big question with many projects. T.I.T so probably late. As long as you can afford what you're buying, relax and enjoy the ride. Besides that: delays just give you more time to save up, and more time when your money is earning a return somewhere else for you. Unless of course you're a tortoise who has sold the house off his back and has nowhere to live until it's ready

No this is an aside, but what an aside

[bingobongo]

construction stopped, price reductions, and oversupply........but i guess there will still be suckers......

Tararom delays product launches as economy remains sluggish

Bangkok Post: 23 August 2007

Last week Tararom held bids for its 49 housing units in Neighbour Home Vacharapol and had sales of 31 units worth about 100 million baht, representing a price discount of 30-40%.

http://thailand-property-guide.com/?p=news...&NewsID=542

[fletchsmile]

construction stopped, price reductions, and oversupply........but i guess there will still be suckers......

Tararom delays product launches as economy remains sluggish

Bangkok Post: 23 August 2007

Last week Tararom held bids for its 49 housing units in Neighbour Home Vacharapol and had sales of 31 units worth about 100 million baht, representing a price discount of 30-40%.

http://thailand-property-guide.com/?p=news...&NewsID=542

Yes, looks another problem for the LOW end. Average 3.3mio each per unit. Obviously some way out of center also. I certainly don't pass there often.

[bingobongo]

for all you donald trump wannabes, lets recap.........oversupply = lower prices and/or rents

Sept 4, 2007

“‘Many observers are calling an oversupply in the condominium market. While our findings show the market has continued to enjoy strong demand, based on anecdotal evidence, a large proportion of condominium purchases in central Bangkok are made by investors buying and intending to put units up for rent."

"In spite of certain indications that the condominium sector is booming, there are a number of factors which lead us to believe the market is nearing a peak," says Tantisunthorn. "Asking prices are rising at a much slower rate compared with previous years and existing supply is remaining idle for longer periods of time," he adds.

"Strong competition in the condominium rental market is pushing rents downwards. This is mainly due to continued amount of new condominium supply entering the market. Though demand remains strong, its growth cannot keep pace with new supply."

Edited September 8, 2007 by bingobongo

[bingobongo]

here is a little something for the homedebtors...... i mean "homeowners" and the renters......enjoy.......how is the baht doing?

One reason the housing debate gets so emotional is that many people cannot distinguish between where they live and who they are. Their home feels like their self. And how can you put a price on your self? Realtors and lenders exploit this emotion for personal profit, destroying the financial lives of millions.

Others take a more practical view, and are willing to separate their sense of self from where they live. They can and have saved huge amounts of money by renting or owning a house well within their means, and can watch the housing bubble implode with equanimity.

[quiksilva]

Bingo have you got a link to those original articles in your two posts above? The Thai one basing their views on "anecdotal evidence" (always the most reliable form I find...). I am not saying that this can not happen, I have long suspected it might, but without hard evidence to qualify them these statements should be taken with a grain of salt.

As for the second post it sounds to me like thatt one was American in origin seeing as only they use the word 'Realtor', the content of which I must take issue with.

To say that "realtors and lenders destroy the financial lives of millions" is a typical modern day American populist response. They are passing the buck of their own stupid actions and dumb decisions on to whoever else is close at hand. These people are unable to face up to the truth and the fact that many millions destroy their own financial well being themselves by making stupid choices and over stretching themselves.

Nobody puts a gun against peoples heads to buy a house, its their choice and they are responsible for it. Newsflash, realtors sell real estate, if you want to buy, they will sell it to you, but Caveat Emptor.

To put the blame on the realtor is as stupid as barmen being made responsible for drunks leaving bars. But thats a whole other topic.

After saying all that perhaps we can get back to the matter at hand, namely Thai real estate which is not in the same state as the American market, although I am sure some would like us to believe that the universe revolves around the USA, but I'm afraid the truth is quite far from that.