Hua Hin And The Thai Market

[DegenFarang]

I'm interested in investing in Thai real estate for the long term. I'm specifically looking at Hua Hin.

As Warren Buffet says, you make your money when you make the investment, not when you sell it. There are a number of factors here that I'm weighing as for when to enter the market and am looking for feedback, more information and clarification on all of them:

-Hua Hin: I rather like this area and think its prospects for the long term are as good as any in Thailand. Given that, I don't know a great deal about it. Please provide me with any relevant information you have about the Hua Hin real estate market as compared to other areas of Thailand.

-Strengh of the Baht: I'm an American and this one is quite important to me. Since I came to Thailand about two years ago I have lost over 20% of my purchasing power. If the Baht should rebound in the near/semi-near future, I'll instantly lose a great deal of equity. I obviously want to avoid this. The government appears bent on stopping the Baht's appreciation, but so far it is not working...it just keeps getting stronger. Any merit to waiting this out for another six months or a year to see what happens with the Baht?

-Strength of the Thai real estate market: This one I am relatively ignorant about. How has the market been over the last couple of years? Has there been rapid appreciation? Depreciation? What is the outlook like over the next couple of years? Are we expected to see a slump like in America? Are people expecting a boom time?

-Foreign investment: Would it be wise to wait this out until the government figures out what they are doing with regard to foreigners investing? Is now the time to snatch up bargains while there is likely be an uncertainty discount built into the purchase price?

-Thai Economy: How is the Thai economy now? Is it down and thus a good time to buy? Is it in some type of bubble where it is better to wait it out for the market to downward correct?

-Wild Card: Anything else you care to add to this that I may not be considering

I know thats a lot to ask and I'm not expecting anybody to reply to it all. Feel free to reply to any question there or add anything else you find relevant.

Cheers

[PeaceBlondie]

To answer all your questions adequately, shall we have the truck drop off all 39 volumes? I'm just kidding; it will be good to have a long discussion here.

Do you want to buy this in your own name? Or just give it to your woman? Do you want a condo, a new home, an old home, raw land? Close to the beach, the highway, etc.? As for market sale data, do you only want audited and accurate raw compilations based on reality, (which doesn't exist), or anecdotes and hearsay? As for the baht and the USD, nobody knows. Good Dr. Tarisa and her counterpart at the US Federal Reserve don't know and won't know. Even Warren Buffet doesn't know. Has the real estate market in America really slumped already, or only in isolated pockets? Will my sister's pending sale in Orlando go through?

The Thai economy; now, that's our forte, our strength. Just look through a boatload of topics/threads here on the ThaiVisa forums. Several thousand posts. We know everything, and nothing. But it is free!

Where's that tongue in cheek emoticon? that's almost it; no, not him oh dear....

Now, the folks can join the discussion....and, thanks for asking.

[chownah]

Do some reading right here and you'll find alot of your answers or at least you'll find that there really is no direct answer to any of them....they are all subjects of hot debate....as if you didn't know this already.

Chownah

[lannarebirth]

It's important to understand that foreigners can not own land, and that a legal construct you are comfortable with will be necessary to pretend you do. While you may do fantastically well as a land speculator, the people I see who are the most successful, buy what they can afford, what they enjoy to live in themselves for however long.

Markets fluctuate and there's no way of knowing if currencies or property is at a top, at a bottom, at the top of the bottom, or the bottom of the top. That's why your personal satisfaction with owning it (however you devise that) is so important.

[DegenFarang]

Ya I know I cannot own land. I'm looking at Condo's.

I'd like something that is finished, but new. I've seen far too many people get frustrated over the delays that appear to be standard with these new projects.

I do quite like the idea of swooping in late though, after others have made mistakes, and snapping up condo's in projects when are a year or more past their completion date.

They all have to be finished eventually right? lol

Edited July 30, 2007 by DegenFarang

[chownah]

They all have to be finished eventually right? lol

Ummmmm.....no.

[DegenFarang]

They all have to be finished eventually right? lol

Ummmmm.....no.

eh? what happens if they don't finish? do you forfeit the money?

[ratchabuild]

They all have to be finished eventually right? lol

Ummmmm.....no.

eh? what happens if they don't finish? do you forfeit the money?

You need to go there in the rainy season and check it out. Roads can be very bad and prone to flooding also quality of work varies fantastically. Nearness to facilites changes rapidaly as developments come on stream like Tesco Lotus. Also a lot of peole say buy up beach front land north and south of Hua Hin because eventually it will all join up. I made money there, there's money to be made because its so popular. But there are lots of very iffy developments too.

Edited July 30, 2007 by ratchabuild

[lannarebirth]

They all have to be finished eventually right? lol

Ummmmm.....no.

eh? what happens if they don't finish? do you forfeit the money?

This isn't Hua Hin specific, but you'll get an idea what happens:

http://forum.skyscraperpage.com/showthread.php?p=2976506

[Irene]

DegenFarang,

My comments to the questions I have an opinion of (in bold):

-Strengh of the Baht: I'm an American and this one is quite important to me. Since I came to Thailand about two years ago I have lost over 20% of my purchasing power. If the Baht should rebound in the near/semi-near future, I'll instantly lose a great deal of equity. I obviously want to avoid this. The government appears bent on stopping the Baht's appreciation, but so far it is not working...it just keeps getting stronger. Any merit to waiting this out for another six months or a year to see what happens with the Baht?

The world's imbalance of trade and reserves will not be reverted to the equilibrium quickly in the shortterm. Therefore, the weakening of the US dollars will continue which shall strengthen the baht. The promise of intervention etc. from the Thai authorities has a few days effects but longterm-wise it will go on strengthening. Thailand is most vulnerable because of its floating system while China and Malaysia are fixed. So, if you invest with the exchange of 33.7, in the longterm you could end up with 32, a nice gain of 5%. But if the Thai authority drops this floating system and stick to a fixed band of exchange like China, then you could have a loss of exchange. Currently, the authority has said that they will never do that.

-Foreign investment: Would it be wise to wait this out until the government figures out what they are doing with regard to foreigners investing? Is now the time to snatch up bargains while there is likely be an uncertainty discount built into the purchase price?

If you are only interested in a condo, then you are not affected by the coming Foreign Business Act.

-Thai Economy: How is the Thai economy now? Is it down and thus a good time to buy? Is it in some type of bubble where it is better to wait it out for the market to downward correct?

Currently, Thai economy is pretty strong despite the export industry (70% of the Thai GDP) having to suffer on exchange losses. The past economists who a few months ago gave Thailand less than 4% growth in 2007, now say it shall be above 4% growth. The only area one needs to watch out is the failure of the baht interventions like in 1997 and the exchange rate sliding down to 31. This is mainly caused by foreign hot money coming in for relatively inexpensive stocks for capital gains and exchange gains (coming in with 33 rate and going out with 31 rate). The exchange gains are due to self-fulfilled prophecy through their own actions of speculating on thai stocks with onslaught of dollars to Thai exchange market. Thailand is ripe for this double-dip gains which is natural for the hedge funds to focus on.

I know thats a lot to ask and I'm not expecting anybody to reply to it all. Feel free to reply to any question there or add anything else you find relevant.

Your questions are so comprehensive and a model for risk management on investment. However, at the end of the day, one erroneous factor could bring you down. You have to pose one final question whether you have any fallback situation if you face some of that errors. Charlie Munger, Warren's close friend, relies exclusively on this question i.e. if everything goes wrong, will I be able to survive to ride over this misfortune.

[cheshiremusicman]

DengenFarang,

I moved to live in Hua-Hin some 8 months ago and can only say that my wife and I are very happy with our new life here.

HH has a lot going for it and we beleive, as you yourself said, that it is one of the up and coming areas.

I don't know if you are into golf, but if you are there are some very fine courses in the area - they are NOT cheap - by Thai standards - but still excellent.

Somebody mentioned Tesco/Lotus in one of the replies and this is situated within 'Market Village' which is located on the south side of HH and provides a very wide range of shops, cinema, bowling alley, etc along with all kinds of restaurants.

local markets are very good and there are some very fine well established condominums along the beach frontage.

Local car suppliers/ servicing agents include Toyota, Isuzu, Honda, Ford and Chrysler so no problems there.

Loads and loads of excellent restaurants of all prices along with hotels from the cheap and cheerful to top of the range exclusive spa hotels.

Who knows where the Thai Baht is going, but the consensus of opinion is that it is overpriced at the present and being held artificially high, my guess, and I hassen to add it is only a guess, is that the Thai Baht will weaken in the months to come.

The prices of houses and condos seems to have remained fairly stable and it is ok for people to say that this and that has 'appreciated by x% in the last year or so' , but it is only worth what you can sell it for and it would seem that at present houses ( and I know you said that you would buy a condo ) over 6million Baht are not selling, but I don't know if this is the case with condo's, but suspect that this is the case.

The area of HH and immediate surrounding areas are undergoing road improvements - particularly on the south side on the way out to Pranburi where the road is single laned, but lots of the minor roads are in poor to awful condition and not made any better with the constant pounding from developers heavy lorries etc. There is an awful lot of housing developments under progress at the present time, with houses ranging from 2.5MB upwards under construction, but not too many new condo developments - these being mainly on new golf course developments. Friend told me yesterday that they had

gone to look at 'Black Mountain golf course development' ( on the south side of HH) and had been told that the houses started at 40MB and condos at 12MB - but of course you do get life membership of the golf club for this - big deal

Areas of HH are prone to flooding, but the condos in the main tend to be outside of these areas.

Hope that the above has been some help - please let us know how you get on and maybe one day we can meet up in HH. Just pm me if you need any more specific info re HH.

[quiksilva]

I wont comment on all your questions regarding investment and economic outlook as I think Irene's post covered that well.

Hua Hin is quite unique as a location, unlike Pattaya and Phuket the market is driven mostly by Thais, the split is in the region of 60:40 in favour of locals, although I expect this to see more growth in the Farang sector as more resorts open and as infrastructure improves.

It will always be a favoured location for Thais and family minded foreigners due to relatively small amount of red light activity and its Royal connection.

Resales of vacant units are always difficult, especially in resort towns. So spend some time on looking at lettings (short term and long term) because units with a decent yield (> 7% net) will always sell.

However lettings will always be difficult if you choose average condos in poor locations, so don't. What is a good location? Well why dont you answer this yourself, put yourself in your tenant's shoes, ask yourself when you holiday in Hua Hin, where do you prefer to stay and why? If you were to stay there long term what would be important to you and why? Ask your friends too.

For me, in both cases I prefer to have a nice sandy beach nearby and don't mind if I am a little out of town, but not too far, 15 minutes drive to shopping (Lotus etc) and can handle up to 30 minutes max to the city. I need to have all the services, and have plenty of facilities. I don't have kids but if I did I would want somewhere that they can play safely, and enough room to run around / ride a bike.

[1Rai.com]

I’m no investment banker so I can’t give you advice on whether to invest or not, but I can say that Hua Hin is doing quite well in terms of the real estate market

Like quiksilva said, “It will always be a favoured location for Thais and family minded foreigners due to relatively small amount of red light activity and its Royal connection”, so it’s perfectly suited for a long-term investment as the situation is unlikely to change.

Have a look through here and you'll get an idea of what's around and for how much:

http://www.1rai.com/Thailand-Real-Properti.../Hua-Hin_2.aspx

On 1Rai.com we have seen a number of enquiries going to Hua Hin real estate agents and, funnily enough, many are American. There are also a number of American-based Thais who choose Hua Hin as a place to buy.

[tuktukmike]

As an investment a Condo as people like to call them (Flat/Apartment in my book) is possably the only worthwhile investment.

There is huge oversupply here since the new FBA intentions were announced, you can not sell your house at present as there are no Buyers.

I know a small developer who can not sell the properties he has and countless others that have had their property on the market for ages.

There is also rumour of another large estate agent going to the wall.

The Market Village has also suffered due to a very very low season with several shops already closed, maybe also due to the high rents imposed there.

There is of course a cinema with thai language films and of course ten pin bowling but unfortunatly this is called Boutique bowling, around 8 Short lanes and ideally for children.

Hua Hin beach has rocks and is far from clean, so yesterday we went to kao takiab beach.

The water had sewage floating on the surface, plus of course the idiots on the Jet Skis who find amusment dodging the swimmers.

So my thoughts would be, rent for at least a year in wherever you are considering buying and get a feel for the place first.

[DegenFarang]

Great feedback, thank you all.

I checked out a few condo developments today and from what the agents are saying and the people at the developments (off-plan they call them, right?...they aren't finished) they are selling out rapidly and they wont budge on the price...in fact they say they'll continue to raise the prices as completion comes closer

rubbish salesmanship or should i act fast?

[jumnien]

Deal only with reputable Thai agents and do not under any circumstances deal with farang salesmen unless you are casting for Grifters II and need some bit players.

[taxexile]

if you want to buy a condo in hua hin , or anywhere in this country , then avoid agents like the plague.

rent somewhere in the town you decide you want to live in , and look around the condos yourself at your own pace.

go directly to the condo management office and ask them if they have anything that is on the market or if they know of any owners who are interested in selling.

they will show you what is available and will either put you in touch with the owner or they will act as "agent" for the owner.

the price will probably be a little cheaper than going through a falang agent.

avoid condos that dont appear well managed or maintained , with untidy common areas and unhelpful staff.

with condo developments under construction , deal directly with the sales office.

if you put down a deposit , make sure the exact unit that you want to buy is named and numbered correctly in the contract.

no shortage of good quality beachfront condos for sale by the owners.

if you find one and you want to buy , then use the services of a reputable bangkok law office , who should be able to guide you as to what needs to be checked out before purchase , and on the day of purchase will help you out at the land office where the transaction will take place. its a straightforward but lengthy procedure , you dont really need a lawyer , but if you are new to the country then it might be advisable to use one.

avoid the small hua hin law offices , they can be unprofessional and you might be lumbered with problems and extra expenses when these problems come to light.

make sure you get the condo regulations "handbook" and if its in thai then go through it with your lawyer so you know exactly what expenses you will be liable for regarding service charges , electricity meter deposits and charges and water charges.

there are no bargains here , but there are condos which are realistically priced compared to the overpriced villas and well run beachfront condos are appreciating nicely in value .

i would guess that it would be much easier to re sell a condo in a mixed thai/westerner block than it would be to sell a villa designed for a wannabe millionaire on an all westerner development.

[tuktukmike]

This always brings a smile to my face,

I checked out a few condo developments today and from what the agents are saying and the people at the developments (off-plan they call them, right?...they aren't finished) they are selling out rapidly and they wont budge on the price...in fact they say they'll continue to raise the prices as completion comes closer.

---------------------------------------------------------------------------------------------

Off plan, this may work very well in the west. But beware as many developers try and sell this way if they do not have the funds themselves to complete the build.

The term they do not like is PYRAMID selling.

Many developers here sell this way and all you see is an artists impression, to date I have yet to see any development that has looked what was promised.

You can also find yourself waiting more than 18months or more than planned for your development to be finished.

Why would anyone buy somthing off plan when there are plenty of finished condos here.

I also agree with the earlier post, go direct not through and agent.

[DegenFarang]

you guys are awesome. thank you so much. this thread may have already saved me untold hundreds of thousands (millions?) of baht.

"Why would anyone buy somthing off plan when there are plenty of finished condos here."

With regard to this though, it is my understanding that you'll save money by doing it this way. As in you get a bargain to what you would get if the property were finished today. Is this not accurate?

In addition, they are only asking for 10% down, then another 15% in monthly installments over the next 18 months, then the remaining 75% at transfer.

If the market keeps appreciating the way it is, I could likely have made over 100% of my investment (the 10% down, plus payments) back by the time I have to fork over the remaining 75%. I could also sell the place at a tidy profit before I have to turn over the money, is this not accurate?

Thats how its done in the states and I'm seeing a lot of potential for that here as well...though I'm not aware what the buyers side of this equation is. Am I the only poor schmuck down here looking to buy? lol

[jumnien]

Please do your homework and investigate the companies who are developing the projects. Be leary of all the "estate agents" on 30 day visas that set up shop between the optical shops and tailor shops. Too many sad stories around, don't make yours another one.

[DegenFarang]

"Will my sister's pending sale in Orlando go through?"

Sorry Blondie, I missed this:

The US real estate market, in many areas, is going to shit. I nearly purchased my Grandfathers home about a year ago, and thankfully for me (not for him) I did not. It has dropped over 30%! This is in Northern California and not in one of the big cities you'd expect. Just a normal town. LA, Florida and many other places are seeing similar corrections now.

A great site to follow this is at www.zillow.com You can plug in any address, city, state or whatever and see how the property values have been doing, over given timeframes etc. It is quite alarming.

There is a silver lining though, when the market corrects and begins to improve, there will be tremendous value. Maybe it will even be possible again to buy a piece of property in America and expect the rental income to cover your mortgage payments...this hasn't been possible in years and years and years.

[lannarebirth]

you guys are awesome. thank you so much. this thread may have already saved me untold hundreds of thousands (millions?) of baht.

"Why would anyone buy somthing off plan when there are plenty of finished condos here."

With regard to this though, it is my understanding that you'll save money by doing it this way. As in you get a bargain to what you would get if the property were finished today. Is this not accurate?

In addition, they are only asking for 10% down, then another 15% in monthly installments over the next 18 months, then the remaining 75% at transfer.

If the market keeps appreciating the way it is, I could likely have made over 100% of my investment (the 10% down, plus payments) back by the time I have to fork over the remaining 75%. I could also sell the place at a tidy profit before I have to turn over the money, is this not accurate?

Thats how its done in the states and I'm seeing a lot of potential for that here as well...though I'm not aware what the buyers side of this equation is. Am I the only poor schmuck down here looking to buy? lol

There are small periods of time in every real estate cycle where the kind of buying you describe takes place and is very successful. It is only my own personal opinion that right now is not one of those times. I would buy something if I think the price is fair and I would enjoy to live in it. If it appreciates in value, well that's just a bonus isn't it? Pay attention to what taxexile said about how the buildings are managed. IMO that's very important in finding long term benefit.

[SiamSquare123]

the US Market Home Builders just caused the biggest loss in 5 years to the Dow Jones.

[Irene]

DegenFarang,

My comments are in bold type:

"Why would anyone buy somthing off plan when there are plenty of finished condos here."

Buying property off plan has always been the practice in Thailand even right now. Only after the Thai financial crisis that there have been a few exceptions. This was led by Land and House developer who introduced the concept of sales of "finished houses". Needless to say, this pioneering company has been so successful with this new concept.

With regard to this though, it is my understanding that you'll save money by doing it this way. As in you get a bargain to what you would get if the property were finished today. Is this not accurate?

It depends. If it goes as planned, yes, it is nice way of buying a property. But while paying your 30% portion, you should be praying all the time that the developer will complete the products otherwise you have to sue the developers for the refund of your payments. By then, the developers may have already gone bankrupt. Unlike the US, the 30% is deposited in an escrow account until the project is finished otherwise it shall be refunded to the customers.

In addition, they are only asking for 10% down, then another 15% in monthly installments over the next 18 months, then the remaining 75% at transfer.

If the market keeps appreciating the way it is, I could likely have made over 100% of my investment (the 10% down, plus payments) back by the time I have to fork over the remaining 75%. I could also sell the place at a tidy profit before I have to turn over the money, is this not accurate?

This is a common practice now especially condominiums at the prime area. There is a group of speculators who follow this practice. If the finished property turns out hot, then there will be phone calls from the estate agent asking whether you want to sell. But if it turns out at bad time like in 1998-2000, then the speculators would be searching for buyers or allowing the forfeitures of your past payments. The developers love these speculators because they form as part of a group of committed buyers that is an essential statistic to allow the developer's bank to extend the credit line. Furthermore, the project would be viewed as successful right from the opening day with more than 50% "sold".

If it goes as planned, the buyer could earn a potential capital gain of over 100%. As an example, two and a half years ago, I committed to buy one condo unit near to Emporium as my normal property investment for rental, it is now completed and due for transfer. The agreed value was 9 million baht. I already paid the deposit and all instalments in a total sum of 3 million baht. Now there are offers for 13 million baht on the unit. If I accept the offer (which I won't), I will get a profit of 4 million, 133% gain. In another situation, I was a buyer from the first buyer and allowed him a profit of the similar sum. Todate, I have a potential profit of 20% on this property. It does not look rosy in all cases. It depends very much on your correct judgement. There could be many sad stories as well for the first buyer of off-plan properties.

Thats how its done in the states and I'm seeing a lot of potential for that here as well...though I'm not aware what the buyers side of this equation is. Am I the only poor schmuck down here looking to buy? lol

It is quite well known already here. There is of an exclusive group of speculators and some of them had the bad experience already between 1998-2000 and learnt their lessons in selecting a right property to speculate on. They don't "buy" one or two units, they "buy" a dozen. The near-Emporium-condo I referred above, two years ago one speculator could not pay his instalments of fifteen units and offer to sell his rights at cost, being an investor and not a daring speculator, I declined. Now all I got is a regret.

[sukanyacondo]

While w e are talking about Hua hin does any body know a good builder there. I really want to build to a western standard no shortcuts.

[quiksilva]

Great feedback, thank you all.

I checked out a few condo developments today and from what the agents are saying and the people at the developments (off-plan they call them, right?...they aren't finished) they are selling out rapidly and they wont budge on the price...in fact they say they'll continue to raise the prices as completion comes closer

rubbish salesmanship or should i act fast?

The condos that my colleagues are selling in Hua Hin are doing extremely well even under the current circumstances. Sure farang buyers have dropped off the face of the Earth (what with the Thai Baht and ebbing confidence etc) but Thais are still buying especially in Hua Hin.

Yes I work for a real estate agency but Im in Commercial and Industrial so truly get no benefit whatsoever by telling you this, but we sold over 68 million Baht's worth of units in one day over the last weekend at one of our projects.

I don't know who you were speaking to but if it was us I wouldn't call that rubbish salesmanship myself.

[Moonfruit]

I like to see comments saying avoid agents at all costs.

Going to the condo management office often results in higher prices being quoted than the agents.

I wouldnt rule out doing things one way or the other. Just do your homework properly, as you would do at home when buying real estate.

[Old Man River]

I am not in the real estate business, but do remember that post tsunami, Thai's started talking more and more about the safety of HH as it appears shielded from this type of disaster.

[1Rai.com]

I must admit I am a little bemused by all this anti-agent sentiment. Would you buy in your own country without an agent? I wouldn't. Buying a house is supposed to be the first or second most stressful thing in life, along with marriage (I suppose it all depends on how highly one values marriage/the property and how many times it's happened before!); agents earn their commissions because they make a deal go smoothly without headaches - it's a service.

The only difference between agents here and agents in, say, the UK is that here you don't need to be qualified or licensed. That means of course there are cowboys around, but these guys don't have a good reputation and certainly don't last. So, as Moonfruit suggests, do your homework. The nature of an agency's business is differentiation - providing a professional service establishes trust and sets them apart from these 'cowboys'. That's the way of the world, and much more so in an industry that seemingly has no barriers to entry like Thai Real Estate.

[taxexile]

when looking for a place in both bangkok and hua hin we started off using agents.

apart from one company in bangkok , (cbrichard ellis) , and one in hua hin ( manora) , all were unprofessional and were unable to give answers to straightforward questions about the properties we were taken to see. some even forgot to bring the keys with them... all the while keeping up a constant , relentless and annoying sales pitch , i've had better sales chat in argos or comet.

the professional ones were no bullsh1t thais , working for the above companies , they had all the info and all the answers , they were thoroughly prepared on the properties they were showing us and didn't have to "just let me call and find out" , or "i'll need to get back to you on that one", or " i really dont know" . nor did they try to insist on us viewing places which we knew from the descriptions were not suitable , something that nearly all the other agents did.

maybe agents have smartened their acts up a bit in the 2 years since we were looking , but we found most of the western run agencies to be very amateur run business , with smart offices and pretty girls but little else.

i have heard that there is one other very good agent in hua hin.

since then we have helped some friends find condos here , by going straight to the condo juristic offices , and found it to be a painless and easy way of doing things.

this might be because in these cases , it was us , the customer who was in control of the situation , whereas when you go to an agent , it is the agent who is in control.