Bangkok Condo Price Trends

[bingobongo]

history repeats..........enjoy the video if you can access it.......Bangkok condo ghost town.......

and just like back then, today people are buying but not living in them......

and please don't say "But it (property market) is different this time", that line has preceded every bubble in history as they deflate......

Bangkok Condo Ghost Town

http://link.brightcove.com/services/link/b...bctid1126133172

Edited October 20, 2007 by bingobongo

[pkrv]

Bingo please try to pay attention we have already been there and done that.

http://www.thaivisa.com/forum/lofiversion/...hp/t144052.html

[skytraining]

I think that there is/will be rental oversupply. And there are also a lot of very rich locals (I know one friend's mum just bought 4 units in a new project on a whim!). But everyone is forgetting how bloody long it takes to do a place up to be ready to rent!! My condo as finished at the start of 2006 but was deserted for a year while everyone decorated. Now it is really pretty full, with 1/4 wealthy Thai residents, and 3/4 Japanese/foreign renters. In a year tell us about Centric scene again...

[BalthazarBeefheart]

I think I recall reading on these pages that there was a simple equation which was the number of months that it would take for the purchase price to be recouped by the market rental price - I think the poster was American and the average figure for the states considered as value was 180 months - If anyone recalls this please confirm if my memory is serving me correctly - although I guess the figure should be rent less management fees.

Cheers BB

[bingobongo]

hi pkrv, sorry you have no idea how supply and demand works.....how much equity do you lose daily as more and more units are built in a sliding economy?

did you enjoy the Bangkok Ghost Town video from the Wall Stree Journal?

anyway, here is a pretty picture from BOT (courtesy of Thaicrisis)

and here is the actual link

http://thaicrisis.files.wordpress.com/2007/10/bothousing.jpg

Edited October 22, 2007 by bingobongo

[quiksilva]

In the view point of property developer, as long as the unit is sold. It is not their problem if it is occupied or not.

Are you in the right business?

I never said that property developer was not a good business.

On the contrary, their financial results are very good. Good enough to impress gogos.

And indeed : they couldn't care less. A unit sold is a unit sold.

But, by saying that you are covering only half of the issue.

If the market has no real buyers anymore... the developpers will go down, like they did in 97.

Therefore, you can't separate them.

One critical difference between now and 1997, is that the vast majority of these projects are now financed locally, rather than using syndicated overseas loans as they did in the run up to 1997. '97 was a failure of the Baht, and an over inflated economy based on loans for the boys secured by assets corruptly valued at unrealistic prices. THAT was a bubble.

Today some may say the prices are too high, but one difference today is that Joe Public is prepared to pay these prices, so there is genuine comparable evidence to support these levels. There is certainly an oversupply of rental units, and I suggest that this will crush yields down to 3-4%, effectively killing off the condo-to-let investment market for the casual player.

Perhaps if the majority of these investors decide to cut their losses, and run values will fall. Experience however tells us that typically the locals will just ride this out and wait for the market to turn even if that means waiting 5 years or so (which is smart if you ask me because property should not be a short term play).

The knock on effect to developers will be that they will have to refocus and rethink their approach to survive. They will have to cater to different market segments, in new geographical locations both in Thailand and perhaps even abroad, as many Singaporean and Hong Kong based developers have done.

Rather than just post a chart, lets look at what that really means.

You will see that new annual supply (red) in 1997 was HUGE, and this dropped off and in the years since the crisis there was hardly any new supply.

Demand for condos never went away, and it was this pent up demand which fueled the explosion in the residential condo market that we witnessed from 2002 up until recently.

Now compare the annual new supply numbers of 2007 (17,000) with 1997 (47,000). This is a huge fundamental difference.

In 1997 developers used what I call "The Field of Dreams" development strategy: "build it and they will come", whereas today the majority are monitoring and reacting to market demand (see how the annual numbers fluctuate).

Look, consider this, are there more adverts for NEW condo projects today than there was two years ago? I think not, and the ad industry here agrees, they have seen falling ad revenues from this sector.

This is a GOOD sign, it shows that developers have learned something. If they were still launching 30,000, 40,000 units per annum today, I'd be terrified, but they are not.

However, that does not mean that I am saying that we are not due for a correction, I think we are, but unfortunately for the short sellers out there this will not be a bubble popping like we saw in 1997, but its not going to be much fun if you have been buying condos to let.

Edited October 22, 2007 by quiksilva

[skytraining]

Also add 3-4% return is rubbish - but better than most bank deposit rates here!

[YoungFarangNa]

"Some bought it as spare guest room to accommodate their family members who will visit Bangkok occasionally."

It is funny that you mention there not being any lights on in the building. I noticed the same thing frequently. I asked my friend the other day if Thai people don't like lights or something. I will look up a condominium and there are maybe five or six lights on at 8 pm. It must be nice to have been handed that kind of money.

Edited October 22, 2007 by YoungFarangNa

[YoungFarangNa]

I think that there is/will be rental oversupply. And there are also a lot of very rich locals (I know one friend's mum just bought 4 units in a new project on a whim!). But everyone is forgetting how bloody long it takes to do a place up to be ready to rent!! My condo as finished at the start of 2006 but was deserted for a year while everyone decorated. Now it is really pretty full, with 1/4 wealthy Thai residents, and 3/4 Japanese/foreign renters. In a year tell us about Centric scene again...

My land lord has five units in this building. Three units in the new building next door and owns a small serviced apartment. The unit I am renting previously sat idle for about a year. I guess there are a limited number of investment outlets for Thais. A shame really as I doubled my money in Chinese stocks this year.

[thaigene2]

I think that there is/will be rental oversupply. And there are also a lot of very rich locals (I know one friend's mum just bought 4 units in a new project on a whim!). But everyone is forgetting how bloody long it takes to do a place up to be ready to rent!! My condo as finished at the start of 2006 but was deserted for a year while everyone decorated. Now it is really pretty full, with 1/4 wealthy Thai residents, and 3/4 Japanese/foreign renters. In a year tell us about Centric scene again...

In a year maybe - maybe not.

The point being made above is that there are countless condo buildings coming on the market now all 'sold out' but very much under-occupied. My question - still unanswered during the past six or eight months - is whether all those absentee-freeholders are now up to their neck in bridging loans because they were unable to flip as planned prior to completion (and had to scramble for a loan when the remaining 80% for title transfer came due - or lose the 20% they already paid out).

The same could be said about those 'investors' who bought with financing planning to rent out too, but now can't find renters...They're now making payments each month (money going out - but nothing coming in - and the planned rate of return declining by the month - just like the asking price of rents in an over-saturated rental market).

Could this be Thailand's version of a "sub-prime" bubble? Speculators who took out loans and are now sweating bullets because they can't sell OR rent?

Unless the banks reveal their exposure to speculators in the residential condo sector we'll never know. But I wouldn't be risking buying any Thai bank stocks anytime soon.

Edited October 23, 2007 by thaigene2

[Abrak]

Could this be Thailand's version of a "sub-prime" bubble? Speculators who took out loans and are now sweating bullets because they can't sell OR rent?

Unless the banks reveal their exposure to speculators in the residential condo sector we'll never know. But I wouldn't be risking buying any Thai bank stocks anytime soon.

Actually Thailand's financing of housing is pretty conservative at the consumer level because mortgage finance is relatively new to the Thai market. In the UK, mortgages as a % of GDP are 135%, in the US it is around 85% while in Thailand outstanding mortgages as a percentage of GDP stands at only about 16%.

This, of course, fits with the sort of anecdotal evidence we read about in this thread - rich Thais buying condos out of petty cash and leaving them empty rather than Thais leveraging themselves up to the hilt in order to make money from rising asset values. In other words dont expect to see a sub prime mortgage crisis in Thailand. Of course where the banks got caught in 1997 was overleveraging to the developers - sometimes 10x capital or more. In this cycle they have been very much more cautious.

[thaigene2]

Could this be Thailand's version of a "sub-prime" bubble? Speculators who took out loans and are now sweating bullets because they can't sell OR rent?

Unless the banks reveal their exposure to speculators in the residential condo sector we'll never know. But I wouldn't be risking buying any Thai bank stocks anytime soon.

Actually Thailand's financing of housing is pretty conservative at the consumer level because mortgage finance is relatively new to the Thai market. In the UK, mortgages as a % of GDP are 135%, in the US it is around 85% while in Thailand outstanding mortgages as a percentage of GDP stands at only about 16%.

This, of course, fits with the sort of anecdotal evidence we read about in this thread - rich Thais buying condos out of petty cash and leaving them empty rather than Thais leveraging themselves up to the hilt in order to make money from rising asset values. In other words dont expect to see a sub prime mortgage crisis in Thailand. Of course where the banks got caught in 1997 was overleveraging to the developers - sometimes 10x capital or more. In this cycle they have been very much more cautious.

Not sure the rate of mortgages compared with % of GDP is that relevant. Nor is the reference to the 1997 bad loans to developers. We know the banks are much more conservative with the developers now..But the questions I'm trying to figure out is how many bad loans have the banks made to 'little guys' - the sort of speculator I was referring to above?

As far as I can tell, it's just as bad to have 100,000 'consumer-level' 'bad loans' as it is to have 2,000 bad 'commercial' loans. But we don't know the full exposure to that .. yet. Yes,it may be true that a lot of these places have been bought by general someone-or-others daughter from his tea-money. Again we don't know..

[YoungFarangNa]

Could this be Thailand's version of a "sub-prime" bubble? Speculators who took out loans and are now sweating bullets because they can't sell OR rent?

Unless the banks reveal their exposure to speculators in the residential condo sector we'll never know. But I wouldn't be risking buying any Thai bank stocks anytime soon.

Actually Thailand's financing of housing is pretty conservative at the consumer level because mortgage finance is relatively new to the Thai market. In the UK, mortgages as a % of GDP are 135%, in the US it is around 85% while in Thailand outstanding mortgages as a percentage of GDP stands at only about 16%.

This, of course, fits with the sort of anecdotal evidence we read about in this thread - rich Thais buying condos out of petty cash and leaving them empty rather than Thais leveraging themselves up to the hilt in order to make money from rising asset values. In other words dont expect to see a sub prime mortgage crisis in Thailand. Of course where the banks got caught in 1997 was overleveraging to the developers - sometimes 10x capital or more. In this cycle they have been very much more cautious.

the problem with what you describe is you almost make it sound like its "hip" right now for Thais to buy condos out of petty cash. since this small group probably spends alot of time socializing with eachother, it seems like it could become unfashionable rather quickly. one person says stop buying condos and then everyone else listens. or maybe not.

[donx]

Could this be Thailand's version of a "sub-prime" bubble? Speculators who took out loans and are now sweating bullets because they can't sell OR rent?

Unless the banks reveal their exposure to speculators in the residential condo sector we'll never know. But I wouldn't be risking buying any Thai bank stocks anytime soon.

Actually Thailand's financing of housing is pretty conservative at the consumer level because mortgage finance is relatively new to the Thai market. In the UK, mortgages as a % of GDP are 135%, in the US it is around 85% while in Thailand outstanding mortgages as a percentage of GDP stands at only about 16%.

This, of course, fits with the sort of anecdotal evidence we read about in this thread - rich Thais buying condos out of petty cash and leaving them empty rather than Thais leveraging themselves up to the hilt in order to make money from rising asset values. In other words dont expect to see a sub prime mortgage crisis in Thailand. Of course where the banks got caught in 1997 was overleveraging to the developers - sometimes 10x capital or more. In this cycle they have been very much more cautious.

the problem with what you describe is you almost make it sound like its "hip" right now for Thais to buy condos out of petty cash. since this small group probably spends alot of time socializing with eachother, it seems like it could become unfashionable rather quickly. one person says stop buying condos and then everyone else listens. or maybe not.

We have an elderly Thai woman from Bangkok visiting us this week. I asked her about why there seem to be many Bangkok condos purchased by Thais yet they remain empty. Her response was that most of these condos are bought with cash by Thais. They are buying them and putting them in company ownership for the purpose of reducing taxes - both personal income tax and estate tax (tax payed by the survivors of someone who died). I don't know how reliable her opinion is, so I'd be interested in hearing from any hi-so Thais about this.

[pkrv]

Perhaps I can provide some raw information that may assist. I have not digested this as it is not relevant to me, but from a cursory glance I percieve that it seems that for the developments that Ferangs are interested in, these are mortgaged (for Ferangs) outside of Thailand. Maybe the info is of use to others - and no, all this is, is sharing raw info.

LS_Letter_to_The_Park_Buyer___FINAL.pdf

Summary_of_Mortgage_Info_update_20_Oct_07.pdf

UOB_New_rate_update_2_Oct_2007__Active_.pdf

UOB_Package_for_Non_Thai_Resident.pdf

Edited November 2, 2007 by pkrv

[pkrv]

quicksilva - I wonder if I can ask for some help please - many of us are seeing multiple condominium projects completing (it does not matter which ones) - essentially the question is how they are populated (possession taken), top down, bottom up, are just the noisiest dealt with first - It is very, very confusing.

[stateman]

Doh! How many times do I have to repeat that values are not the same as prices.

The average price of BMR Housing units launched has come down, big deal.

It is NOT the same thing as Values collapsing.

What Area's graphs show is that developers today are targeting lower income market segments, nothing more than that.

Oh and these projects are selling rather well too.

I think you are right.

I seem to have read some months ago that the developers were shifting to the lower priced market.

[palm]

Doh! How many times do I have to repeat that values are not the same as prices.

The average price of BMR Housing units launched has come down, big deal.

It is NOT the same thing as Values collapsing.

What Area's graphs show is that developers today are targeting lower income market segments, nothing more than that.

Oh and these projects are selling rather well too.

I think you are right.

I seem to have read some months ago that the developers were shifting to the lower priced market.

It's now November 2007, and I've yet to see any quality condo prices dropping. I've only been asking for a year.

Prices in fact have been going up, and the cost of land certainly isn't falling either.

If you look at land and property prices in major Asian cities, you'll notice the same pattern.

But if you understand that those saying prices must fall are the ones who can't afford to buy here anyway, you can see their frustration.

[merlion]

Doh! How many times do I have to repeat that values are not the same as prices.

The average price of BMR Housing units launched has come down, big deal.

It is NOT the same thing as Values collapsing.

What Area's graphs show is that developers today are targeting lower income market segments, nothing more than that.

Oh and these projects are selling rather well too.

I think you are right.

I seem to have read some months ago that the developers were shifting to the lower priced market.

It's now November 2007, and I've yet to see any quality condo prices dropping. I've only been asking for a year.

Prices in fact have been going up, and the cost of land certainly isn't falling either.

If you look at land and property prices in major Asian cities, you'll notice the same pattern.

But if you understand that those saying prices must fall are the ones who can't afford to buy here anyway, you can see their frustration.

I concur, those pathetic creatures.... poor souls.

[bingobongo]

when dealing with investments, most people are emotional rather than rational.......

for instance most people would not buy necessities (such as food) that are overpriced and usually look for bargains or sales, but when it comes to property, equities (nonnecessities) or whatever people think will "make them rich".....people overpay because sadly people identify those with a sense of self....the human condition truly is amazing

let the price come to you, dont chase the price......patience

anyway, here is an interesting graph courtesy of BOT and Thaicrisis....and the trend is down, yet more supply being built everyday

http://thaicrisis.files.wordpress.com/2007/11/condo.jpg

[pkrv]

bingobongo - I found these links on the above web site to be particularly illuminating:

http://thaicrisis.files.wordpress.com/

http://thaicrisis.files.wordpress.com/2007/

http://thaicrisis.files.wordpress.com/2007/11/

Especially if you follow through on the instructions on the page

Edited November 12, 2007 by pkrv

[quiksilva]

quicksilva - I wonder if I can ask for some help please - many of us are seeing multiple condominium projects completing (it does not matter which ones) - essentially the question is how they are populated (possession taken), top down, bottom up, are just the noisiest dealt with first - It is very, very confusing.

Projects tend to be sold bottom up, shifting harder to sell units first, possession typically follows this too, but there really is no hard and fast rule it all depends on whether the developer is a muppet or not

[TonyLeung]

"If you look at land and property prices in major Asian cities, you'll notice the same pattern."

this doesn't mean a correction is not coming. Property has skyrocketed in Thailand. Its not realistic to expect to 30% gains every year. The US credit crisis and its effect on the Worlds economies is still up in the air.

[TonyLeung]

People are being quite silly when they say "who knows why the Thais are buying these units and leaving them vacant. Maybe their child is starting university. Maybe its to be used as a guest house. Maybe they will use it to house their stamp collection". If the fundamentals aren't there, then the markets are acting irrationally and they will correct themselves.

[bingobongo]

now now children, let us not get caustic........reality is what it is.......now if the housing economy is supposedly robust, (which it is not), then why dear reader are a majority of the increasing bankrupticies in housing related businesses? and as for the new business creation, these are not for condo/home developers........could it be oversupply? could it be poor lending practices? could it be overpriced domiciles? or perhaps all 3?

Bankruptcies rose 6.5% in October

Most of the companies are in the construction, property development and electrical appliance distribution industries.

http://www.nationmultimedia.com/2007/11/15...ss_30056209.php

Edited November 15, 2007 by bingobongo

[TonyLeung]

good post.

[trajan]

developer asking prices are definitely rising...the Sukhumvit Soi 39 Sansiri project wants B140K psm for a two bedroom 80 sm unit on the 20th floor (with prices rising B1K psm each floor you go up....but every other unit (except the penthouse) is booked out already....

the location is very good..(near the main road and Skytrain station)....but I consider Sansiri projects mid-level in quality.....

just a few years back, I remember people gasping when they heard B100K psm (like at All Seasons)... now B100K is pretty normal for good units in central locations....

5 years from now, maybe B150K psm will be the new B100K psm?

[bingobongo]

another chart courtesy of Thai Crisis using BOT data.........the trend in home loans is of course down, and the silly thing is that builders keep building........so builders keep building due to artifically low rates yet loan volume is decreasing even with artifically low rates.....so oversupply continues.......builders can of course increase asking prices onnew product but the second hand market will get clobbered as inventory will not move

enjoy

http://thaicrisis.files.wordpress.com/2007/11/credit2.jpg

[backflip]

"now if the housing economy is supposedly robust, (which it is not)"

If the housing sector was more robust, prices would rise, and you'd have yet another reason not to buy a home. W're lucky that you, and your loyal believers, don't buy homes. If everyone who posted "I'm waiting for <this> to happen or <that> to happen" actually bought a home, they'd be a shortage of housing, and the prices would escalate even quicker. Your ilk are the people who refuse to buy real estate when it's relatively cheap, waiting for it to become too expensive to afford.

[zorro1]

Bingo bongo, imagine the day you are waiting for has come today. Tens of thousands of people have lost millions because they bought on emotion but not you

You knew today was coming. Where would you buy in BKK exactly! (please name the soi) and what would you spend per sqm? would it be 1 ,2,3 bedroom or a high end penthouse and please give your reasons for your selection.