Rental Prices Going Insane

[mikethevigoman]

I have been living in a 42 sq meter condo since 1999 for the price of 6500 baht. I pay my electricity to the electricity company, water is almost nothing and all Thai tv channels are free. I moved in when it was new.

The condo is located on a small backwater soi from Huai Kwang intersection on Ratchada. Approximately 10 minutes walking to the Subway.

Recently a new building was finished by the owner of this condominium. As curious as I am I asked for the rental prices.

For a 32 sq meters (smaller than my appartment!!) They have the nerve to ask 13.000 b/mth for the 3rd floor and 14,500 b/mth for the 4th and 5th floors!! For a 50 sq meters (only marginally larger than my room) they ask 21.000 baht p/m for floor 3 and 23.500 for the 4th and 5th floors!!

Now look at the fine print:

Electricity 7 bt a unit (more than 2 times what I pay per unit)

Furniture but NO TV NO REFRIGARATOR NO MICROWAVE!! (apart from the microwave the tV and fridge are included in my rent)

Now this is backwater soi bangkok we are talking about. Not even Silom or Thonglor or Sukhumvit.

For comparison:

An older flat with wooden flooring in Discovery Bay Hong Kong (Discovery Bay is kinda a resort) will cost you 35.000 baht a month for 90 square meters. Very good quality building. And you live in Discovery Bay in Hong Kong of all places!

What the hel_l do condominium builders in Thailand start thinking by charging so much for tiny rooms. It is plain ridiculous.

Waerth

The opposite is happening in pattaya, .especially in houses, we looked at a new house for rent, in a decent sized lot with its own pool ,real estate company wanted 50.000 originally, he called us up and said the owner just wants someone in there and will take 25000 ! my wife didnt like the area ( no security ) ,so we declined, im sure it would come for 15000,,.pattaya is in a bit of a housing mess at the minute it seems,.

[Payboy]

"Thai economics" said as a stupidity is shared with Japanese too.

Japan has the world's second largest economy because we are so stupid.

yeah any more stupid and you could have been the largest! :D :D

[JonnieB]

as to the comments about the practice of keeping rental units vacant instead of lower asking prices for rental or even sales of real property (and comments about "strange" Thai economics) i would suspect that thai tax laws have something to do with local RE economics (as they do in most countries when it comes to real estate practices). there must be some economic (tax influenced) reason owners would rather keep a unit vacant than lower the price. all business owners seek to mazimize their returns so if it was a better economic/business proposition to lower asking prices they would do it...it must not be.

[mikethevigoman]

as to the comments about the practice of keeping rental units vacant instead of lower asking prices for rental or even sales of real property (and comments about "strange" Thai economics) i would suspect that thai tax laws have something to do with local RE economics (as they do in most countries when it comes to real estate practices). there must be some economic (tax influenced) reason owners would rather keep a unit vacant than lower the price. all business owners seek to mazimize their returns so if it was a better economic/business proposition to lower asking prices they would do it...it must not be.

On a personal level i was renting a place for 30000 a month as needed somewhere quick when we came back, after being there 5 months i tried to negociate the rent down for a further 12 months, they werent interested so we left, that was 6 months ago,.it is still empty,.6 months at 25000 empty, 150000, whatever the thai way and thoughts that to me is terrible business and they will never make that up,.must be nice to have that much money as to not need it !

[Heng]

as to the comments about the practice of keeping rental units vacant instead of lower asking prices for rental or even sales of real property (and comments about "strange" Thai economics) i would suspect that thai tax laws have something to do with local RE economics (as they do in most countries when it comes to real estate practices). there must be some economic (tax influenced) reason owners would rather keep a unit vacant than lower the price. all business owners seek to mazimize their returns so if it was a better economic/business proposition to lower asking prices they would do it...it must not be.

For properties for sale... a lot (not all of course) of property owners don't have downward pressure from mortgages unlike a good majority of properties in other parts of the world (in Texas and California for example I have never seen a family purchased property that the owner wasn't still paying off... sometimes after owning it for 20-30 years!). That is, a lot of properties here are already 100% equity. On top of that, there is no steep yearly property/public school tax, so again, no pressure there either. And as a whole, properties only go up in the long term, and for those who aren't in need of cash inflows, there's no reason to lower the sales price.

For rentals, along the same lines of the wishful thinking mentioned earlier, sometimes a particular tenant isn't what the owner is looking for. I've heard the "I don't understand why they wouldn't rent it to me for 3 months... I don't understand why they wouldn't want me to open a pet hospital in their building... etc. etc." complaints before, from both locals and foreigners. Well, maybe I don't like short term leases... maybe I don't want to have small hospital/clinic like rooms set up in my building. Quite simply, this isn't the weekend market and yes, the owner will indeed let you walk away with no regrets. It's also not true that an owner will "never" lower the rental price... I've certainly done it before, but again don't expect me to do it the first time I show you the property like we're haggling over some handicrafts or a bolt of fabric or something. Typically I'll say something like "I'm going to keep this rental rate posted for another 3 months... if there are no takers and you still want it then at your offered price, it's yours." Sometimes the place stays vacant and I'll take the offer, sometimes I get my target rental rate. I'm certainly not going to sweat about losing X amount in the mean time (just because you would). It all depends.

[solo siam]

as to the comments about the practice of keeping rental units vacant instead of lower asking prices for rental or even sales of real property (and comments about "strange" Thai economics) i would suspect that thai tax laws have something to do with local RE economics (as they do in most countries when it comes to real estate practices). there must be some economic (tax influenced) reason owners would rather keep a unit vacant than lower the price. all business owners seek to mazimize their returns so if it was a better economic/business proposition to lower asking prices they would do it...it must not be.

On a personal level i was renting a place for 30000 a month as needed somewhere quick when we came back, after being there 5 months i tried to negociate the rent down for a further 12 months, they werent interested so we left, that was 6 months ago,.it is still empty,.6 months at 25000 empty, 150000, whatever the thai way and thoughts that to me is terrible business and they will never make that up,.must be nice to have that much money as to not need it !

Another way to look at it is that if you rented it for 10 years at 25,000, is that better than them renting it out for 9 years at 30,000+ to someone else???

If everyone let tenants jack prices down, pretty soon they've devalued their property.

Besides why would the place be worth less because you like it after 5 months of living there?

[mikethevigoman]

as to the comments about the practice of keeping rental units vacant instead of lower asking prices for rental or even sales of real property (and comments about "strange" Thai economics) i would suspect that thai tax laws have something to do with local RE economics (as they do in most countries when it comes to real estate practices). there must be some economic (tax influenced) reason owners would rather keep a unit vacant than lower the price. all business owners seek to mazimize their returns so if it was a better economic/business proposition to lower asking prices they would do it...it must not be.

For properties for sale... a lot (not all of course) of property owners don't have downward pressure from mortgages unlike a good majority of properties in other parts of the world (in Texas and California for example I have never seen a family purchased property that the owner wasn't still paying off... sometimes after owning it for 20-30 years!). That is, a lot of properties here are already 100% equity. On top of that, there is no steep yearly property/public school tax, so again, no pressure there either. And as a whole, properties only go up in the long term, and for those who aren't in need of cash inflows, there's no reason to lower the sales price.

For rentals, along the same lines of the wishful thinking mentioned earlier, sometimes a particular tenant isn't what the owner is looking for. I've heard the "I don't understand why they wouldn't rent it to me for 3 months... I don't understand why they wouldn't want me to open a pet hospital in their building... etc. etc." complaints before, from both locals and foreigners. Well, maybe I don't like short term leases... maybe I don't want to have small hospital/clinic like rooms set up in my building. Quite simply, this isn't the weekend market and yes, the owner will indeed let you walk away with no regrets. It's also not true that an owner will "never" lower the rental price... I've certainly done it before, but again don't expect me to do it the first time I show you the property like we're haggling over some handicrafts or a bolt of fabric or something. Typically I'll say something like "I'm going to keep this rental rate posted for another 3 months... if there are no takers and you still want it then at your offered price, it's yours." Sometimes the place stays vacant and I'll take the offer, sometimes I get my target rental rate. I'm certainly not going to sweat about losing X amount in the mean time (just because you would). It all depends.

Dosent change that an empty place is making nothing, that is bad business and i wont be convinced otherwise,.i have also been a landlord,in my case i rented on a 6 month lease which we stayed for then asked ror a reduction for a 12 month, as i said the answer was no, we were and are very good tenants, we had no problem finding a better place for less rent, id rather be a tenant than a landlord in thailand !

[mikethevigoman]

as to the comments about the practice of keeping rental units vacant instead of lower asking prices for rental or even sales of real property (and comments about "strange" Thai economics) i would suspect that thai tax laws have something to do with local RE economics (as they do in most countries when it comes to real estate practices). there must be some economic (tax influenced) reason owners would rather keep a unit vacant than lower the price. all business owners seek to mazimize their returns so if it was a better economic/business proposition to lower asking prices they would do it...it must not be.

On a personal level i was renting a place for 30000 a month as needed somewhere quick when we came back, after being there 5 months i tried to negociate the rent down for a further 12 months, they werent interested so we left, that was 6 months ago,.it is still empty,.6 months at 25000 empty, 150000, whatever the thai way and thoughts that to me is terrible business and they will never make that up,.must be nice to have that much money as to not need it !

Another way to look at it is that if you rented it for 10 years at 25,000, is that better than them renting it out for 9 years at 30,000+ to someone else???

If everyone let tenants jack prices down, pretty soon they've devalued their property.

Besides why would the place be worth less because you like it after 5 months of living there?

simple, i did some comparisons and as usual the agent had charged us too much, and as it happened we were glad our offer wasnt accepted, we found a much better place for less money,its a renters market right now, and if you dont beleive me il take you to an estate agent that has had properties on his books to rent for 2 years plus. the rents are dropping like stones ( in pattaya ) and again ill take you to see a place that was 50000 a month and is empty right now and can come for 20000 and possibly 15000,.

[Heng]

as to the comments about the practice of keeping rental units vacant instead of lower asking prices for rental or even sales of real property (and comments about "strange" Thai economics) i would suspect that thai tax laws have something to do with local RE economics (as they do in most countries when it comes to real estate practices). there must be some economic (tax influenced) reason owners would rather keep a unit vacant than lower the price. all business owners seek to mazimize their returns so if it was a better economic/business proposition to lower asking prices they would do it...it must not be.

For properties for sale... a lot (not all of course) of property owners don't have downward pressure from mortgages unlike a good majority of properties in other parts of the world (in Texas and California for example I have never seen a family purchased property that the owner wasn't still paying off... sometimes after owning it for 20-30 years!). That is, a lot of properties here are already 100% equity. On top of that, there is no steep yearly property/public school tax, so again, no pressure there either. And as a whole, properties only go up in the long term, and for those who aren't in need of cash inflows, there's no reason to lower the sales price.

For rentals, along the same lines of the wishful thinking mentioned earlier, sometimes a particular tenant isn't what the owner is looking for. I've heard the "I don't understand why they wouldn't rent it to me for 3 months... I don't understand why they wouldn't want me to open a pet hospital in their building... etc. etc." complaints before, from both locals and foreigners. Well, maybe I don't like short term leases... maybe I don't want to have small hospital/clinic like rooms set up in my building. Quite simply, this isn't the weekend market and yes, the owner will indeed let you walk away with no regrets. It's also not true that an owner will "never" lower the rental price... I've certainly done it before, but again don't expect me to do it the first time I show you the property like we're haggling over some handicrafts or a bolt of fabric or something. Typically I'll say something like "I'm going to keep this rental rate posted for another 3 months... if there are no takers and you still want it then at your offered price, it's yours." Sometimes the place stays vacant and I'll take the offer, sometimes I get my target rental rate. I'm certainly not going to sweat about losing X amount in the mean time (just because you would). It all depends.

Dosent change that an empty place is making nothing, that is bad business and i wont be convinced otherwise,.i have also been a landlord,in my case i rented on a 6 month lease which we stayed for then asked ror a reduction for a 12 month, as i said the answer was no, we were and are very good tenants, we had no problem finding a better place for less rent, id rather be a tenant than a landlord in thailand !

It's all relative, Mike. By that rationale you're the guy offering 30 Baht for the 59 Baht of Campbell's Pork and Beans in Foodland. *If you don't accept my 30 Baht price and your beans stay on the shelf in these next few months (and yes, they often do), then it's "bad business."* The market counts on on folks who would rather be tenants. It means that there is an endless supply of people who work to pay their rents so that landlords can "work" by checking their bank balances at the beginning and end of each month. To each, his/her own.

[mikethevigoman]

as to the comments about the practice of keeping rental units vacant instead of lower asking prices for rental or even sales of real property (and comments about "strange" Thai economics) i would suspect that thai tax laws have something to do with local RE economics (as they do in most countries when it comes to real estate practices). there must be some economic (tax influenced) reason owners would rather keep a unit vacant than lower the price. all business owners seek to mazimize their returns so if it was a better economic/business proposition to lower asking prices they would do it...it must not be.

For properties for sale... a lot (not all of course) of property owners don't have downward pressure from mortgages unlike a good majority of properties in other parts of the world (in Texas and California for example I have never seen a family purchased property that the owner wasn't still paying off... sometimes after owning it for 20-30 years!). That is, a lot of properties here are already 100% equity. On top of that, there is no steep yearly property/public school tax, so again, no pressure there either. And as a whole, properties only go up in the long term, and for those who aren't in need of cash inflows, there's no reason to lower the sales price.

For rentals, along the same lines of the wishful thinking mentioned earlier, sometimes a particular tenant isn't what the owner is looking for. I've heard the "I don't understand why they wouldn't rent it to me for 3 months... I don't understand why they wouldn't want me to open a pet hospital in their building... etc. etc." complaints before, from both locals and foreigners. Well, maybe I don't like short term leases... maybe I don't want to have small hospital/clinic like rooms set up in my building. Quite simply, this isn't the weekend market and yes, the owner will indeed let you walk away with no regrets. It's also not true that an owner will "never" lower the rental price... I've certainly done it before, but again don't expect me to do it the first time I show you the property like we're haggling over some handicrafts or a bolt of fabric or something. Typically I'll say something like "I'm going to keep this rental rate posted for another 3 months... if there are no takers and you still want it then at your offered price, it's yours." Sometimes the place stays vacant and I'll take the offer, sometimes I get my target rental rate. I'm certainly not going to sweat about losing X amount in the mean time (just because you would). It all depends.

Dosent change that an empty place is making nothing, that is bad business and i wont be convinced otherwise,.i have also been a landlord,in my case i rented on a 6 month lease which we stayed for then asked ror a reduction for a 12 month, as i said the answer was no, we were and are very good tenants, we had no problem finding a better place for less rent, id rather be a tenant than a landlord in thailand !

It's all relative, Mike. By that rationale you're the guy offering 30 Baht for the 59 Baht of Campbell's Pork and Beans in Foodland. *If you don't accept my 30 Baht price and your beans stay on the shelf in these next few months (and yes, they often do), then it's "bad business."* The market counts on on folks who would rather be tenants. It means that there is an endless supply of people who work to pay their rents so that landlords can "work" by checking their bank balances at the beginning and end of each month. To each, his/her own.

i would probably agree anywhere else other than thailand, ive been here ( with a 2 year break ) for 11 years, i kept my house in the uk as i didnt like the feel of the investment in houses in thailand, i am of the same opinion 11 years on,.i wouldnt have a clue as to how much beans or beer are,and im not known for being thrifty, however i wont risk money on a property market that seems so risky, the 1000 a month rent our property in the uk is bringing in takes care of whatever rent we pay here but i dont like paying more than i have to for big items, rent, cars etc,i feel comfortable renting here,

[Heng]

That's the beauty of the market, you never have to pay more than you have to. But it is often -not saying this is the case in your rental experience- wishful thinking that just because one isn't happy with a particular price (of any product or service really), it doesn't automatically mean everyone else is or that your offer is somehow magically the "best offer" or as good as it's going to get for the owner: who surprise, isn't always a greedy land baron with no business sense.

Smart move by the way. You're a step ahead of all the bridge burners out there. Always good (IMO) to keep a home or homes back in your home country. Even as Thais, we didn't sell up stateside before moving back here. It's a forex hedge rental income wise, a home or at least vacation home just in case, public school options for future generations, no need to pay out of state/foreign tuition for college, etc. etc.

[JimsKnight]

Last year a nice looking condo building had just been built (on outskirts of Chiang Mai). I went in and it just so happened the owner was there showing a couple around. I tagged along to check it out.

They wanted 6500 baht per month for a room with two bedrooms, internet, fridge, TV (with cable) and Aircon. It even had biometric access to get into the complex & cameras, electricity was/is 7 baht per unit. No matter how much I argued he wouldn't lower the price on the sparky charge, however the owner did swear that he couldn't change the electricity rate!

I was tempted to dive in but declined (I was already committed to an apartment elsewhere).

Rolled into town two days ago... Same room now only 5000 baht p/m!!

I'll take a 6 month lease thank-you!

[Pepe']

Do they have a lot of sexy puyings in Discovery Bay?

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

I thought they were everywhere...

[WAERTH]

i know the reference to discovery bay in hong kong is a bit off topic, but i have to correct several misconceptions

rental prices have risen out of the asian economic duldrums of a few years back and a condo of the size mentioned by the OP could command as much as 60,000 to 80,000 baht per month depending on age, location, condition, etc

add to that management fees of about 5,000 baht

the ferry between Central and Discovery Bay does NOT have a queue at any time of day, also the service runs to a strict timetable so you can time your arrival at the pier to avoid any wait at all

i know, because I live there

but i would still prefer to be living in LOS, and plan to do so quite soon

Hmmmm I must add that the condo was rented 2,5 years ago or some by my father privately when the company stopped paying for the rent. The price hasn't risen since. I must also say I really like Discovery Bay. And if I didn't like Thailand so much better, I would have moved there. The Plaza is great so is the new waterfront dining. The fery service is really nice, so are the busservices to Tung Chang and Sunny Bay. I am always happy to go there for a few days every 6 months or so. The air is better than Bangkok. You can walk around etc etc. But still if push comes to shove I am rather here. But Discovery Bay makes a good second for me ..... with Luxemburg coming in third and Surinam 4th (I am Dutch btw, but because of my fathers work we lived in a couple of different places when I was young)

Waerth

[CaptHaddock]

Up till 1986 they were going along swimmingly. Now they have 100 year mortgages

and still live in 50 square meter "houses"

Naka.

I have been wondering what became of those 100-year mortgages from the 80's in Japan. Are people still paying them off? Did the next generation inherit the mortgage and continue to pay it off? Also, in reading an article aout the Japanese housing bubble bursting, I came across the story of some salaryman who bought and apartment for the equivalent of USD 1.2 million in 1990 or so. Now the apartment is worth about USD 300,000, but he is still paying it off and plans to continue to do so for another ten years. Now, I wonder why this poor guy didn't walk away when the apartment went under water? Is it because of a contractual requirement or cultural somehow?

[londonthai]

most probably he took the mortgage for only a part of the house, the rest was his investment from the savings or from the sale of his previous property

[cclub75]

6 months at 25000 empty, 150000, whatever the thai way and thoughts that to me is terrible business and they will never make that up,.must be nice to have that much money as to not need it !

I think you are on something.

We all agree that we don't understand this kind of behaviour, because it's non-rational. On the other hand, we can't say that all those people are stupid.

Now... we forgot a very important issue in Thailand : distribution of wealth.

The more I think about this issue, the more I think that's the key.

We should aknowledge that there is a small group of thais, very wealthy (relative to the rest of the population) who see real estate as "bank account". They have so much cash, they'll buy condos, to simply park their money.

Of course, they are willing to make a profit. If an opportunity arise.

But to rent, to maximize their investments... basically, it's not a issue for them.

For me the best proof of this logic is the famous "to rent... or to sale" sentence that you can see on many ads.

We are talking here only about opportunities. But, it shows also that there is no necessity.

In this logic, leaving empty a condo for month, or even years ... is fundamentally not a problem.

Edited October 20, 2007 by cclub75

[Theyreallrubbish]

6 months at 25000 empty, 150000, whatever the thai way and thoughts that to me is terrible business and they will never make that up,.must be nice to have that much money as to not need it !

I think you are on something.

We all agree that we don't understand this kind of behaviour, because it's non-rational. On the other hand, we can't say that all those people are stupid.

Now... we forgot a very important issue in Thailand : distribution of wealth.

The more I think about this issue, the more I think that's the key.

We should aknowledge that there is a small group of thais, very wealthy (relative to the rest of the population) who see real estate as "bank account". They have so much cash, they'll buy condos, to simply park their money.

Of course, they are willing to make a profit. If an opportunity arise.

But to rent, to maximize their investments... basically, it's not a issue for them.

For me the best proof of this logic is the famous "to rent... or to sale" sentence that you can see on many ads.

We are talking here only about opportunities. But, it shows also that there is no necessity.

In this logic, leaving empty a condo for month, or even years ... is fundamentally not a problem.

This is very true. Wealthy Thai families I know have huge numbers of units all over the place. Condos, apartments, offices, retail units. Thought of as alternatives to bank accounts and the money is parked there with capital appreciation the benefit. They're not at all interested in renting and leave them sitting empty for years.

I've walked around completely empty entire floors of prime office space that's been empty for years as its owned by a friend's mother.

Taken the lift down to the lobby and seen empty and dusty prime retail units and asked why no-one is renting it in this location, is there anything wrong with the building, "Oh my mum owns those too"

[matter]

Why live so far out? With a bit of searching you can easily find somewhere closer. Jus gotta look...

[lazeeboy]

Why live so far out? With a bit of searching you can easily find somewhere closer. Jus gotta look...

rents are expensive as the owners cant sell the property at the moment and think they can recoup there outlay for the property by renting high and getting there money back in 5 years .