Condo Projects Facing Oversupply

[backflip]

Miami, FL - a city of less than 500,000 - has over 35,000 unsold condos. I bet you can find a good deal there...

[VegasVic]

Miami, FL - a city of less than 500,000 - has over 35,000 unsold condos. I bet you can find a good deal there...

I wouldn't suggest that anyone even think of buying a condo in Miami for at least another year or four! While many of the overheated markets in the U.S. (California, Vegas, and Phoenix come to mind) that saw a doubling of real estate values between 2004-2006, are in fact bottoming and will likely turn around before years end, Florida and in particular Miami could take years before the market there returns to normalcy(and by that time the oceans could rise and it will be under water )

[VegasVic]

Miami, FL - a city of less than 500,000 - has over 35,000 unsold condos. I bet you can find a good deal there...

BF, Not that it changes anything but your population estimate for Miami seemed a bit low so I googled it and found that the immediate Miami metro area actually has a population of 2.4 million and the Miami -Ft.lauderdale metro area has a population of 5.5 million, this is the 2006 census information

[ray08]

Supply and demand means that there is a market to meet that supply , if i am overstocked in product that means i have no demand for my product ,i can do 2 things ,

Thai Way : Hold on to my stock and wait for demand to meet my supply

Western Way : Discount old stock in order to get rid of inventory , where there is no demand at my current price if i discount enougth there will come a price where someone will see a bargain at that price and hence a demand

And please when we talk about the Bangkok market ,lets not forget the secondhand market can someone show me the supply and demand there ?

Ray, I was informed about this real estate phenomenon (The thai way) before my wife and I spent the winter in Thailand (Dec. 2006-March 2007) but did not really believe it until we started to travel and research real estate throughout the eastern gulf region, Hua Hin, Issan, and Chiang Mai. Not only is this phenomenon very apparent in condos and homes(many of the houses and condos we looked at over a year ago are still on the market, and have increased their asking price) , but it is also in many beachfront developments from Ban Chang all the way to Klaeng that were finished and left empty or almost empty since 1997. The concept of a bank or any financial institution in the west holding on to a non preforming asset for 10 years is inconceiveable. While in Chiang Mai we met a lady that was desperately trying to sell her house, she had the house on the market for nearly two years and when we asked her what the asking price was when she first listed it she said "the same price it is now" almost in a quizical fashion wondering why we would ask such a foolish question. It struck me as very odd that this total lack of business accumen thats seems to permeate thai society could equate to the rise of Thailand over the last 20 years as the economic "star" of SE Asia, then I met a German industrialist who does business in Thailand and he unabashadly told me point blank that it was not thai businesses or thai businessmen that have brought Thailand out of the third world, rather it was a combination of the the American presence during the 1960's building their air bases and the roads and infrastructure and R&R facilities that goes along with it, and then European, American, Chinese, Japanese and later on Korean businesses that came to Thailand and employed thais and exported their goods. He went on to say that even today if he needs to fill a skilled position (like IT) he has to go headhunting back in europe because there just are not very many thais qualified in those skilled areas.

Very supprised that the lady in Chiang Mai kept same price as 2 years ago, in most cases the price would have gone up for 2 reasons

A) to make up for the lost profit over 2 years

B ) Because market has risen the price must go up

Before Xmas i spoke to sales lady at State Tower on Silom Road ,they have plenty of empty units which they have not sold ( around 10 year old building ) she told me with a straight face , good time to buy unit in State Tower because in 2008 they are increasing selling price because market is up , tried to explain to her that if you cannot sell at current price ,how can they expect to sell at higher price,

Again with a straight face she replied " Market has gone up so cannot sell at lower price"

Another good one was in july last year saw a add on internet about le Raffine , where property was for sale around Thb 32m and at the end of add it said CONDITION , from November price will increase to Thb 34m or thb 35m , so if they cannot sell property instead of dropping price they are going to put it up

With logic like this,very hard for me to find the true value of a property

[LivinLOS]

Re the prices just being raised without any sales.. I have mentioned this before and its very obvious here on Phuket where single plot homes simply are frozen and some on the market for years. Real estate sales are only made when buyer and seller agree.. Just because someone asks for a price doesnt mean he will get it.

I will say however Thailand is one country where pricing seems to have face issues. Thais it seem price not on an ability to sell the land but by using a comparable plots 'claimed' selling price.. Selling for anything substantially less (appears to me) causes some less of face as though they couldnt get the deal or thier land was not as good.. Hence they often claim land sells for a FAR FAR higher price than actual cash changes hands, this in turn is the new base price that everyone selling around immediately moves up to plus a little more for face..

So that even without hardly any plots changing hands, and very little actual trade done they keep upping the price each few months, based on heresay of what other people got, or keeping up with the jones's.. A cycle of inflation without any real normal supply and demand dynamics.

Similarly farangs get caught up in this too.. I looked at a home for sale 3 or 4 years ago for 12m asking (probably 10m purchase ??).. Since then I have seen the house price go to 15m asking and most recently 18m asking.. I heard through the grapevine the seller REALLY now wants to shift it and would accept 10m cash for a quick sale yet he has it on the market at 18 !!! Why ?? I have another mate with a house which appears to be at a very good market price yet its been on the market for >3 years now, and thats in a really busy ideal location. Basically the resale market here seems very tough and I take all claimed prices as being numbers plucked from air. People seem to buy new builds and people then price to new developments, I just watched 4 pool homes get snapped up from the off plan stage for +-10m while a resale home with potential to expand and add a pool sits close by unsold for 4 - 5m ?? Its a strange market.

[VegasVic]

Supply and demand means that there is a market to meet that supply , if i am overstocked in product that means i have no demand for my product ,i can do 2 things ,

Thai Way : Hold on to my stock and wait for demand to meet my supply

Western Way : Discount old stock in order to get rid of inventory , where there is no demand at my current price if i discount enougth there will come a price where someone will see a bargain at that price and hence a demand

And please when we talk about the Bangkok market ,lets not forget the secondhand market can someone show me the supply and demand there ?

Ray, I was informed about this real estate phenomenon (The thai way) before my wife and I spent the winter in Thailand (Dec. 2006-March 2007) but did not really believe it until we started to travel and research real estate throughout the eastern gulf region, Hua Hin, Issan, and Chiang Mai. Not only is this phenomenon very apparent in condos and homes(many of the houses and condos we looked at over a year ago are still on the market, and have increased their asking price) , but it is also in many beachfront developments from Ban Chang all the way to Klaeng that were finished and left empty or almost empty since 1997. The concept of a bank or any financial institution in the west holding on to a non preforming asset for 10 years is inconceiveable. While in Chiang Mai we met a lady that was desperately trying to sell her house, she had the house on the market for nearly two years and when we asked her what the asking price was when she first listed it she said "the same price it is now" almost in a quizical fashion wondering why we would ask such a foolish question. It struck me as very odd that this total lack of business accumen thats seems to permeate thai society could equate to the rise of Thailand over the last 20 years as the economic "star" of SE Asia, then I met a German industrialist who does business in Thailand and he unabashadly told me point blank that it was not thai businesses or thai businessmen that have brought Thailand out of the third world, rather it was a combination of the the American presence during the 1960's building their air bases and the roads and infrastructure and R&R facilities that goes along with it, and then European, American, Chinese, Japanese and later on Korean businesses that came to Thailand and employed thais and exported their goods. He went on to say that even today if he needs to fill a skilled position (like IT) he has to go headhunting back in europe because there just are not very many thais qualified in those skilled areas.

Very supprised that the lady in Chiang Mai kept same price as 2 years ago, in most cases the price would have gone up for 2 reasons

A) to make up for the lost profit over 2 years

B ) Because market has risen the price must go up

Before Xmas i spoke to sales lady at State Tower on Silom Road ,they have plenty of empty units which they have not sold ( around 10 year old building ) she told me with a straight face , good time to buy unit in State Tower because in 2008 they are increasing selling price because market is up , tried to explain to her that if you cannot sell at current price ,how can they expect to sell at higher price,

Again with a straight face she replied " Market has gone up so cannot sell at lower price"

Another good one was in july last year saw a add on internet about le Raffine , where property was for sale around Thb 32m and at the end of add it said CONDITION , from November price will increase to Thb 34m or thb 35m , so if they cannot sell property instead of dropping price they are going to put it up

With logic like this,very hard for me to find the true value of a property

Ray, You seem to be correct about that lady in Chiang Mai, she must have been behind the curve by not upping her asking price:rolleyes: by the way her house is still on the market today! As a matter of fact I recently checked out a number of thai real estate web sites that I frequented last year, and found out that there are about twice as many properties available now, so I guess in thai terms that must mean the real estate market is red hot over there? Or perhaps they are having difficulty in apraising the true value of their property, maybe if they just ask another 500,000 baht it will sell

[jonniebkk]

Miami, FL - a city of less than 500,000 - has over 35,000 unsold condos. I bet you can find a good deal there...

I wouldn't suggest that anyone even think of buying a condo in Miami for at least another year or four! While many of the overheated markets in the U.S. (California, Vegas, and Phoenix come to mind) that saw a doubling of real estate values between 2004-2006, are in fact bottoming and will likely turn around before years end...

As a point of price comparison, I read in a USA paper yesterday that the price per square meter for one new condo developments in a nice beach front area of Miami dropped from approximately B 150,000 per square meter at the height of the real estate boom 18-24 months ago to about B 102,000 at the present time. (Figures have been converted from sq. feet to meters and adjusted for currency fluctuations during this time.) That's a drop of about a third (30%).

If I was an investor or just someone looking for a place to live, the costs vs. benefits vs. lifestyle vs. legal certainty is certainly not as lopsided in Thailand's favor at these new prices than it once was. For condos in the USA, one has no flim-flam about ownership rules and quotas, real and enforceable laws and regulations regarding management of condos, and of course, the amenities that come with living in the First World. However, the running costs (taxes, insurance, maintenance) would be much higher in Miami than anywhere in Thailand.

Places like Miami might start giving places like Pattaya and Phuket, where some of the new stuff is prices much higher than B 100,000 sqm, a run for their money.

As to Bangkok condo prices, as a comparison, I have a condo in the East Bay Hills of the San Francisco Bay Area and per a recent sale in the building (3 months ago) it would be worth about B 138,000 sqm. Many places in Bangkok now sell at around this figure or higher. So, San Francisco Bay Area or Bangkok...same money where would you invest or want to live?

Edited March 2, 2008 by jonniebkk

[obsession]

what utter nonsense....if there is an oversupply, then the price should decrease under the law of supply and demand...that is often not the case here...with supply often just lying dormant instead of selling at a decreased price....that is not a perfect equilibrium....

More like supply and no demand, look at real estate ads in Bangkok post and websites, properties unsold for 6 months or longer and they increase selling price, true market forces would say that if a property cannot sell at a certain price, after a period of time it means price is too high and needs to be dropped down, in Bangkok it goes up, supply and demand does not apply here

Do you two even read what you post? Have you ever read an economic book and attempted to understand the difference between short term and long term commodities?

Condos are not like bananas that have a life span of five days or so. With bananas the price must be adjusted instantly in order not to lose your entire investment.

The correlation of prices of condos in regards to the supply and the demand of condos does not adjust instantly, but incrementally over a period of time. What often happens is a few people in a building will have a need for cash after holding a unit for a period of time, usually at least a year or so. At which time they will sell at a lower rate to receive an influx of cash. When this happens a new market value has been established for that particular building for the short term.

But there are also long term investors in that building which have plenty of cash and are able to hold out until the demand for units increases again. In other words if they were to put their money in the bank at 5% interest they would only need to wait 5 years to have the essentially the same return as they would if they sold their condo for 25% more than they paid for it.

Another major point you are missing is the vast majority of the people purchasing units are not looking at them principally as an investment, but as a place to live and raise a family. And if they are fortunate enough to live there long enough their condo will increase in value.

There is a reason it is called "The Law of Supply and Demand." Because after hundreds of years of study by individuals much smarter than you or I they have been able to determine a direct correlation to prices one will pay for an item as it relates to the demand for that item and the availability of that item in the market.

If you google "supply and demand" you will find it to be a very complicated formula with many variables ,me being a simple Noodle vendor might not comprehend such complicated equations, But i do know that in the bangkok market the demand is far less than the supply , put it any way you want and lets include secondhand properites the supply far outstrips any real demand,

i have the same problem in my soi with my noodles , but when i offer them at half price all of a sudden they sell out , so that is where the demand must be ,

as for your example of holding on to a unit for a further 5 years for the market to catch up , well great theory , called the "pigs fly theory "

Good post and well spotted that Bilaa was recommending buying in Jomtien . What a donkey. Hopefully he will be too busy playing golf and whoring with his humungous profits to post any more.

[kanderson]

If the rules change and the Farang can buy a house/property, the condo market won't be lookng so desireable.

Renting in Thailand is much better.

I doubt the rules will change - the King and government has been smart. It's the only way to keep housing affordable for Thai people. Look at what has happened to Hawaiian People.

If anyone can own the land - prices go way up - just like Hawaii.

I think things will remain the same - only less tolerance for fake company names - that I really don't understand anyway. Why try to do things under the table or something.

[kanderson]

A friend bought a place in Jomtien a few years ago. The Land Office was packed with people doing business.

Recently, he went there and it was empty, like a ghost town.

I think there are serious problems in the local real estate market.

I think your right - Not to many people have been buying since the military takeover. Hard to understand that stuff. It was a shock at first - no doubt.

In the mean time - the others who bought a few years ago - have seen the Baht go way up.

I don't buy real estate as an investment - but it seems to be working over the past few years.

I'll leave it all to my Thai Wife anyway - so it seems to be working out fine - unless you want to sell right away.

Chok Dee

[bingobongo]

this is fantasic, so now anyone with no money can be a homedebtor, i mean homeowner........so why give away furniture and such loan terms if things are going swimmingly? beacause they are not

these same types of loans were once available in the US and how is that turning out?

Zero-rate loan campaign targets new buyers

First is a loan programme offering a six-month grace period on an SCB mortgage and 0%-rate credit for 10 months to purchase up to 200,000 baht worth of furniture and home electronics from Index Living Mall.

http://www.thailand-property-guide.com/?p=...&NewsID=720

Edited March 3, 2008 by bingobongo

[dotcom]

The greedy sods learned absolutely nothing in 1996. Overbuilding???? from my apartment I see nothing but tower cranes. Buckle up boys, it's gonna be a rough ride. My comments limited to BKK only.

Sadly down in Rayong Province you have the Swedes coming in. They all must be bazillionaires. Paying really stupid prices for stuff.

Edited March 3, 2008 by dotcom

[bingobongo]

The greedy sods learned absolutely nothing in 1996. Overbuilding???? from my apartment I see nothing but tower cranes. Buckle up boys, it's gonna be a rough ride. My comments limited to BKK only.

Sadly down in Rayong Province you have the Swedes coming in. They all must be bazillionaires. Paying really stupid prices for stuff.

dotcom, thanks for the REALISTIC on the ground perspective as opposed to the rose colored glasses, denial view as told by the "homedebtors" on this board

anyway, as inflation rages, and the economy skids, and debt burden worsens, i thought this image would be appropriate......just for fun, fill in the caption as appropriate

Edited March 4, 2008 by bingobongo

[bingobongo]

brilliant, and now developers have another reason to keep adding to the oversupply.........

Incentives aimed at wrong people, says consultant

New government incentives to spur the property market will benefit developers more than consumers and will also encourage more speculation , according to Sopon Pornchokchai, the president of the property consultancy Agency for Real Estate Affairs.

http://www.thailand-property-guide.com/ind...&NewsID=728

[bingobongo]

banks trying to unload NPAs/NPLs in the real estate market, yet more supply added daily..........speculative stupidity truly is amazing

Home loans at zero interest

Exhibition offers stunning rates, but with a catch

http://www.nationmultimedia.com/2008/03/13...es_30067988.php

Edited March 12, 2008 by bingobongo

[quiksilva]

NPA's/NPL's have been off loaded every year in the market since 1997. Nobody is taking them because as we know Thais don't like buying secondhand property hence the attractive mortgages.

This is not a sub-prime copy cat, this is Banks desperate to get rid of assets they held on to for far too long.

[Daisy75]

Do you think we will see a rerun of what happened 1997?

[calmichael]

Billaaa777

Just noticed a quote below from another thread in the thaivisa real estate the you posted , below is part of your quote

As somebody who actively participates in the condo market in Jomtien and Pattaya I can tell you it is always a good time to buy here. There are new buildings going up everywhere that are all being sold.

After comments like that i feel very very sorry for the poor investors who follow your advice

Here in California, that's what all of the Realtors were saying before this real estate bubble burst. The line "it's always a good time to buy here" is now a running joke in California and most of the US. Lots of agents/brokers/underwriters/loan officers are out of work here. Look out below my friend.

[lioness]

Re comment's thaibkk ( which is slightly off the original topic )

Talking about Farang here buying in their Thai partners name and loosing the lot. Why aren't they leasing the land and owning the building. I can't understand anybody putting their hard earned money into someone elses name.

[thaigene2]

Re comment's thaibkk ( which is slightly off the original topic )

Talking about Farang here buying in their Thai partners name and loosing the lot. Why aren't they leasing the land and owning the building. I can't understand anybody putting their hard earned money into someone elses name.

Because leasing the land is still doing just that - putting their hard earned money into someone else's name - since it's still in that Thai guy's name, they are effectively paying 30-years worth of rent "up front" - now why would anyone do that?? But I agree - buyiong is equally silly in the present circumstances...

[lioness]

Thaigene 2

Well at least you would get 30 years and with a renewal option another 30 maybe. You would own the building on the property. Hence you have a secure period of 30 or 60 years, are not subject to rental price hikes and other factors associated with renting, it is your own home.

You can sub lease, on sell and/or bequeath,if you have the correct contracts in place. A few of these developments also write in a clause that if and when the government changes the law regarding Foreign land ownership then you can have the land in question transferred into your name at no charge except you pay the associated fees concerned with the transfer.

OK you are paying money up front that is usually equivalent of the present day land value, in 10, 20 years time under normal circustances it would be worth a great deal more.

[quiksilva]

Do you think we will see a rerun of what happened 1997?

No. Its a completely different set of circumstances.

[bingobongo]

right, the BOT says all is ok.........genius i tell you, pure genius

for those who dont remember, when supply is greater than demand, prices go DOWN

More Condo projects, but BOT says no need to worry

The rise, however, has aroused fears of an excess of supply.

http://www.nationmultimedia.com/2008/03/25...ss_30069097.php

[jumnien]

With prices sky high in other Asian cities, the demand is sky high for cheap (under 150,000 baht/meter) condos in Bangkok. The economic slowdown only fuels the demand as investors pull their money out of stocks and wait for a recovery.

[ray08]

With prices sky high in other Asian cities, the demand is sky high for cheap (under 150,000 baht/meter) condos in Bangkok. The economic slowdown only fuels the demand as investors pull their money out of stocks and wait for a recovery.

[/quote

Sky High demand up to thb 150,000 , more like Pie in the Sky Demand , i don,t see the market jumping up with sky high demand from people pulling out of shares and deciding to invest in the Bangkok Propery Market