Failure Rate For Condos Nears 50%

[george]

Failure rate for condos nears 50%

BANGKOK: -- The chance of failure for condominium developers in Bangkok has grown to almost 50 per cent as competition heats up amid a glut of fresh supplies, warned Aquarius chief executive Yongyuth Chaipromprasert.

After conducting a study during the past five months, the building consultant said even inner Sukhumvit, an area once deemed immune to downturns, "no longer guarantees success".

"The average take-up rate for Bangkok condominiums is now 54 per cent," he said. "That is considerably lower than about 70 per cent for last year."

"Of the 50,000 units that are expected to be launched this year, about 46 per cent won't be sold," he deduced from recent statistics. "One out of every two developments could fail."

"The inventory left over from last year should also add to current stock, making the situation even tougher for sellers, especially newcomers," he said.

With 15,000 unsold units from last year and 25,000 units from this year, the market will have an additional 40,000 units to clear in 2009.

Because of the worrying trend, he expected new supplies to fall to 40,000 units next year. Yesterday TCC Land said it was halving the number of new projects from 5 to about 2.

Yongyuth said most of the buyers are in the outer zones where land is cheaper. "If developers can sell units for between Bt1 million and Bt2 million, they should survive. It is the large units which will find difficulty selling with rising inflation and oil prices," he said.

Supharat Development managing director Sumet Sukapanpotharam agrees. "Even with the government incentives to boost home sales by suspending the sales and purchase tax, the developers who will benefit are those who have completed projects and can transfer the units within the year."

"We are building for urban workers with limited spending power. There's no point selling expensive units when purchasing power has fallen," said Ananda CEO Chanond Ruangkritya.

Ananda's Ideo Mix near Sukhumvit 103 is commanding sales as the units sell from Bt1.5 million.

Yongyuth said the worst hit would be developers who bought land recently at high prices and were forced to construct at escalated costs.

-- The Nation 2008-06-10

[Scott]

I think this is just the start of what is going to be a lot of problems in a lot of areas, not just the property market.

[A_Traveller]

Hi George, LINK at 08:42 this morning, in property forum.

Regards

Edited June 10, 2008 by A_Traveller

[Plus]

I'm not an expert on Bangkok condo market, but everytime I read gleeful articles about new projects I have a feeling they are not for living but for speculation only.

Business is ok only as long as demand is rising, so they need to keep the bubble in the constant expansion stage, which is impossible.

They should rename Sukhumwit from "residential" to "speculation" area, no one can afford living their anymore.

[Samuian]

I'm not an expert on Bangkok condo market, but everytime I read gleeful articles about new projects I have a feeling they are not for living but for speculation only. .........re.

Not restricted to Bangkok, here on Samui it's just the same, new building project going up like mushrooms, while half of other units are still "for rent", "for lease", "for sale"... well don't need to be an expert... to come to some conclusion!

Guess, there be some very cheap rentals soon!

[bonobo]

I'm not an expert on Bangkok condo market, but everytime I read gleeful articles about new projects I have a feeling they are not for living but for speculation only.

Business is ok only as long as demand is rising, so they need to keep the bubble in the constant expansion stage, which is impossible.

They should rename Sukhumwit from "residential" to "speculation" area, no one can afford living their anymore.

I bought at MetroPark last year, the very last 2-bedroom unit available in Phase 1. However, as I walk around the buildings, there are numerous empty rooms still, a year after the first of us moved in. I would say the number may be as high as 15%. I found out that these were all bought by speculators who have not even bothered to rent them out.

I am on the second floor facing the parking lot, so I would love to have had a chance to buy a place with a nicer view, but all of them were taken by people who never had an intention of living there, and by doing so, driving up prices for those of us who needed someplace to live.

I had actually considered the Lumpini project in Pin Klao, but the same units which were being sold for 2.3 million 6 months earlier were then for sale by speculators for 4.5.

I usually don't wish ill on people, but I have to admit, I hope some of these people get burned playing thsi game.

[soundman]

I bought at MetroPark last year, the very last 2-bedroom unit available in Phase 1.

So the sales man said!

[Martin]

"We are building for urban workers with limited spending power. There's no point selling expensive units when purchasing power has fallen," said Ananda CEO ....

And recession with inflation means less customers, and their spending power decreasing.

.... Yongyuth said the worst hit would be developers who bought land recently at high prices and were forced to construct at escalated costs....

"What goes up, comes down" applies to bubble-pressure, too.

The returns on getting out when the pressure is falling are always less than the costs going in when the pressure was still rising.

Considering the amount of property that has stood empty for over ten years, they might have learnt.

[djinn]

I'm not an expert on Bangkok condo market, but everytime I read gleeful articles about new projects I have a feeling they are not for living but for speculation only. .........re.

Not restricted to Bangkok, here on Samui it's just the same, new building project going up like mushrooms, while half of other units are still "for rent", "for lease", "for sale"... well don't need to be an expert... to come to some conclusion!

Guess, there be some very cheap rentals soon!

I have a friend in Pattaya.He try to sell a brand new 90 sqm condo.Luxury furnitures,farang owned ....for months

His condo is advertised in 15 real estates firms

Only 1 visit

And prices (asked ) are rocketing everywhere in the area

And I know one or 2 developments that will never be finished ( expat rumors,not bar ones but...So sorry no names)

Me think there is a problem somewhere

[A_Traveller]

The problem is the skewed marketplace which everyone in the business ignores, whilst convincing foreigners to purchase at unsustainable market prices. Then when they try to sell or even trade on they find their asset is worth {what anyone will pay for it} considerably less. Further Thai's are not used home buyers, they will always prefer to purchase new, even in condominiums, which also narrows the marketplace. Let's not forget that prestige projects are pre-sold, often at invitation only launches. I'm told a number of the river view developments had this occur so that many of the properties 'with a view' were already sold to those, in the circle investors, before the doors opened.

Regards

[MaiChai]

Thai banks don't give good interest, so those with some money look for somewhere to invest their money, and thus condos seem a sure bet?

I really don't understand the property market here; seems like straightforward supply and demand doesn't kick in to keep the prices realistic, and instead prices seem to rocket for some strange unknown reason? I also don't buy the 'condo dream lifestyle' that the developers seem to cultivate in their marketing. Look at Sapan Kwai; if they keep building condo's in this area the local infrastructure is going to collapse; I mean water/electricity/even the ability to get in and out of the area by car; those sois were not designed to accomodate the number of people living in the area!

Until Bangkok becomes easier to get around I am going to continue renting. I mean virtually no decent public transport and everyone driving around in cars choking up the roads? If the government doesn't start building more metros what is Bangkok going to be like to live in in 5 years from now? Only way to get around quickly is by motorbike, which isn't particularly safe or comfortable.

[TheWalkingMan]

I'm not an expert on Bangkok condo market, but everytime I read gleeful articles about new projects I have a feeling they are not for living but for speculation only...

Yep.

I always wonder what the actual live-in rate for these condos. I always imagine that a large percent have been purchased by people with excess cash just for an investment. I wish that they were able to produce something accurate which would say x% of the condos are occupied while xx% are empty and back on sale.

TheWalkingMan

[webtv]

It is a global downturn in the property sector..

UK's forecasts are not good.

http://www.guardian.co.uk/business/2008/ju...ket.houseprices

The USA

http://www.usatoday.com/money/economy/hous...rice-usat_x.htm

Australia

http://www.theage.com.au/national/rates-bl...80607-2nbz.html

The world is in real trouble on many levels...

sorry, but the sky is falling.

Edited June 10, 2008 by webtv

[Johpa]

It is a global downturn in the property sector..

The world is in real trouble on many levels...

sorry, but the sky is falling.

Yes, well, modern western capitalism was always just a big pyramid scheme built upon cheap energy (oil). The house of cards is finally beginning to tumble, more literally it is running out of gas, whilst the believers are down on their knees praying that their new god Technos will bring them salvation. Meanwhile those who prospered will more than likely keep the military generals happy by plying them with wine and women and false riches whilst fooling the foot soldiers into thinking they are protecting gods and country (propaganda), and will have orders issued to protect them, the current elite, from the historical "rabble".

Chaiyo!

[harleyclarkey]

Yep...its upon us all. Ireland where we had a massive property boom up to 2 years ago is still falling. My guess is 20-25% and heading down . ..albeit much slower.

The UK?/ Worst sales for 30 years according to figures released 2 days ago and talk of negative equity again.

USA? Still struggling and will do so for the year according to the bankers. I am just back from there and the only talk is of OIL...and the collossal effect this has on their lives. transport (cars, lorries, planes, ships, trains, etc, etc.) and heating costs out of control to them. However at $4 per gallon compared to 10 in Ireland they aren't too badly off.

The horizon looks bleak indeed and this is without a clear picture of where oil prices will end up. I am not going to go ahead with my intended house on Phuket.

[ray08]

I'm not an expert on Bangkok condo market, but everytime I read gleeful articles about new projects I have a feeling they are not for living but for speculation only.

Business is ok only as long as demand is rising, so they need to keep the bubble in the constant expansion stage, which is impossible.

They should rename Sukhumwit from "residential" to "speculation" area, no one can afford living their anymore.

I bought at MetroPark last year, the very last 2-bedroom unit available in Phase 1. However, as I walk around the buildings, there are numerous empty rooms still, a year after the first of us moved in. I would say the number may be as high as 15%. I found out that these were all bought by speculators who have not even bothered to rent them out.

I am on the second floor facing the parking lot, so I would love to have had a chance to buy a place with a nicer view, but all of them were taken by people who never had an intention of living there, and by doing so, driving up prices for those of us who needed someplace to live.

I had actually considered the Lumpini project in Pin Klao, but the same units which were being sold for 2.3 million 6 months earlier were then for sale by speculators for 4.5.

I usually don't wish ill on people, but I have to admit, I hope some of these people get burned playing thsi game.

I have a feeling a lot of the speculators live in fantasy world , i know of a building where the developer 3 years after finished is asking thb 75 k per meter and speculators are asking around thb 120 k , they will sit on it for years , easy to ask for a high price ,but very hard to get

[PeaceBlondie]

Yes, well, modern western capitalism was always just a big pyramid scheme built upon cheap energy (oil). The house of cards is finally beginning to tumble, more literally it is running out of gas, whilst the believers are down on their knees praying that their new god Technos will bring them salvation. Meanwhile those who prospered will more than likely keep the military generals happy by plying them with wine and women and false riches whilst fooling the foot soldiers into thinking they are protecting gods and country (propaganda), and will have orders issued to protect them, the current elite, from the historical "rabble".

Chaiyo!

That post feeds my prejudices. It appears that the feces is hitting the ventilator.

[brahmburgers]

Part of the current quaqmire relates to the Thai (Asian) way of doing business. If a vendor sets up on a sidewalk to sell candy covered peanuts, and gets a lot of sales. Within six months there'll be 45 vendors stretched out alongside selling candy covered peanuts. Then they wonder why they're not all selling as well as the original vendor was.

Speaking of sidewalks; Admittedly, I'm a country mouse, not a city mouse, but when I have to go to Sukhumvit, two things happen:

#1 I'm eager to get the heck out of the congested city as fast as possible.

#2 There's essentially nothing but sidewalks and shops there. You step out of your pad and it's sidewalks going on forever, most of those sidewalks are commandeered and dirty. People must have reasons for spending hefty sums to live in Bangkok, but they sure have different priorities than me.

Nine years ago, I paid under Bt.200k for 5 acres (13 rai) of a secluded park-like setting near a tourist town. What can you get for Bt.200k in Bangkok (or Pattaya or Phuket, for that matter)?

Granted it's like comparing parks to garbage dumps, but it's still a basic question of what sort of property a person chooses to purchase. How much bang for the Baht.

[bartender100]

Whats the new project called right on the corner of Asoke and Sukhumvit? It looks like its going to be an impressive building.Hotel or apartments?.

[Seneque]

The best way to see how the condo property market is doing (speculation or live-in owners) is to walk / drive around at night (not too late ... 8 pm) and see how many windows/apartment have the light on !!!

[jayjayjayjay]

I'm not an expert on Bangkok condo market, but everytime I read gleeful articles about new projects I have a feeling they are not for living but for speculation only.

Business is ok only as long as demand is rising, so they need to keep the bubble in the constant expansion stage, which is impossible.

They should rename Sukhumwit from "residential" to "speculation" area, no one can afford living their anymore.

I bought at MetroPark last year, the very last 2-bedroom unit available in Phase 1. However, as I walk around the buildings, there are numerous empty rooms still, a year after the first of us moved in. I would say the number may be as high as 15%. I found out that these were all bought by speculators who have not even bothered to rent them out.

I am on the second floor facing the parking lot, so I would love to have had a chance to buy a place with a nicer view, but all of them were taken by people who never had an intention of living there, and by doing so, driving up prices for those of us who needed someplace to live.

I had actually considered the Lumpini project in Pin Klao, but the same units which were being sold for 2.3 million 6 months earlier were then for sale by speculators for 4.5.

I usually don't wish ill on people, but I have to admit, I hope some of these people get burned playing thsi game.

What proof do you have these condos were actually sold at all. What pressure did you put on them to take one the better ones or walk. It is my experience that projects do everything they can, including lying to new customers, to fill out there worse rooms and keep the better views for selling easier at a later date! I was taught to: "believe nothing what you hear and half what you see" a good case-in-scenario......

Another great habid of Thai's was witnessed in massive proportions only 11 years ago with the economic downturn. If a developer is going belly up, he will stop paying banks, refuse to deal with them and keep taking funds on sales. It keeps going until the Banks or finance corps go belly-up themselves and then the Taxpayer pays as the government takes over the failed entity...... This will happen again........ the forecast is here for the taking......... What. Vietnam and the IMF (International Monetary Fund)............ Have you heard this before...............

Edited June 11, 2008 by jayjayjayjay

[steveromagnino]

Part of the current quaqmire relates to the Thai (Asian) way of doing business. If a vendor sets up on a sidewalk to sell candy covered peanuts, and gets a lot of sales. Within six months there'll be 45 vendors stretched out alongside selling candy covered peanuts. Then they wonder why they're not all selling as well as the original vendor was.

sorry but I have no idea of the relevance of your comment. The reality is that there are few barriers to entry to sell a commodity type product, so you will see entrants to the market until everyone ends up making a normal profit; or are you suggesting somewhere in the world there is a race/nation dumb enough to see one person cleaning up running a business and then just let them do it forever??!

I don't doubt everyone would like to make cash the same as the original vendor, but I really don't think the street vendors in Thailand or Asia are anywhere near as dumb or naive as you seem to be suggesting.

With regards to the original article, what a surprise that we see this article from Aquarius; they are strangely enough the agent for developments by Ananda which is a low to mid end priced developer who is....coincidentally specialising in building condos on the sky train routes outside of the inner city.

A large volume of that 46% not sold is a result of more product with a similar absorbtion rate that has been mounting up in part due to the large numbers of mid end developments LIKE Ideo, AP, Hive, etc - the quantity of available super high end is actually fallling when you consider Sukhothai sold 80%+, Park sold out, INfinity sold out. So the big picture story is true but skewed massively to make it sound like Ideo type developments are the way to go.

Nice PR....as long as you know the background.

As for financing, this time around, the finance arms are a lot more stringent and the deposits from customers are a fair bit larger. There will not be another 1997 but there will certainly be a number of companies and projects going to the wall; you can see projects like the Regent/Trendy/Sails as proof of that. I'd be picking companies who already went through 1997 to get through this time more unscathed - Sansiri, LPN, Ideo (Ananda), etc - they have learned something from the last time.

[jalansanitwong]

The Thai real estate market is totally different from the West and should be tackled only with the greatest of caution.Here a used house is literally called SECOND HAND HOUSE and has limited value sort of like a second hand car in farang countries. Thais only want to buy new houses and cars not second hand!The number of new and used houses /condos in Thailand is astounding.Generally speaking a house that sells off the plan say 2.5 million baht can be resold for about 1.8m-2million baht a few years later.Farangs be warned!

[nick2k]

the prices for condos here in thailand are based on what foreigners can pay. not what the local thais can pay. in other words, if the foreigners all left, the condos would stay empty. that's a fact.

look at what happened over at - http://www.mttbkk.com/about-mtt.htm.

mtt was constructed to fill a demand by people from hong kong, taiwan. but after the crash of 1997, nobody from those places came to live there. now,

look at the development now.

one common fact that many new foreigners that come into thailand do not know is that - condo developments - by law - are only allowed to sell about 50% of the total units available to foreigners. the locals don't buy the other 50% because they cannot afford the prices, so, guess what happens to them? the developer is forced to hold them himself. he is expected to pay the share of maintenance fees that his empty unsold condos are suppose to pay. but often as is the case, he doesn't, and finds (illegal) ways to offset this cost back to the foreigners who bought into the complex.

another crash is coming. I feel it.

[nick2k]

if the condo market goes to pot, you can bet your bottom dollar that the us dollar to thai baht exchange rate will change too. not that I wish suffering to thailand. I want thailand to prosper because that would mean the place will be full of happy people. but reality is knocking at the door. mind you, 42 to 1 is right around the corner again.

I blame the PAD for causing this to happen. instability is not a good thing. let the <deleted>#king election results stand as they are. allow the winning party to function until their term is over. otherwise, watch thailand suffer. PAD doesn't care about thailand. they only care about themselves.

Edited June 11, 2008 by nick2k

[Samuian]

I blame the PAD for causing this to happen. instability is not a good thing. let the <deleted>#king election results stand as they are. allow the winning party to function until their term is over. otherwise, watch thailand suffer. PAD doesn't care about thailand. they only care about themselves.

Sure, blame it on something!

The Catholics blamed it on the devil! It's all about money, money, money no matter what, as long a there is a profit - sure...

It's doesn't matter, in another thread "Samak something"... some people would like to see him and his crew better sort off to run a Soup Kitchen way down at the end of Sukhumvit...

Edited June 11, 2008 by Samuian

[steveromagnino]

the prices for condos here in thailand are based on what foreigners can pay. not what the local thais can pay. in other words, if the foreigners all left, the condos would stay empty. that's a fact.

another crash is coming. I feel it.

Fascinating. Please back that up with data from say, Sansiri and LPN sales; two ends of the market, what percentage of foreigners are buying condos from these developers?

Don't know?

Try 80%+ Thai buyers on average.

In other words.....your 'fact' flies totally in the face of some company's actual experience.

How all the foreigners are going to leave I have no idea. And nor do you.

Your comment about 50%; you actually mean 49% and this is only relevant for freehold property anyhow. In many cases irrelevent (.e.g. Ideo, AP, LPN, Sansiri = no where near 49% in most of their developments). In some cases relevant e.g. Sukhothai, The Met, Raimon Land, etc - coicidentally all effectively foreign companies and they don't really know how to sell to Thais. Right now Sukhothai and The Met then construct and sell on lease basis - they are not 'stuck holding the property' as you claim.

How you can claim a swing in condo prices would cause a massive change in the Thai Baht USD exchange rate is beyond me.

And as for the PAD, if you think we would be better off just keeping quiet and watching idiots like Chalerm, Jakapop, Mingkwan and Samak shoot their mouths off and do nothing constructive while basically continuing the idiocy, well that's up to you. Protests disturb, but welcome to democracy. PAD has as much right to stir up cr&p as anyone else; no it doesn't help stability of the country, but a few jitters is better now than the all out war that could occur were PPP to have changed the constitution to get TRT and Taksin off all their sins.

After all, just because they were elected, using that logic it would be fine for them to say, lock all the ethnic minorities up in happy camps, gas them, maybe slaughter a few other groups and then hold all night drug fueled drum and bass parties until 9am on and on and on for all sheep and children aged under 12. Surely the point of a democracy is that we also have the freedom to express disagreement and get people out of power???? Shades of Korea come to mind here.

But then again, what would I know, I'm just a Thai which means I cannot afford to buy a condo. Strange being that i have/earn enough to easily finance a place worth like 50m baht, but I guess that is chump change for these affluent farangs running around like they own the place

[Seneque]

That is the main problem with most farangs here (u.s. & brits) ... they think the world revolve around them ... and they are way wrong !

[roamer]

A lot of people out there believe that historically property has always been a good investment.

I believe it was Warren Buffet who said that if history was all there was to investment then all librarians would be millionaires.

[cloudhopper]

Wow I'm so relieved - I first read it as failure rate for condoms nears 50%!