Condo & Irratioanl Exuberance

[siddv]

Thai stock market has sunk nearly 40 percent since May; a Muslim insurgency rages in the south; the rich tourist market has shrunk; Thailand's great unifying figure, King Bhumibol Adulyadej, is 80, raising great concern about how the nation will cope with the eventual succession to the throne. world economic crisis. Hum are "lower" "more realistic" condo prices on the horizon? Is Thailand's "irrational exuberance" finally on the verge of imploding?

Edited October 8, 2008 by siddv

[quiksilva]

Firstly, you didn't mention the political unrest, which by far and away is the main overriding cause for concern, nothing has hit confidence harder, certainly not the stock market or the muslim insurgency!

That aside, if the current situation continues you wont see many residential sales, and whilst in most markets that would affect values, the lessons learned from 1997's economic crisis show us that Thailand's residential property market does not function like the more mature markets that most of us are used to.

During the Tom Young Goong crisis the market was saturated with bargain hunters (looking to buy when 'blood was on the streets') yet the vast majority of Thai owners refused to sell at a loss, instead they simply held on to the asset and rode out the economic wave, and sold when they could achieve their target price.

So did values drop then? Well the professional definition of value is not whatever the buyer is willing to pay. It is the level at which a willing prudent buyer and seller will transact at after a suffficient period of marketing.

As to whether prices (which are NOT not the same thing as values) will fall in new developments, then I think yes they probably will, to a point.

However, there will always be a point when it does not become economical to sell. So the 'basement' is still fairly high unless of course construction costs fall with the decline of global demand in light of the economic climate.

[Gary A]

What is astounding to me is that people are still buying houses through bogus companies. As compared to that foolishness, existing condos in your own name still look great. I say existing condos because I think buying pre construction is almost as foolish as buying a house through a company.

[LennyW]

What is astounding to me is that people are still buying houses through bogus companies. As compared to that foolishness, existing condos in your own name still look great. I say existing condos because I think buying pre construction is almost as foolish as buying a house through a company.

Now now Gary, have you yet heard of any houses being taken away from "bogus / foolish " buyers ?? (apart from the obvious woman problems???) I always have this strange vision about people who think they own their condos and, their associated peice of land. Imagine trying to sell your "own name " condo and asking, " so what bit of land is actually mine"?? The answers could be quite entertaining, anyone tried yet??

[pkrv]

What is astounding to me is that people are still buying houses through bogus companies. As compared to that foolishness, existing condos in your own name still look great. I say existing condos because I think buying pre construction is almost as foolish as buying a house through a company.

Now now Gary, have you yet heard of any houses being taken away from "bogus / foolish " buyers ?? (apart from the obvious woman problems???) I always have this strange vision about people who think they own their condos and, their associated peice of land. Imagine trying to sell your "own name " condo and asking, " so what bit of land is actually mine"?? The answers could be quite entertaining, anyone tried yet??

Err.... you put it on the market and sell it? It may take time but if you need a quick in and out and haven't figured that out yet well so be it.

http://www.hamptons.co.th/

[philstone]

What is astounding to me is that people are still buying houses through bogus companies. As compared to that foolishness, existing condos in your own name still look great. I say existing condos because I think buying pre construction is almost as foolish as buying a house through a company.

Maybe Sour Grapes on your part I known 21 members of my wife family still buying homes with my money. And believe me they are all very happy and spent most of the time partying with money also.

Edited October 8, 2008 by philstone

[Bangyai]

Thai stock market has sunk nearly 40 percent since May; a Muslim insurgency rages in the south; the rich tourist market has shrunk; Thailand's great unifying figure, King Bhumibol Adulyadej, is 80, raising great concern about how the nation will cope with the eventual succession to the throne. world economic crisis. Hum are "lower" "more realistic" condo prices on the horizon? Is Thailand's "irrational exuberance" finally on the verge of imploding?

It looks that way, especially for the coming year. Lots of investors scared off by the political troubles plus a world recession looming ever bigger on the horizon....not a good time to be buying or selling in Pattaya.

[Naam]

What is astounding to me is that people are still buying houses through bogus companies. As compared to that foolishness, existing condos in your own name still look great. I say existing condos because I think buying pre construction is almost as foolish as buying a house through a company.

Now now Gary, have you yet heard of any houses being taken away from "bogus / foolish " buyers ?? (apart from the obvious woman problems???)

of course. houses are confiscated left and right. the owners are tortured, circumcised (no matter whether they still have a foreskin or not) and then deported to their home countries. i own land in the name of a company, built a house on it but tremble when the door bell rings because it might be the "expropriators" taking the land away which i acquired in a criminal way.

i wish i had not spend the dough on a house but kept the cash safely in a bank in Iceland, Lehman Brothers or in funds which invest in dollar denominated shares quoted at DOW, Nasdaq or S&P. then i could relax and console myself that most of the dough has not disappeared...

...but is safe and sound in other pockets and not mine :D

[jimmybkk]

Well said Naam! The expropriators came to my house yesterday - gang raped my dog in front of her puppies. It was awful.

[Gary A]

What is astounding to me is that people are still buying houses through bogus companies. As compared to that foolishness, existing condos in your own name still look great. I say existing condos because I think buying pre construction is almost as foolish as buying a house through a company.

Maybe Sour Grapes on your part I known 21 members of my wife family still buying homes with my money. And believe me they are all very happy and spent most of the time partying with money also.

Sour grapes ?? I too have bought land that I can NEVER own. BUT, I did not pay a crooked lawyer to set up a company and then have to pay an accountant to file tax returns for a company that does no business.

We all have a certain tolerance for risk and my tolerance is obviously much lower than some others. I like to sleep nights and I do sleep well knowing that the government will not confiscate or force me to sell my company's house. It may never happen but the uncertainty would definitely bother me.

The land I bought belongs to my Thai wife and I had to sign a paper saying I had no financial interest in the properties. If worse comes to worse, I still OWN a condo in my name. That means having a roof over my head missing no meals.

Can anyone say that buying a house through a Thai company is a good idea? If you think it is a good idea, I maintain that maybe it's the misery loves company syndrome. Would anyone recommend buying a condo from Ocean One?

[Khun Jean]

The problem (and to many peoples relieve) is that existing laws are not enforced.

That can change however in a blink of an eye. How soon that will happen is anybodies guess, my feeling is it will happen.

You just need one person in Thailand to make that decision and then shit hits the fan.

Probably it still will not be a disaster because people will get time to change their company structure or have time to sell and restructure.

As Gary said, some are comfortable with it and some are not.

Again problem with a company structure is that it is sold as a 100% safe way to own property and land. And that is simply not true. Compared to full ownership of a condo, guaranteed lease for 30 years, a usufruct for life or just simply rent, you can question what is best for an individual case.

[whatsoever]

What is astounding to me is that people are still buying houses through bogus companies. As compared to that foolishness, existing condos in your own name still look great. I say existing condos because I think buying pre construction is almost as foolish as buying a house through a company.

Maybe Sour Grapes on your part I known 21 members of my wife family still buying homes with my money. And believe me they are all very happy and spent most of the time partying with money also.

Wow 21 members buying houses (with money) - must be a record. Or your some kind of Walter Mitty

[richm7]

What is astounding to me is that people are still buying houses through bogus companies. As compared to that foolishness, existing condos in your own name still look great. I say existing condos because I think buying pre construction is almost as foolish as buying a house through a company.

Now now Gary, have you yet heard of any houses being taken away from "bogus / foolish " buyers ?? (apart from the obvious woman problems???) I always have this strange vision about people who think they own their condos and, their associated peice of land. Imagine trying to sell your "own name " condo and asking, " so what bit of land is actually mine"?? The answers could be quite entertaining, anyone tried yet??

Am I missing something here? Condo owners jointly own the land; that is what a Condominium is, whether it be in Thailand, Texas or Timbuktu. Land ownership is calculated on a ratio basis (the penthouse guy owns a higher percentage than the guy who lives in the broom cupboard). Selling is not nor should it be a problem.

Going back to the OP, I think one of the reasons you don't see much change here is because Condo's are relatively cheap, still. In which other major capital can you buy a 1500 sq. ft unit right downtown for $250k? Reykjavik maybe, but that is hardly a major capital and apologies to any Icelandic members for the dig! When prices are already low they tend not to go lower. As someone rightly said you reach a point where sellers won't sell, they'd rather hang on. Most condo's are either investment, a pad in town or a retirees home. The investment only starts to hurt if rents crash, but I don't see a crash (though they are down). With current interest rates and the state of the stock market I'd hold property any day. It's a better bet.

Now the old chestnut about the rules changing tomorrow will come up, but show me historical evidence where rule changes have resulted in loss of an investment. Despite what some posters would have you believe, Thailand is quite a civilized country. And don't mention the current troubles, please. Ohio is still in the memory of most posters here.

[Gary A]

I have mentioned before that I am quite conservative. I didn't buy my condo for an investment. I'm pleased that it has appreciated in value but it makes absolutely no difference because I have no intention of selling it. Unlike many others I have never considered Thailand property as a good investment. Many people have invested and have made money. In some cases, lots of money. More power to them. They took a risk and it paid off. There is nothing wrong with that. Those brave souls who own property through a company may or may not have problems. It simply was never worth my peace of mind to go for it.

[Gravelrash]

So stock markets are crashing, banks are failing, so where is the traditional safe haven...real estate. And in Thailand that means condos. If you buy well you should get 7 - 10% return on investment, in good times that is moderate but safe, in bad times it is a god send.

Or you can listen to the "never invest more than you are willing to walk away from" mob. Like, ah, when did anyone have to walk away from a condo investment in Thailand? Those knobs probably have all their money in the stock market or Icelandic banks and are taking a hammering now.

Things will probably get worse, consider your investment portfolio structure and go for whatever safe haven you prefer.

[pkrv]

What is astounding to me is that people are still buying houses through bogus companies. As compared to that foolishness, existing condos in your own name still look great. I say existing condos because I think buying pre construction is almost as foolish as buying a house through a company.

Now now Gary, have you yet heard of any houses being taken away from "bogus / foolish " buyers ?? (apart from the obvious woman problems???) I always have this strange vision about people who think they own their condos and, their associated peice of land. Imagine trying to sell your "own name " condo and asking, " so what bit of land is actually mine"?? The answers could be quite entertaining, anyone tried yet??

Am I missing something here? Condo owners jointly own the land; that is what a Condominium is, whether it be in Thailand, Texas or Timbuktu. Land ownership is calculated on a ratio basis (the penthouse guy owns a higher percentage than the guy who lives in the broom cupboard). Selling is not nor should it be a problem.

Going back to the OP, I think one of the reasons you don't see much change here is because Condo's are relatively cheap, still. In which other major capital can you buy a 1500 sq. ft unit right downtown for $250k? Reykjavik maybe, but that is hardly a major capital and apologies to any Icelandic members for the dig! When prices are already low they tend not to go lower. As someone rightly said you reach a point where sellers won't sell, they'd rather hang on. Most condo's are either investment, a pad in town or a retirees home. The investment only starts to hurt if rents crash, but I don't see a crash (though they are down). With current interest rates and the state of the stock market I'd hold property any day. It's a better bet.

Now the old chestnut about the rules changing tomorrow will come up, but show me historical evidence where rule changes have resulted in loss of an investment. Despite what some posters would have you believe, Thailand is quite a civilized country. And don't mention the current troubles, please. Ohio is still in the memory of most posters here.

correct I own 0.26% of all assets

Edited October 9, 2008 by pkrv

[DFW2BKK]

From the looks of things, I am starting a new career in Thailand at a time of tremendous uncertainty and upheaval (not that things are that rosy in America). Nevertheless, I plan to be in BKK longterm and make the smartest moves possible. My plan is to rent a condo for 6 months to a year -- then buy a condo with the intent of living there for at least five years.

My question for the thread relates to mortgages available to foreigners. Do you know whether the banks that deal in these loans would principally look at my salary as a means of determining my creditworthiness? Or would they also look at my American credit rating, properties I own in America, and other factors?

I suppose if credit continues to tighten around the world I may be paying for some place in cash but that would not be my preference.

Any thoughts would be appreciated.

[zorro1]

So stock markets are crashing, banks are failing, so where is the traditional safe haven...real estate. And in Thailand that means condos. If you buy well you should get 7 - 10% return on investment, in good times that is moderate but safe, in bad times it is a god send.

Or you can listen to the "never invest more than you are willing to walk away from" mob. Like, ah, when did anyone have to walk away from a condo investment in Thailand? Those knobs probably have all their money in the stock market or Icelandic banks and are taking a hammering now.

Things will probably get worse, consider your investment portfolio structure and go for whatever safe haven you prefer.

Agreed. Some posters claimed a 30% yearly return on stocks, doubtful then , pure fantasy now

[Gary A]

I think I'm safe in saying that as a farang in Thailand you will NOT get a mortgage from a Thai bank. There will likely be several posts saying that I am wrong but do you know of any farang who has borrowed money from a Thai bank? I know of NONE!

[zorro1]

I think I'm safe in saying that as a farang in Thailand you will NOT get a mortgage from a Thai bank. There will likely be several posts saying that I am wrong but do you know of any farang who has borrowed money from a Thai bank? I know of NONE!

http://www.thailand-property-guide.com/?p=finance

You have to go via there Singapore branch. Think its called UOB or something like that

Edited October 10, 2008 by zorro1

[bendix]

I have mentioned before that I am quite conservative. I didn't buy my condo for an investment. I'm pleased that it has appreciated in value but it makes absolutely no difference because I have no intention of selling it. Unlike many others I have never considered Thailand property as a good investment. Many people have invested and have made money. In some cases, lots of money. More power to them. They took a risk and it paid off. There is nothing wrong with that. Those brave souls who own property through a company may or may not have problems. It simply was never worth my peace of mind to go for it.

Completely agree. I've just taken the plunge and bought a condo in Sukhumvit, not because I think or expect it will soar in value (a common expectation in the west), but because I need to live somewhere and I'm tired of paying 60-70k a month rent. I paid cash for my place, so that rent money is heading straight to my savings. In that regard it is a good investment because it's increasing my network by $2000 a month and is providing a roof over my head.

[bendix]

I think I'm safe in saying that as a farang in Thailand you will NOT get a mortgage from a Thai bank. There will likely be several posts saying that I am wrong but do you know of any farang who has borrowed money from a Thai bank? I know of NONE!

I'm not sure that's true Gary. My bank (Bangkok Bank) were prepared to give me a mortgage in my name. I'm married - not sure if that has anything to do with it.

Another farang friend of mine (also married) to a Thai, has a large mortgage in his name on a house out at Lam Lukka. I have no idea how he got it. His take home is around 180k per month and his repayments are 92,000 per month for 15 years! I'm pretty sure no bank in the west would lend on such terms. For the record, his wife has no income. Again, it was Bangkok Bank that lent him the money.

I also know another guy - just arrived here - who is buying a 17m condo and has been offered a ten year mortgage (because he is older) for 12m of that.

[zorro1]

I have mentioned before that I am quite conservative. I didn't buy my condo for an investment. I'm pleased that it has appreciated in value but it makes absolutely no difference because I have no intention of selling it. Unlike many others I have never considered Thailand property as a good investment. Many people have invested and have made money. In some cases, lots of money. More power to them. They took a risk and it paid off. There is nothing wrong with that. Those brave souls who own property through a company may or may not have problems. It simply was never worth my peace of mind to go for it.

Completely agree. I've just taken the plunge and bought a condo in Sukhumvit, not because I think or expect it will soar in value (a common expectation in the west), but because I need to live somewhere and I'm tired of paying 60-70k a month rent. I paid cash for my place, so that rent money is heading straight to my savings. In that regard it is a good investment because it's increasing my network by $2000 a month and is providing a roof over my head.

D

I did the same a while back on Sukhumvit. And just bought another but now concentrating on stock market, should be a good time to buy about now

[steveromagnino]

D

I did the same a while back on Sukhumvit. And just bought another but now concentrating on stock market, should be a good time to buy about now

Yep, Amata and LPN looking sweet about now....if PSL tanks some more, then that is a 10%+ dividend yield right there.

I also know a few foreigners; one on this board dude something or other, not the idiotic thedude stupid tiger guy, another dude; he got a loan with SCB and a know a few in the old company I worked for were able to get loans from Thanachart etc etc. as well.

Not the norm, but possible with a few connections and decent work history.

[glyph]

"not the idiotic thedude stupid tiger guy"

You mean the guy who constantly referred to himself in the third-party? "thedude thinks that's sweet...thedude thinks that's OK...thedude failed English class..." It was funny as a Seinfeld episode, not so funny to think that a grown man would articulate himself in that manner.

[glyph]

" Is Thailand's "irrational exuberance" finally on the verge of imploding? "

To what "irrational exuberance" are you referring? Many people are optimistic, but that's not irrational. The last time that I read the term "irrational exuberance" was a couple years before the US stock market crashed in 2001. So, somehow, you decided to use a decade-old term whre it was nver applicable. I guess you're trying to sound hip, happening, down with it, and in tune. You're not in tune, you're out of touch. Using this term today, in the context you're trying to use it, sounds as phony as a white guy trying to talk black: "brah, yo yo yo, whassup wid dat, homie!"

[midas]

" Is Thailand's "irrational exuberance" finally on the verge of imploding? "

To what "irrational exuberance" are you referring? Many people are optimistic, but that's not irrational. The last time that I read the term "irrational exuberance" was a couple years before the US stock market crashed in 2001. So, somehow, you decided to use a decade-old term whre it was nver applicable. I guess you're trying to sound hip, happening, down with it, and in tune. You're not in tune, you're out of touch. Using this term today, in the context you're trying to use it, sounds as phony as a white guy trying to talk black: "brah, yo yo yo, whassup wid dat, homie!"

Ok if he ommited the word "irrational " and just used " exuberance " - would the Op get a

more meaningful response to your question ?

[clausewitz]

I think the real decline is going to be with some of the condo developments that have targeted naive farang investors. Some of them have paid almost 100,000bht/ sqm (some even more!), when comparable properties- albeit without the marketing to foreigners and a fractionally less desirable location- are selling for 45,000sqm to Thais. The Thai market is hard for new farang to understand- they pick up the Nation, which has daily 'columns' by property managers, or even developers who put forward rosy views of the market, and who omit telling about the huge number of rental vacancies in Bangkok- one of the highest levels in the world and still more units coming on the market.

[steveromagnino]

I think the real decline is going to be with some of the condo developments that have targeted naive farang investors. Some of them have paid almost 100,000bht/ sqm (some even more!), when comparable properties- albeit without the marketing to foreigners and a fractionally less desirable location- are selling for 45,000sqm to Thais. The Thai market is hard for new farang to understand- they pick up the Nation, which has daily 'columns' by property managers, or even developers who put forward rosy views of the market, and who omit telling about the huge number of rental vacancies in Bangkok- one of the highest levels in the world and still more units coming on the market.

please can you give an example of two properties that were launched in a similar period with such a dual strategy as this?

I am wracking my brain to think of a single one in BKK.

[Gary A]

I think I'm safe in saying that as a farang in Thailand you will NOT get a mortgage from a Thai bank. There will likely be several posts saying that I am wrong but do you know of any farang who has borrowed money from a Thai bank? I know of NONE!

I'm not sure that's true Gary. My bank (Bangkok Bank) were prepared to give me a mortgage in my name. I'm married - not sure if that has anything to do with it.

Another farang friend of mine (also married) to a Thai, has a large mortgage in his name on a house out at Lam Lukka. I have no idea how he got it. His take home is around 180k per month and his repayments are 92,000 per month for 15 years! I'm pretty sure no bank in the west would lend on such terms. For the record, his wife has no income. Again, it was Bangkok Bank that lent him the money.

I also know another guy - just arrived here - who is buying a 17m condo and has been offered a ten year mortgage (because he is older) for 12m of that.

I have asked around some more about farangs having a bank mortgage on properties. Let's talk about the average farang, not one who works for an international company and earns a couple hundred thousand baht per month.

I have talked to guys who have been turned down cold for a mortgage and NEVER found an average guy or retiree who was able to get a mortgage. Their wives don't have a steady income from a regular job so they don't qualify either. I'd wager that many more have been turned down that those who have been able to get a loan.

I stand by my statement that the average farang CANNOT get a mortgage from a Thai bank.