Condo & Irratioanl Exuberance

[bendix]

Huh? Average farang? What is an average farang? I'm not sure I know any of them . . .

But, come on, let's get real. Why would a Thai bank offer a mortgage to a retiree, particularly one who can leave the country on a whim? No UK / US / Ozzie bank would do it; their shareholders would be up in arms.

And - horrible as it may sound - a teacher pulling in 40,000 a month is hardly an attractive option either.

Don't attack me - I don't make up the rules.

Who was it who said that banks are places that lend money to people who don't need it?

[bendix]

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.

Ummmmmm .. . you DO realise that those same condos targeting naieve foreign investors have to sell 51% of the units to Thais, don't you?

[Heng]

Not a real confiscation of property, but I do know of a few attorneys who are the defacto owners (through share ownership) of property of foreigners who have died of natural causes/old age. While I assume that they have a responsibility to contact the next of kin, I'd imagine in situations where the spouse (or anyone who cares) is no longer around that they could just as easily arrange for the company (now minus the most important shareholder) to sell the property to whoever they wanted (including themselves).

On a similar tangent I know of a few people who also became the defacto owners of property that foreigners had them purchase, but who later passed away (again, as far as I know all natural cause deaths). The property was already in the local's name, and the foreigners in question decided to go this route instead of having the property owned by their significant other's (with many of those guys opting for relationships without a single sig. other party), in essence choosing to trust the 'stranger or non-personal acquaintence' instead.

[lifeisrandom]

it is saddening that there are not any great deals for condos

a couple of condos i have my eye on have declined in price only about 10% over the last year or so

[PattayaParent]

mmmmmm .. . you DO realise that those same condos targeting naieve foreign investors have to sell 51% of the units to Thais, don't you?

But they don't sell that 51% to the Thais at the same price as they sell the 49% to the Farang.

[PattayaParent]

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.

I don't think clausewitz was referring to dual pricing in the same building, but comparing buildings marketed exclusively to Thais vs. those marketed to Farangs.

[zorro1]

it is saddening that there are not any great deals for condos

a couple of condos i have my eye on have declined in price only about 10% over the last year or so

ermmm.. so what are you waiting for?

[zorro1]

mmmmmm .. . you DO realise that those same condos targeting naieve foreign investors have to sell 51% of the units to Thais, don't you?

But they don't sell that 51% to the Thais at the same price as they sell the 49% to the Farang.

I don't know what they do pre launch and maybe someone can enlighten us? however my uni educated never set foot in a bar virgin TGF went in cold before my recent off the plan purchase and I can tell you 100% there wasn't a 2 tier price structure.

[Wonderboy]

mmmmmm .. . you DO realise that those same condos targeting naieve foreign investors have to sell 51% of the units to Thais, don't you?

But they don't sell that 51% to the Thais at the same price as they sell the 49% to the Farang.

I don't know what they do pre launch and maybe someone can enlighten us? however my uni educated never set foot in a bar virgin TGF went in cold before my recent off the plan purchase and I can tell you 100% there wasn't a 2 tier price structure.

Key word here is off plan. Things often change when the foreign quota has been filled. Expect to see more of this in the future, as the new condominium act specifies that unsold units' service fee should be fully paid by the developer.

Anyway, two-tier pricing is institutionalized in Thailand. Are you so naive you think the condo-market is excempted based upon your own sole experience?

Would it made a difference if your girlfriend had no uni-education? Or if she some time had set her feet in a bar? Or if she was not a virgin? And have you still not done her?

WB

Edited October 15, 2008 by Wonderboy

[zorro1]

mmmmmm .. . you DO realise that those same condos targeting naieve foreign investors have to sell 51% of the units to Thais, don't you?

But they don't sell that 51% to the Thais at the same price as they sell the 49% to the Farang.

I don't know what they do pre launch and maybe someone can enlighten us? however my uni educated never set foot in a bar virgin TGF went in cold before my recent off the plan purchase and I can tell you 100% there wasn't a 2 tier price structure.

Key word here is off plan. Things often change when the foreign quota has been filled. Expect to see more of this in the future, as the new condominium act specifies that unsold units' service fee should be fully paid by the developer.

Anyway, two-tier pricing is institutionalized in Thailand. Are you so naive you think the condo-market is excempted based upon your own sole experience?

Would it made a difference if your girlfriend had no uni-education? Or if she some time had set her feet in a bar? Or if she was not a virgin? And have you still not done her?

WB

Strange post. I did say off the plan and you agreed and then call me naive My TGF comment was tongue in cheek and no i would not send a bar girl to negotiate a condo sale, That would in itself justify "irrational Exuberance "

[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.

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.

I don't think clausewitz was referring to dual pricing in the same building, but comparing buildings marketed exclusively to Thais vs. those marketed to Farangs.

Thank you PP, yes, of course I was. Those focussing mainly on Thais go for value for sqm and top out at about 45,000sqm, they may be a couple hundred meters outside of the most prime spot and don't have quite the same degree of luxury but they have value.

Nevertheless Raimon annouced recently that in one of its buildings that focus on the (naive)farang market they were having problems selling to Thais (because of the exobitant pricing) - hence the same size rooms - without the best views - in the same building , were now going to be sold at 50% of the price (equivalent sqm) of the most prime apartments. How many people would pay an extra 8million baht becuase they get a better view than their neigbours 10 floors down and on the other side of the building? Even with those 'discounts' it is not going to be easy to sell to Thais who are focussed on value purchasing.

Once the thousands of new prime apartments hit the maket over the next year, and the economic downturn bites, I expect a real decilne in the market here, there are just too too many vacant apartments/houses in Bangkok. Pattaya is probably in an even worse position.

Or I could put on my rose glasses and say "oh but Bangkok is much cheaper than London, Singapore and Hong Kong, lets buy!"

[bendix]

I don't understand how the Raimon example is dual pricing. There was a price fixed. Many people (mostly farang) agreed to pay it. Thai's didnt (according to you).

So what happens? Because the remaining units MUST be sold to Thai's the price has to come down to meet the new market level.

It's not an optimum situation for sure but it's one borne of legal ownership issues, not a desire to scam farang.

[steveromagnino]

I don't buy this 45k for Thais, 100k for foreigners point. You have said yourself it is different location; there is a world of difference between say beach front and 200m back from the beach.

Name 2 projects then, one aimed at Thais, one aimed at foreigners. No question, a company like Riamon Land doesn't really know how to sell to Thais and they also have a higher marketing spend than some of the developers more adept at selling to Thais. However, you cannot compare Raimon Land to LPN and then say well Raimon Land are ripping off farangs. The offerings are totally different.

It seems like you are saying (and I could be wrong) the farangs like buying Camrys, the Thais like buying Honda Jazz, someone is being ripped off - I'd say more like, farangs like buying camrys, Thais like buying many types of cars including camrys, a few dealers don't know how to sell camrys to Thais and so have to drop their price to the price of a honda jazz to try to sell.

I know of a project right now selling at 200k and most of the buyers are Thai in the heart of BKK incidentally, The Park and many other projects are all easily able to fill the Thai quotas. There are are plenty of Thais willing to spend 100k+ per sqm on real estate; there are a ton more who want to buy ideo level property - I cannot think of a SINGLE development on the market now in the Ideo/LPN type category that is topping out at 45k per sqm; please can you name one in BKK?

The River is simply struggling because they market heavily to foreigners, they don't really know how to sell to Thais and the location is not one most Thais would like to live in.

There is a legal obligation to sell 51% to Thais, so they have chosen to market (as I understand) the second building with no view of the river to Thais at a lower price. Not sure one can directly compare a 45th floor river view unit to a 8th floor road view and say one is 50% cheaper; which may or may not be the case; and then complain that the units are effectively the same.

They aren't.

If Raimon Land want to use this strategy that's up to them; it certainly is not widespread among the Thai developers; it is widespread among the foreign developers who don't know how to design and sell to Thais.

[BEENTHEREDONETHAT]

In Cha Am the majority of condo units are owned by Thais who live in BKK and come to Cha Am for the occasional weekend or Holiday. So being in the 49% is no problem. Should mention I have no hard data to back this up, it is just from observations and talking to the locals and realitors. But I do know that in the condo building we live in only my wife and I and one other farang couple live here fulltime. Nice and quiet that way. Of the 38 beachfront units only 12 are owned by farangs and most of those have bought in the last 12 months.

I also have been told (by a resident who would know) that the Thais who bought the mirror immage of our unit, on the same floor paid 25% more than we did. That was 2 or 3 months after we bought our unit. So thais don't necessarily pay less.

[steveromagnino]

In Cha Am the majority of condo units are owned by Thais who live in BKK and come to Cha Am for the occasional weekend or Holiday. So being in the 49% is no problem. Should mention I have no hard data to back this up, it is just from observations and talking to the locals and realitors. But I do know that in the condo building we live in only my wife and I and one other farang couple live here fulltime. Nice and quiet that way. Of the 38 beachfront units only 12 are owned by farangs and most of those have bought in the last 12 months.

I also have been told (by a resident who would know) that the Thais who bought the mirror immage of our unit, on the same floor paid 25% more than we did. That was 2 or 3 months after we bought our unit. So thais don't necessarily pay less.

Marakesh, Sansiri, etc etc projects are all marketed mostly at Thais in Hua Hin.

I am wracking my brains for a single project down there with a top price of 45k launched in the last 12 months.....cannot think of one.

I also cannot think of a single Hua Hin project marketed exclusively at Thais nor any marketed exclusively at foreigners or any significant difference really between most of these projects.

They are all mostly 60k - 80k for a decent level or build in an ok condition, with the better ones ranging up to about 120k.

Given a cost to build for a mid/upper level build around 30k per sqm, I cannot possibly see how anyone could create something and sell it for 45k per sqm.

If building something really slummy, maybe they can sell for 45k but then you aren't comparing apples with apples no more innit.

[BEENTHEREDONETHAT]

In Cha Am the majority of condo units are owned by Thais who live in BKK and come to Cha Am for the occasional weekend or Holiday. So being in the 49% is no problem. Should mention I have no hard data to back this up, it is just from observations and talking to the locals and realitors. But I do know that in the condo building we live in only my wife and I and one other farang couple live here fulltime. Nice and quiet that way. Of the 38 beachfront units only 12 are owned by farangs and most of those have bought in the last 12 months.

I also have been told (by a resident who would know) that the Thais who bought the mirror immage of our unit, on the same floor paid 25% more than we did. That was 2 or 3 months after we bought our unit. So thais don't necessarily pay less.

Marakesh, Sansiri, etc etc projects are all marketed mostly at Thais in Hua Hin.

I am wracking my brains for a single project down there with a top price of 45k launched in the last 12 months.....cannot think of one.

I also cannot think of a single Hua Hin project marketed exclusively at Thais nor any marketed exclusively at foreigners or any significant difference really between most of these projects.

They are all mostly 60k - 80k for a decent level or build in an ok condition, with the better ones ranging up to about 120k.

Given a cost to build for a mid/upper level build around 30k per sqm, I cannot possibly see how anyone could create something and sell it for 45k per sqm.

If building something really slummy, maybe they can sell for 45k but then you aren't comparing apples with apples no more innit.

Steve.........You have confused me with the reply to my post. As none of your comments relate to anything I said. Never mentioned price nor launch date or how it was marketed. Also I was refering to Cha Am not Hua Hin.

[steveromagnino]

sorry mate, hit reply and brain was not engaged to delete the quote of the section above; just a general comment and not really related to your post at all ;-)

Sorry 'bout that!

I think your story regarding your neighbour adequately reflects that this idea that Thais pay one price and foreigners pay another is not really true a lot of the time.

Cha-am; lovely spot; I'm a sailor so prefer the other coast, but sure looks nice for windsurfing some of the times I've been down there..... ;-)

[thaihome]

Come on now, with a title containing the word “irrational” how dare you try to bring rationality into this thread.

TH

[jimmybkk]

I know a couple of people at Raimon Land and they've told me that they don't operate any dual pricing system, although apparently they have considered it. Personally I don't see anything wrong with it when talking about condo sales. The fact is, the foreign quota units are worth more, particularly in a location such as Pattaya which attracts a lot of foreign buyers. I am against most forms of dual pricing where the foreigner pays a higher price for exactly the same experience as the Thai - e.g. national parks, zoos, baht buses etc. where everyone who enters sees the same waterfall, the same forest, the same panda, the same views. They are not purchasing an asset which has a resale value. The fact is that by owning the unit in foreign quota it is more sellable (and therefore more desirable from an investment perspective) than the same unit held in Thai quota. Why should this not be reflected in the price?

Quite a few developers in Pattaya do this already - not sure if it's happening in Bangkok though.

My understanding is that almost all of Raimon Land's complete projects are sold out and so I'm not sure I agree with the comment from a previous poster that they don't know how to sell to Thais - either that or there are a lot of foreigners out there who are quite happy to buy in the wife/gf/Thai Comany name. IMHO, from speaking with some Thai friends, a lot of Thais have not forgotten '97 and, with a few exceptions, are wary of buying anything until it's quite a long way out of the ground. Unfortunately for them, this means that they have often missed the lowest (launch) prices and often the available units could be considered less desirable. Maybe they feel this is a small price to pay compared to the risk of losing their deposits/downpayments.

[pkrv]

In Cha Am the majority of condo units are owned by Thais who live in BKK and come to Cha Am for the occasional weekend or Holiday. So being in the 49% is no problem. Should mention I have no hard data to back this up, it is just from observations and talking to the locals and realitors. But I do know that in the condo building we live in only my wife and I and one other farang couple live here fulltime. Nice and quiet that way. Of the 38 beachfront units only 12 are owned by farangs and most of those have bought in the last 12 months.

I also have been told (by a resident who would know) that the Thais who bought the mirror immage of our unit, on the same floor paid 25% more than we did. That was 2 or 3 months after we bought our unit. So thais don't necessarily pay less.

Marakesh, Sansiri, etc etc projects are all marketed mostly at Thais in Hua Hin.

I am wracking my brains for a single project down there with a top price of 45k launched in the last 12 months.....cannot think of one.

I also cannot think of a single Hua Hin project marketed exclusively at Thais nor any marketed exclusively at foreigners or any significant difference really between most of these projects.

They are all mostly 60k - 80k for a decent level or build in an ok condition, with the better ones ranging up to about 120k.

Given a cost to build for a mid/upper level build around 30k per sqm, I cannot possibly see how anyone could create something and sell it for 45k per sqm.

If building something really slummy, maybe they can sell for 45k but then you aren't comparing apples with apples no more innit.

Steve.........You have confused me with the reply to my post. As none of your comments relate to anything I said. Never mentioned price nor launch date or how it was marketed. Also I was refering to Cha Am not Hua Hin.

BEENTHEREDONETHAT - he was thinking out aloud, that is all. I do that too. IMO one of the good guys - for the moment ];-)

[quiksilva]

it is saddening that there are not any great deals for condos

a couple of condos i have my eye on have declined in price only about 10% over the last year or so

This post sums up the reality of the Thai property market. How many similar posts have there been on TV like this recently?

I.e. People looking to buy, but hoping that values will fall. There are always plenty of bargain hunters.

I think there is a chance a further drop in prices as there is a combination of weak (but not inexistent) demand and lower construction costs. For example steel right now is dropping like a stone.

The question remains though if the developers who sought to pass on the increased costs to consumers will also pass on the saving as these costs fall...

[pkrv]

it is saddening that there are not any great deals for condos

a couple of condos i have my eye on have declined in price only about 10% over the last year or so

This post sums up the reality of the Thai property market. How many similar posts have there been on TV like this recently?

I.e. People looking to buy, but hoping that values will fall. There are always plenty of bargain hunters.

I think there is a chance a further drop in prices as there is a combination of weak (but not inexistent) demand and lower construction costs. For example steel right now is dropping like a stone.

The question remains though if the developers who sought to pass on the increased costs to consumers will also pass on the saving as these costs fall...

If they locked in their costs it would cause problems. None the less everything down, where elese would you invest - core assets comes to mind