Thinking Condo? Think Bangkok !

[george]

Thinking condo? Think Bangkok

BANGKOK: -- Imagine your own premium three-bedroom condominium, replete with private swimming pool, sweeping cityscape views and centrally situated in one of Asia's most vibrant cities - all for under $650,000.

Hong Kong? Singapore? Shanghai? Not a chance. Think Bangkok.

The new Le Raffine 24 is the latest posh condominium launched on Thailand's luxury property market this year. Local and foreign buyers have so far reserved a third of the high-rise's 48 units, all floors of which have been marketed as "penthouse" standard living.

"It's like having your own little ocean in the middle of the city," enthuses a sales agent, Jariya Lertchaiporn, pointing to a shiny model of the yet-to-rise building.

Well, perhaps. But compared to other Asian cities, Bangkok's top-end condominiums seem cheap. A square meter of luxury condominium space in Bangkok now sells for about one-tenth the price of similar units in Hong Kong and one-third in Singapore. The cost is about 10 percent cheaper than Shanghai's premium units, according to statistics compiled by the property consultants CB Richard Ellis.

That's the case even after a major appreciation in Thai condominium assets last year. Average high-end prices in Bangkok's central business district jumped 34 percent in 2003, surpassing the speculation-inflated property prices that presaged Thailand's spectacular 1997 financial crash.

Seven years later, a new property boom is clearly underway. Across Bangkok's well-heeled Sukhumvit and Sathorn suburbs, developers are gobbling up vacant land and demolishing houses to make way for luxury high-rises. Half-finished buildings abandoned during the financial crisis are being completed and sold.

For the first time since that crisis, reservations for yet-to-be-built condominiums are being traded at a premium to their asking price on informal secondary markets - a situation similar to the speculative transactions seen during Thailand's property boom in the early to mid-1990s. Investors who scooped up reservations for luxury units overlooking Lumpini Park in 2002 have since been able to sell those buying rights at a 30 percent markup. With thousands of new luxury units scheduled to come on line over the next two to three years, some property analysts believe Bangkok has become a buyers' market.

Thai developers launched more than 10,400 condominium units this year through September, with most of them aimed at the high end of the market, according to the Agency for Real Estate Affairs, an independent property appraiser. That figure represents nearly twice the number of units launched for all of 2003.

The surge in new building marks a significant reversal of fortunes. When Thailand's financial bubble burst in 1997, the supply of new condominiums wildly overshot demand. A glut of more than 14,000 unoccupied units meant no projects were launched between 1997 and the autumn of 2002.

In a bid to clear the market, the government in 1998 partly repealed legislation that barred foreigners from owning property here. So foreign investors can now own condominiums outright in buildings where Thai citizens own the majority of units. (Foreigners are still barred from owning raw land.)

Foreign investors accounted for about 10 percent of all condominiums bought and sold on the Thai market last year, according to property analysts based in Bangkok. Low mortgage rates, excess liquidity in the banking system, a recent stock market boom and pent-up consumer demand have all fueled the luxury property boom.

Moreover, the more discerning tastes of a new generation of buyers have pushed developers to improve their quality and design.

But, says Srettha Thavisin, the president of Sansiri PCL, Thailand's leading condominium developer, "location, location, location" is still crucial for a successful product launch. He says condominiums that have easy access to Bangkok's new skytrain and subway systems sell fastest.

"Thais want to drive their Mercedes and Porsches, but they still want to be close to mass transit," Srettha says. "They want it all and that's what we try to give them."

James Pitchon, executive director of CB Richard Ellis in Bangkok, believes foreign buyers will propel the market over the next two to three years. He notes that many multinational businesses have established regional hubs in Bangkok, swelling the ranks of foreign executives working here by 13 percent.

"More and more expats are choosing to buy rather than rent," Pitchon said. "Foreign investors are starting to recognize that Thailand's top-end condominiums are now up to international standard."

Some Thai developers are banking on that trend. Hemaraj PCL, a newcomer to condominium development, will launch its luxury condominium, "Park Chidlom - A Symphony in Living," in December in central Bangkok, marketing its high-end units specifically to foreign buyers. Hemaraj is asking for as much as 70 million baht, or $1.75 million, for its penthouse units.

Some property price watchers, however, feel that the top end of the condo market is at risk of becoming saturated. Jiraporn Bumrungchatudom, a property analyst at Phatra Securities in Bangkok, believes that a "mini-bubble" has formed in Bangkok's luxury property market. She says that all the new supply coming onto the market has driven average rental yields down from 10 percent in 2003 to around 5 percent this year.

Still, nobody is talking about a repeat of the 1997 collapse. In large part, that's because the central bank has moved to drive speculators out of the market. Regulators have also moved to cool the market through new environmental codes, which require developers to set aside a certain amount of open space against the number of units they build.

"Thailand's buyers and developers are more sophisticated nowadays," said Sopon Pornchokchai, managing director of the Agency for Real Estate Affairs. "Better research, better regulation and better quality products have all made Thailand a safer place for investing in property."

--Shawn W. Crispin, International Herald Tribune 2004-12-01

[OldAsiaHand]

I'd suggest you check with some people who know before you rely on any of this.

Every real estate professionall in town will tell you the same thing: the residential real estate market, particularly at the top end, is in a state of total collapse. An 'reservations for unbuilt condos trading at a premium to their asking prices?' 'A new property boom is underway?' That's just baloney. This guy Crispin has long had a reputation as a sloppy reporter and this latest gem is a prime example why that is. Take a handful of developer press releases, stir liberally with beer and BS, and voila! A totally misleading story.

'Nobody is taking about a repeat of the 1997 collapse?' Heck, man. Nobody who knows is talking about anything else.

[Digger]

Only a crazy man in my opinion would buy a condo in BKK aimed at the upper market and I spend my days buying and selling property.

The dynamics are all wrong in BKK. Way too few people able to afford these properties (unlike Singapore or HKG where there are huge numbers of very well paid personnel plus more liberal purchasing laws for foreigners.)

And as for the Raffine devlopment in Sukhumvit, I would hazzard an educated guess that at least 8 of those "sold" units have been sold at around 50% of retail price to a selected group of influential people so that when Mr & Mrs Jo Public go and have a look, the sales agent says, "well of course you know Khun Big Nob has bought a place here and dont forget that TV actress Khun Vanity she's got the place just 3 doors down from the one you are interested in....., my this condo is attracting more generals than a VIP motorcade, we are seriously wondering if we even need to employ security guards as their will always be so many bodyguards here protecting the elite."

Given its all face, Mr & Mrs sucker get dragged in and are hooked at the thought of living in the same place that all these celebs live. I have seen this done many times at high end condo's in BKK. Of course, the celebs if they are smart sell off the place ebfore its finished to another sucker and gain a huge profit.

[chingy_]

The new Le Raffine 24

over price building

[OldAsiaHand]

Yep, you're both right. Le Raffine has been a well-known and much chuckled about dog on the condo sales market in Bangkok for quite a while. The real question here, of course, is how much it cost the Le Raffine developers to get Crispin to plant that piece in the IHT. I suppose the guy could just be dumb and have gotten taken in, but does anyone really believe that?

[udon]

Half-finished buildings abandoned during the financial crisis are being completed and sold.

Really, I wonder if Crispin could point to one?

7 years exposed to the elements, rotten steel inside the concrete, etc. etc. Yeah, right!

[pedro01]

Heard on Radio Thailand that there are 250,000 empty homes - houses & condos in Bangkok.

They did mention the growth rate in the economy required over the next 5 years to eat up this supply - can't remember the number but it sounded ambitous.

It's certainly a scary time to be buying in Bangkok...

Maybe worth considering 'low-end' rental properties...

[udon]

Heard on Radio Thailand that there are 250,000 empty homes - houses & condos in Bangkok.

I'd love to see the list (250,000) if one exists, I wonder where RT got their info from.

Sorry to be so sceptical of info from RT or any gov't propaganda outlet.

No rudeness intended to Pedro.

[Digger]

Half-finished buildings abandoned during the financial crisis are being completed and sold.

Really, I wonder if Crispin could point to one?

7 years exposed to the elements, rotten steel inside the concrete, etc. etc. Yeah, right!

<{POST_SNAPBACK}>

Actually there are more than you think, for example, The Lakes in Soi 16 Sukhumvit was planned to be a office building and has been altered to be a residential condo. Sold out in 3 days but they were not greedy with the price. Just been opened and first people moved in I believe.

Also the Northshore is another example in Pattaya.

[boris]

I'd suggest you check with some people who know before you rely on any of this.

Every real estate professionall in town will tell you the same thing: the residential real estate market, particularly at the top end, is in a state of total collapse. An 'reservations for unbuilt condos trading at a premium to their asking prices?' 'A new property boom is underway?' That's just baloney. This guy Crispin has long had a reputation as a sloppy reporter and this latest gem is a prime example why that is. Take a handful of developer press releases, stir liberally with beer and BS, and voila! A totally misleading story.

'Nobody is taking about a repeat of the 1997 collapse?' Heck, man. Nobody who knows is talking about anything else.

<{POST_SNAPBACK}>

Absolutely correct.In addition the real estate "expert", James Pitchon(podgy little North London type usually nursing a hangover), who is always quoted in this type of article has a history of giving very misleading advice

[Captain Chaos]

I am surprised. I live on Suk 24 and thought Le Raffine had been open for some time. From the outside it certainly looks like the building has seen a few monsoon seasons. Around my area, there are certainly lots of new condo's going up now. Not sure about old ones being finished off. My guess, looks like supply will exceed demand quite soon, so I'll wait another year or so and see if prices come off again.

I also disagree with the IHT reporter's comment about multinationals establishing regional hubs here. I work for what I think is one of the few multinationals that has had its regional hub here for some time - and the immigration / WP laws for such jobs here remain a complete pain in the arse compared to most local rivals.

Just my opinion

[PvtDick]

They're talking about Raffine 2, which is currently on the drawing block and due to be built on Sukhumvit 31.

[charles]

A square meter of luxury condominium space in Bangkok now sells for about one-tenth the price of similar units in Hong Kong and one-third in Singapore.

So condo prices in Singapore are 3 times more than in Bangkok.

I'm no real estate expert, but I'm thinking:

By what multiple are salaries of people in Singapore higher than in Bangkok?

Are there more or less pressures on space in Singapore than Bangkok?

So who is going to buy all these condos?

He notes that many multinational businesses have established regional hubs in Bangkok, swelling the ranks of foreign executives working here by 13 percent

How many genuine "foreign executives" are there in Bangkok? What impact would a 13% rise in that number have on the condo market?

[chingy_]

They're talking about Raffine 2, which is currently on the drawing block and due to be built on Sukhumvit 31.

yes we are talking about Raffine suk 31, its not open yet still under construction, this building come with a pool on ever floor

http://www.leraffine.com

[Captain Chaos]

In the IHT article, why is it called Raffine 24 then?

[PvtDick]

Because it's wrong, that's why.

[Digger]

A square meter of luxury condominium space in Bangkok now sells for about one-tenth the price of similar units in Hong Kong and one-third in Singapore.

So condo prices in Singapore are 3 times more than in Bangkok.

I'm no real estate expert, but I'm thinking:

By what multiple are salaries of people in Singapore higher than in Bangkok?

Are there more or less pressures on space in Singapore than Bangkok?

So who is going to buy all these condos?

He notes that many multinational businesses have established regional hubs in Bangkok, swelling the ranks of foreign executives working here by 13 percent

How many genuine "foreign executives" are there in Bangkok? What impact would a 13% rise in that number have on the condo market?

<{POST_SNAPBACK}>

Typical Singaporean Sales Manager with a decent track record would earn around 12,000 S$ Month or 275,000 baht month. Singaporean VP or Director could easily be earning 20,000 S$ month. Taxation is low at around typically 15% of salary but also dont forget they can use CPF funds towards property acquisition (i.e their retirement pot).

Land is very limited of course in SIngapore and the govt strictly controls how much land is released for housing and of what type so not to over burden the market.

I think the 13% quote of increase in expats is confusing. How many additional people have had to apply for work permits but have been here donkey's years working on the 'grey' side of things. Personally, I have seen more expats leaving Thailand (e.g the closure of Kimberly Clarks Regional HQ in BKK - a loss of some 30 very highly expats) than new arrivals.

[chingy_]

in another word Singapore suck-ass, an island the size of a bugger, word from taiwan prime minister

[PvtDick]

When has anyone ever heard someone in the real estate business say it would be a terrible time to buy real estate?

[samran]

I thought the government deported this Crisipin fella. Why did they let him back in. Obviously a top notch quality journalist.

Thaksin can't do anything right can he?

[NotaNutter]

What about the mid-to-top end Detached Housing Market, rather than condos? Particularly around the new airport (eg. Windmill, L&H Projects, Monaco, etc.). I've been considering buying a house around there for a few years (always backed away for some reason or other), but anyway I can say that the selling price of Land & House Plc projects has not increased significantly over the last 3-4 years. Around Bangna/Srinakarin 100 tw of land with a L&H house is still between 9.2 - 12 depending on location (same as a few years ago). But where's this market going? Opinions from people who know more than me would be most welcome (I don't know any proporty market insiders).

[OldAsiaHand]

If you're just looking for a place to live for the foreseeable future, you shouldn't worry about the day-to-day state of the market. My own guess is that you might be able to buy a little cheaper in a year or so (say, 10-12%), but it almost certainly won't be enough to make it worth playing the market if you want a place to live before that.

On the other hand, if what you're worried about here is the resale value at some future point, you should be. The detached home market is essentially limited to Thais because of the restrictions on land ownership. Yes, I know there are loopholes, but regardless, the only foreigners in the market as a practical matter are those long-term residents with Thai spouses who can afford detached houses and that's not a whole heck of a lot of those folks. Certainly not enough to constitution anything you can really call a market.

As you will read in plenty of other threads on this forum, Thais almost never buy 'used property.' I know that term sounds silly to a westerner, but it doesn't to a Thai. If a Thai can afford to move up to a bigger house, generally for the prestige of it, he wants a new house, not one somebody has already lived in. To buy 'used property' (house, car, etc) just seems to advertise that he can't afford new property, and where is the prestige in that?

My advice is to go ahead and buy the house whenever you like if you want to live in it here in Thailand for the foreseeable future, but understand that -- whenever you buy it -- you are almost certain to own it for a very, very long time ... if not forever.

[Heng]

Also, Thais don't like to live in homes that the previous owner (or whoever) died in. In my experience, Westerners have no problem with this, even if the corpse(s) is buried somewhere on the property.

[PeaceBlondie]

I know nothing about Thai real estate, and I got burned in Texas real estate, so I'd be a pessimist in any event. But I'm looking at Post #23 and thinking that nobody says real estate (high end condo, detached mid-to-high, etc) is going up, and most of it's overpriced, and you can't get title as a farang or sell it, etc., etc.

So, unless you have a Thai spouse and kids here and have no intention of ever moving and will die in the house (!!), why even buy?

And if it rents for 0.5% of FMV per month, why buy to rent it out?

[bkk_mike]

I also disagree with the IHT reporter's comment about multinationals establishing regional hubs here. I work for what I think is one of the few multinationals that has had its regional hub here for some time - and the immigration / WP laws for such jobs here remain a complete pain in the arse compared to most local rivals.

Just my opinion 

<{POST_SNAPBACK}>

I second that opinion.

No multinational is going to set up a regional hub in Thailand if they need to transfer people here for short periods on a regular basis because of the, frankly, silly rules.

I have been on a 2 week trip to Tokyo that turned into a 3 week trip, user-testing and installing some software I worked on, where I worked in the Tokyo office for that time. I didn't even need to apply for a visa.

I've been on similar trips to Sydney, Hong Kong and New York. - Hong Kong and the US, similarly, didn't need a visa of any sort, Australia did, but you could apply for it on a website, and didn't have to go near an embassy, and the visa lasts for the life of the passport.

For Thailand, to do the same thing, I would have to apply for a "B" non-immigrant visa, because the "Business Visitor" 30-day entry permit doesn't cover software installation, and the "Urgent Work Permit" classification which does, is restricted to 15 days. I personally know people who got sent to the Hong Kong office for two weeks, and ended up extending their stay for a few months until the system was signed off. Thailand's visa rules simply don't allow for that (especially for a person that is still being paid abroad)

(I do know the States isn't in this region before anyone points it out to me).

[donx]

About 7 years ago, our company had a few guys in Thailand installing hardware but mostly software and they were over there for at least a month at a time. No one had work permits as far as I know. Maybe the laws have changed or maybe it was because we were installing satellite control ground system software for Thaicom, a.k.a. Shin Satellite. Thaksin was PM back then, but do you think he had an influence on the situation or do you think this kind of installation doesn't require a work permit?

[bkk_mike]

About 7 years ago, our company had a few guys in Thailand installing hardware but mostly software and they were over there for at least a month at a time. No one had work permits as far as I know. Maybe the laws have changed or maybe it was because we were installing satellite control ground system software for Thaicom, a.k.a. Shin Satellite. Thaksin was PM back then, but do you think he had an influence on the situation or do you think this kind of installation doesn't require a work permit?

<{POST_SNAPBACK}>

I'm assuming that you knew well in advance that you were coming, which would mean your company probably made a visa application on your behalf. - You only really need the work permit when it comes to extending your visa, or where your being paid by a Thai company directly.

[bkk_mike]

About 7 years ago, our company had a few guys in Thailand installing hardware but mostly software and they were over there for at least a month at a time. No one had work permits as far as I know. Maybe the laws have changed or maybe it was because we were installing satellite control ground system software for Thaicom, a.k.a. Shin Satellite. Thaksin was PM back then, but do you think he had an influence on the situation or do you think this kind of installation doesn't require a work permit?

<{POST_SNAPBACK}>

I'm assuming that you knew well in advance that you were coming, which would mean your company probably made a visa application on your behalf. - You only really need the work permit when it comes to extending your visa st 90 days, or where you're being paid by a Thai company directly.

Edited December 13, 2004 by bkk_mike

[donx]

Thanks for the clarification bkk_mike. I wasn't over there for the installation. The guys that went weren't paid directly by the Thai company. Our company paid them to perform the work as we had a fixed priced contract for the job which (for tax reasons I was told) was actually signed in the US.

In my original post I meant to say, "Thaksin wasn't PM back then." As most of you know, he was (is?) CEO of Thaicom, the company we had the contract with.

[jtb]

I'd suggest you check with some people who know before you rely on any of this.

Every real estate professionall in town will tell you the same thing: the residential real estate market, particularly at the top end, is in a state of total collapse. An 'reservations for unbuilt condos trading at a premium to their asking prices?' 'A new property boom is underway?' That's just baloney. This guy Crispin has long had a reputation as a sloppy reporter and this latest gem is a prime example why that is. Take a handful of developer press releases, stir liberally with beer and BS, and voila! A totally misleading story.

'Nobody is taking about a repeat of the 1997 collapse?' Heck, man. Nobody who knows is talking about anything else.

<{POST_SNAPBACK}>

Highly enlightening! A friend who has just built a house on the coast near Pattaya (Ban Saray) also had his eye on the Raffine development. I'll make sure he reads this thread. I'm looking for a condo in BKK nearer the other end of the scale - 1 or 2 beds with easy access to the skytrain. I'm not looking for massive investment potential, but modest rental income would be good. Any advice would be very welcome.