Capital Faces Oversupply Of Condo Units

[think_too_mut]

This is all good stuff bingo, but I think most people on this forum are in broad agreement with you about the state of the economy and the real estate market. (Thailand and the world).

The question is when is this going to translate into lower condo prices on both new and re-sales in Thailand.

I would say "possibly" the 3rd quarter of 2009, anyone else got any thoughts

That's where the perversion is: it won't lower the asking prices but it will make sale difficult and resale impossible (it's already near there).

So, the dwindling number of new entrants won't get it cheaper and existing ones are stuck for life a while until the markets recover with whatever they hold.

Agreed, with one minor modification.

Haha...and when the market recovers, it first clears the logjam of unsold properties.

Then it comes with more new developments to choose from.

Who would look into the pre-owned stock....unless you know of some intergalactic market recovery that could make many second hand properties in Thailand sellable at a profit.....or, sellable at all .

Edited December 26, 2008 by think_too_mut

[quiksilva]

hehe no I cant claim to know when that will happen, later is the best answer you'll get from on that point! Will it clear the logjam, perhaps, perhaps not, it all depends on how good the property is, but it should ease it somewhat.

I can say that if given a choice I will look at existing stock over new build any day of the week, because I can see how the property is being managed, learn about the condo's finances, and have a better appreciation about how the property has been positioned and established in the market. (Is it still desirable, even after years of completion? If yes, then for me it merits further investigation)

Also last time around, the older existing properties were fetching lower prices in the open market than new build. So better rental returns could be had, which is why they proved to be quite popular with investors. Often the units in older stock tend to be larger, with higher ceilings so they prove popular with tenants too, helped by the fact that they also tend to occupy good locations.

Now I suspect the profit made on the sale of these units was very poor, as I have never raved about capital appreciation in the condo market, save for a few rare exceptions, but reasonable rental returns (for this market) could be found much more readily in existing units than new build. **

I can't say whether the same will hold true in the future, but I don't think its unreasonable to extend that train of thought, and say it should.

**Note I'm just talking about natural capital appreciation here and excluding the practice of 'flipping' for a profit during a boom... ah now those were the days!!

Edited December 26, 2008 by quiksilva

[MJP]

This is an email I sent to my sister-in-law who was at the time, an estate agent in Jomtien. Sent start of May 2008. Now lives in Blighty, god help her.

Nat, The British are now clean out of Satang, so are the German's. Austrailian's too. USA - doomed. You need to aim condo marketing at;

• Swedes
  
• Norweigens
  
• Danes (Denmark)
  
• Russians
  
• Chinese
  

The last two on the list will be buying in Pattaya/Jomtien - for reasons the human mind does not want to explore! Possibly the Arabs too - oil money!

A recent item in the Bangkok Post showed the Scandinavian's have taken an interest in Rayong/Bang Saray. In a big way.

This may mean having some translation of basic house and condo descriptions into Russian and Chinese. Scandie's can usually read English.

The graphs below show annual house price change in Thailand, the latter average prices in the BMR. Notice it is has been going down since mid-2004. Looks like it's picking up now? Well, the BoT are about to raise base interest rates which will cause the Baht to strengthen further for the moment and make mortgage lending more expensive . . . add to this the credit crunch, which is about to get a whole lot worse when the derivatives market falls apart, reducing the availability of all but AAA-rated loans. Mortgage lending is down 68% in the UK, year-on-year! Land prices have fallen 40% in the past 18-months which usually preceed a house price crash, which is happening over here right now. Down around 15% since the credit crunch started in August 2007. When advising sellers on pricing, show them the competition and how long it's been on the market. If they really want to sell, they will soon drop their prices.

[merlion]

bingokoko's very first post was "there is an oversupply of condos...the sky is falling". Through the months, his posts have been consistent...and his predictions consistently wrong.

Please expand on what you have said. Though he sounds cocky at times, he has been relatively accurate on the property front.

[quiksilva]

Even a stopped watch tells the correct time twice a day.

[bingobongo]

nothing to see here, move along........looks like the spin machine will be working overtime....but lest we not forget LOS is always immune from everything thanks to som tham and sunshine

the stupid deserve to be separated from their dough..........

The Asia-Pacific property market downward over the next 12-24 months.

http://www.nationmultimedia.com/2008/12/29...ss_30091952.php

[bingobongo]

say bye bye to those deposits.......

Small firms may not complete

Some of Thailand's leading property firms are voicing concern about small and medium-sized property developers who may no longer be financially capable of delivering new homes to their customers from projects begun last year.

We're afraid that most small and medium-sized property companies will leave their projects when they face the financial crunch. That will affect home-buyers just like it did in the 1997 financial crisis.

http://www.nationmultimedia.com/2009/01/09...ss_30092748.php

[crocodile1]

say bye bye to those deposits.......

Small firms may not complete

Some of Thailand's leading property firms are voicing concern about small and medium-sized property developers who may no longer be financially capable of delivering new homes to their customers from projects begun last year.

We're afraid that most small and medium-sized property companies will leave their projects when they face the financial crunch. That will affect home-buyers just like it did in the 1997 financial crisis.

If people buy off plan then they are investing their money in a property development business. They hope for profit and they are taking a risk. I mean, a pretty simple economics concept this, isn't it? So if the project is not completed and they lose their money then that's fair enough. They chose to take risk/gamble and lost.

I almost paid my deposits to the lawyer on Trendy about 3 years ago. I finally decided I did not want the risk so I withdrew. I have nothing but congratulations to those who did invest in Trendy 3 and more years ago. It seems to have turned out a good investment. I am perfectly happy that I made the correct decision for me 3 years ago because I have not had to live with the stress of will they complete or won't they.

Now you pays your money and takes your choice. Having watched the collapse in 1997, I personally would never invest off plan in Thailand. The risk is too great. Bingo Bongo goes a little to extremes sometimes but I essentially agree with him. I have made my choice. You make yours. But don't moan about it if you lose your money.

[bingobongo]

not Bangkok the capital (but maybe the sex capital to keep in theme with this thread) but you get the picture, it is nice to know that is always a good time to buy, when the market goes up and when the market is going down......after all RE agents, brokers, banks have the interest of you the little guy come first......

Reductions in Phuket property prices

A small sample of the exceptional deals we can bring you are:

* 25% off completed apartments and villas at a luxury development on the West Coast.

* Buy a two bedroom pool suite and get a studio for free.

* 10% discount and a free furniture package from a branded resort development on the East Coast.

* Move into your own luxury condo for just 1 million Baht down payment and spread the rest over 5 years.

* Free Toyota Yaris when you purchase an apartment in a completed development on the West Coast.

http://www.pr-inside.com/reductions-in-phu...es-r1012266.htm

[hhgz]

Next to The Infinity, at the corner of Sathron and Narathiswas, a huge lot has been cleared, and it's obvious that it's going to be another condo development. Since excavation hasn't been started, I'd guess that they won't be ready for another 4 years. It's too early for the developer to worry about whether the units are selling or not, but it gives some of you ample time to moan about the "impending oversupply of condos in 2013".

[LennyW]

Next to The Infinity, at the corner of Sathron and Narathiswas, a huge lot has been cleared, and it's obvious that it's going to be another condo development. Since excavation hasn't been started, I'd guess that they won't be ready for another 4 years. It's too early for the developer to worry about whether the units are selling or not, but it gives some of you ample time to moan about the "impending oversupply of condos in 2013".

Lol

[kaxper]

Next to The Infinity, at the corner of Sathron and Narathiswas, a huge lot has been cleared, and it's obvious that it's going to be another condo development. Since excavation hasn't been started, I'd guess that they won't be ready for another 4 years. It's too early for the developer to worry about whether the units are selling or not, but it gives some of you ample time to moan about the "impending oversupply of condos in 2013".

last i heard (last year) was that it will be office building (Thainox).

[bingobongo]

let me guess, LOS is immune because it is filled with rainbows, unicorns, bargirls, and farangs in midlife crisis?

Property slump to aggravate Asian economic slowdown

http://www.reuters.com/article/ousiv/idUSTRE50L1WE20090122

[quiksilva]

Next to The Infinity, at the corner of Sathron and Narathiswas, a huge lot has been cleared, and it's obvious that it's going to be another condo development. Since excavation hasn't been started, I'd guess that they won't be ready for another 4 years. It's too early for the developer to worry about whether the units are selling or not, but it gives some of you ample time to moan about the "impending oversupply of condos in 2013".

last i heard (last year) was that it will be office building (Thainox).

The name of the office building will be Sathorn Square, a development by Goldenland, which is scheduled to be the only office enter the market in 2010. It will be next to the new W hotel on the site of the old Russian embassy.

[trajan]

quiksilva, I believe you are referring to the corner lot (old-Russian embassy, soon to come up "W Hotel" and now under construction office tower) ...

I believe hhgz was referring to the lot on the other side of Infinity on Narathiwat Road...according to a Bangkok Post article last June or July, that will be a super hi-rise mixed development...(hotel, residences, retail etc.)......hopefully completed after the current global crunch....

[rott]

let me guess, LOS is immune because it is filled with rainbows, unicorns, bargirls, and farangs in midlife crisis?

Property slump to aggravate Asian economic slowdown

http://www.reuters.com/article/ousiv/idUSTRE50L1WE20090122

Not sure what your point is anymore bingo, most of the world is pretty well stuffed at the moment and while Thai banks don't appear to have the liabilities of those in the West I don't know of anybody saying Thailand is immune.

[quiksilva]

quiksilva, I believe you are referring to the corner lot (old-Russian embassy, soon to come up "W Hotel" and now under construction office tower) ...

I believe hhgz was referring to the lot on the other side of Infinity on Narathiwat Road...according to a Bangkok Post article last June or July, that will be a super hi-rise mixed development...(hotel, residences, retail etc.)......hopefully completed after the current global crunch....

Yes he could be, I only mentioned that as he said "on the corner of Sathorn and Narathiwas" which is the location of Sathorn Square.

[trajan]

quiksilva, youre absolutely right, the plot right on the corner is the Sathorn Square project.....workers on that office building are working at a fast pace and the tower is rising well....

the other large plot on the other side of Infinity (recently completely cleared by bull dozers) is definitely being readied for development...

[bingobongo]

again pure genius i tell you, credit markets tightening and they want to issue debentures in this evironment? cash flow worsening and they need dough.......i smell quite a few defaults coming...........and before any of you geniuses think it wont happen, i remember some of you also thought Lehman brothers would rescue a ceratin LOS project as well.........

thats it, keep builiding.....genius, pure genius

Thai developers plan to issue debentures to secure funding as credit dries up

The revenue raised will contribute to fulfilling loan repayments as well as providing funding for new residential projects, at a time when commercial banks are increasingly reluctant to provide credit to developers.

Similar to bonds, debentures allow companies to obtain credit secured only by their perceived earning power, and are not linked to any specific asset.

http://www.property-report.com/em_top_stor...amp;date=230109

[think_too_mut]

The revenue raised will contribute to fulfilling loan repayments as well as providing funding for new residential projects, at a time when commercial banks are increasingly reluctant to provide credit to developers.

If someone you know well (let alone you don't know at all) came to you and asked "Please lend me 1000$, no bank would do that"....what would you tell him?

[think_too_mut]

....i remember some of you also thought Lehman brothers would rescue a ceratin LOS project as well......

Many sighs of releif when that news came in....That was the most visible sign that nobody (including Lehman's criminals) knew how deep the abyss is.

[hhgz]

"LOS is immune because it is filled with rainbows, unicorns, bargirls, and farangs in midlife crisis?"

bingobongo seems to be fascinated with American TV. One of his favorite phrases is "unicorns, lollipops and rainbows - from the show "Sesame Street". The other phrase is "silly rabbit" - a refrain used in a Trix (children's breakfast cereal): "Silly rabbit, Trix are for kids."

[hhgz]

"Next to The Infinity, at the corner of Sathron and Narathiswas..."

I had no idea that this post would have people spinning. I was referring to the EMPTY lot, on the NW corner of the aforementioned roads. The W hotel is being constructed in a lot that is not EMPTY, rather it's in the process of being developed...with a hotel.

Not too far from the W hotel construction site - just to be sure that all of us are on the same page - on the same side of Sathorn, and further west, there is a derelict embassy compund...just ripe for development.

[bingobongo]

it is no wonder that stupidity and denial are correlated

what is the rush to invest in a capital trap.......there is none

BANGKOK REAL ESTATE

Clearing property stocks to take 3 years

Due to the economic slowdown, it will take two years to clear out new housing inventory left from last year, and three years including residential projects coming onto the market this year, the Real Estate Information Centre said yesterday.

Last year, 82,387 units worth Bt205.9 billion remained unsold, while this year will add 30,000-40,000 units, said Samma Kitsin, director-general of the REIC.

http://www.nationmultimedia.com/2009/01/28/business/business_30094335.php

Edited January 28, 2009 by bingobongo

[donx]

it is no wonder that stupidity and denial are correlated

what is the rush to invest in a capital trap.......there is none

BANGKOK REAL ESTATE

Clearing property stocks to take 3 years

Due to the economic slowdown, it will take two years to clear out new housing inventory left from last year, and three years including residential projects coming onto the market this year, the Real Estate Information Centre said yesterday.

Last year, 82,387 units worth Bt205.9 billion remained unsold, while this year will add 30,000-40,000 units, said Samma Kitsin, director-general of the REIC.

http://www.nationmultimedia.com/2009/01/28/business/business_30094335.php

You are absolutely correct that there is and will be an oversupply of condominiums for at least the next 3 years.

What I find very interesting are a few statements made within this same article:

"Bangkok had 194 condo projects with 69,828 units, and the suburbs were home to 19 condo projects with 19,169 units. According [to] the survey, 68,935 units of the total 88,997 condo units had succeeded in selling out, while 20,062 units were still waiting for an owner. "

This implies that over 77% of condo units from projects "that had opened pre-sales and started construction" have been sold. The 20,062 unsold units represents less than 23% of condo units available for sale. Personally, I would have thought that the percentage of unsold units to be much higher given the current world financial situation.

I also find the following statement from the article very interesting:

"The main areas that are starting to see a supply overhang are Sukhumvit and Ratchada. New condominium projects added significantly to supply just when demand started to cool off last quarter."

[hhgz]

"The 20,062 unsold units represents less than 23% of condo units available for sale."

Are the 20,062 units ready to move-in today? Of course not. "Available for sale" can mean any unit: planned, under construction, or gathering dust.

[think_too_mut]

What I find very interesting are a few statements made within this same article:

"Bangkok had 194 condo projects with 69,828 units, and the suburbs were home to 19 condo projects with 19,169 units. According [to] the survey, 68,935 units of the total 88,997 condo units had succeeded in selling out, while 20,062 units were still waiting for an owner. "

This implies that over 77% of condo units from projects "that had opened pre-sales and started construction" have been sold. The 20,062 unsold units represents less than 23% of condo units available for sale. Personally, I would have thought that the percentage of unsold units to be much higher given the current world financial situation.

What % of those "sold" still have to see any significant money? They are off the market based on peanuts deposits.

Just look at prakard dot com.....tens of thousands of those "sold" are looking for someone to pay for them.

[donx]

What I find very interesting are a few statements made within this same article:

"Bangkok had 194 condo projects with 69,828 units, and the suburbs were home to 19 condo projects with 19,169 units. According [to] the survey, 68,935 units of the total 88,997 condo units had succeeded in selling out, while 20,062 units were still waiting for an owner. "

This implies that over 77% of condo units from projects "that had opened pre-sales and started construction" have been sold. The 20,062 unsold units represents less than 23% of condo units available for sale. Personally, I would have thought that the percentage of unsold units to be much higher given the current world financial situation.

What % of those "sold" still have to see any significant money? They are off the market based on peanuts deposits.

Just look at prakard dot com.....tens of thousands of those "sold" are looking for someone to pay for them.

I agree that it would be good to know how many of the sold units were bought with the intension that they would be re-sold prior to final payments being made. What do you think? 50%? I don't know if we will ever get a reliable answer.

[donx]

"The 20,062 unsold units represents less than 23% of condo units available for sale."

Are the 20,062 units ready to move-in today? Of course not. "Available for sale" can mean any unit: planned, under construction, or gathering dust.

What you say is true. Either they are planned, under construction, or gathering dust. What is your point? Are you trying to point out that they are mostly not ready to move into and therefore not completed empty units?

Edit: You wouldn't happen to be the latest reincarnation of backflip, would you?

Edited January 29, 2009 by donx

[UncleFrank]

Perfect storm brewing.

I'll be shopping for a penthouse when prices reach 65,000/meter and the baht is 45 to a dollar.