Thai Property Assets Becoming Unsaleable

[quiksilva]

The major difference in the Thai property market to many others is that it is very lightly leveraged. Foreigners must bring in 100% funds from abroad and there is no local financing, which means for the vast majority that most condo's are cash purchases, this holds true for the majority of local buyers too.

So when things get tough next year (as they will) many of these will not be bending over backwards to give amazing deals, simply because they don't NEED to sell.

Developers however always need to sell, and as all of their profits are tied up in the remaining 20-30% of the unsold inventory, (plus with the inventory which doesn't transfer as planned) they will be left in a very awkward situation which cash rich buyers maybe able to capitalise on.

[ray08]

"... i called the fall of the SET all the way from 725 to 400, so my advice was worth it to those who got their heads out of the sand..."

If you say you did, I'll accept that - it does not matter. The situation is that your belief is that the BKK real estate market will collapse, and you've not been able to identify any significant correlation to any event within or without Thailand to support your belief. "The real estate market in <US, Europe, China> has collapsed, and the market in Thailand will do the same." It hasn't. "The equity market index in <US, Europe, China> has collapsed, and that means the real estate market in BKK will collapse". It hasn't. "Hyperinflation and the rice crisis in Thailand will destroy the BKK real estate market." It hasn't. "For several years, there have been too many condos on the market, and the inventory is now an oversupply, and that means the BKK real estate market will collapse". It hasn't.

Making a statement, "but I did predict the decrease of the SET", is similar to a magician's misdirection. "HEY, look over here!", as he waves his left hand. "Wow, did you see that. There's a pigeon in his right hand. Heck, how did he ever do THAT?" The SET index is thing one, the BKK real estate market is another thing entirely.

I dont think it will collapse but I do believe unless you have an exceptional condo

you will find it increasingly difficult to sell it Its ok for those who never want to sell

but as for me I would rather onwn an asset where I have the option of getting cash

just in case in the times that lie ahead

It's a strange situation ,where people say it has not collapsed ,yet on the other side not many sales either ,all the developers are saying the market has slowed down, People are sitting on Real Estate not selling and say it is worth Thb 10M , but they cannot sell on the open market at that price ,what does that mean . No Buyers at Price .Yet property still on the market for Thb 10m, If you can't sell at what you are asking ,means you are not meeting the market , I would hate to hate to have money tied up in a thai condo and looking to cash out quick ,

[midas]

It's a strange situation ,where people say it has not collapsed ,yet on the other side not many sales either ,all the developers are saying the market has slowed down, People are sitting on Real Estate not selling and say it is worth Thb 10M , but they cannot sell on the open market at that price ,what does that mean . No Buyers at Price .Yet property still on the market for Thb 10m, If you can't sell at what you are asking ,means you are not meeting the market , I would hate to hate to have money tied up in a thai condo and looking to cash out quick ,

Maybe you are right ray. How many will be able to afford to hang on this time ?

some think it is worse than 1997 already ............................

S. Korean crisis 'worse than 1997'

(China Daily)

Park Ji-eun's dream of buying her first house in Seoul collapsed along with South Korea's shares and currency.

"I've never seen the economy so bad," said freelance scriptwriter Park, whose pay from a radio music program was cut by 15 percent after the station suffered a drop in advertising. "I've worked on this program for eight years, and this is the first time I've ever had my pay cut."

From writers to builders to chief executives, the won's 28 percent slump and the Kospi stock index's 40 percent plunge this year has revived memories of 1997, when the government was forced to turn to the International Monetary Fund for a $57 billion bailout. Only this time, they say it will be worse.

The central bank cut interest rates a record 75 basis points at an emergency meeting Oct 27 to shore up an economy that last quarter grew at the slowest pace in four years.

Housewife Tae Hur, has stopped dining out and shopping. Hur joined a stock-investing boom last year as the Kospi surged 33 percent to record highs, along with jumps in overseas markets. Now, she is watching her savings disappear with "a desperation like nothing I knew during the Asian crisis".

The number of retail equity-investment accounts more than doubled to a record 17 million in 2007 from a year earlier, according to data from the Asset Management Association of Korea.

"So many people piled into stocks late last year because they were feeling left out of the bonanza, with the Kospi hitting 2,000 and Chinese stocks gaining more than 100 percent," said Park-Hyun Chul, a fund analyst at Meritz Securities Co in Seoul. "Most of them have never experienced a market like what we have now, so they find it hard to bear."

The government today announced 14 trillion won ($10.9 billion) in extra spending and tax benefits for 2009 aimed at small businesses, low-income earners and the property market.

Son Yu-nam, who installs electrical systems in new homes and offices, said business is flagging and he is facing delays in payments for previous jobs as the economic downturn deepens.

"There was still a lot of building going on in the first half, but that's drying up these days," said the 41-year-old.

The backlog of unsold homes surged this year to the highest in more than a decade and defaults by Korean builders increased for the first time in five years.

Son said business was brisk during the 1997-1998 crisis as restaurants changed hands and people who lost jobs opened their own stores. "I'm not seeing that this time around."

1997 vs 2008

South Korean stocks fell 42 percent in 1997, while the currency plunged to 1,695 against the dollar, from 844.90. This year the benchmark stock index has fallen as much as 51 percent and the won has slipped 28 percent so far, making it the worst- performing currency in Asia.

The economy expanded 0.6 percent in the third quarter, down from 0.8 percent in the previous three months, as consumer spending stagnated and exports fell by the most in seven years.

Ssangyong Motor Co, a South Korean unit of China's largest automaker, said on Oct 28 it may ask office workers to take leave to reduce costs after vehicle sales tumbled 23 percent in the first nine months of 2008.

Korea's jobs growth moderated in September to the weakest pace in more than three years as manufacturers, builders and retailers cut employees.

[Chewbacka]

"... i called the fall of the SET all the way from 725 to 400, so my advice was worth it to those who got their heads out of the sand..."

You called it but did you per chance go short on the SET50 Futures and have nice little bunsen?

Just one contract (the minimum) placed short at 1,000 baht a pip would have netted you 275,000 baht.

[Chewbacka]

sorry, 325,000 baht.

[spiderman2]

Just over a year ago i used to rent a 1 bed apartment in Chiswick, W.London for 1000GBP a month, this area whilst not top of the tree is extremely affluent and sought after, to buy the same studio would have cost 200,000GBP approx. but you could guarantee to rent it.

Ive just been to Sukhumvit Soi 14 to look at a brand new 1 bed apartment to rent, they only do 6 month rentals at a cost of 45000BHT a month, which is 950GBP a month.

Now whether the UK housing market is crashing or not, if it is purely a financial decision i would choose the London place everytime as i just cant accept the true market value of a place in Soi 14 Sukhumvit is the same as one of the better areas of London.

The global property market is so out of sync with its true value due to banks lending money that never existed, if anyone thinks Bangkok or any tourist resort in LOS is value for money then they cant be that bright.

[spiderman2]

i called the fall of the SET all the way from 725 to 400, so my advice was worth it to those who got their heads out of the sand

Did you put money on this? as i make great predictions several times a day that i never back.

[andyc2006]

A general comment such as "Thai Property assets becoming unsaleable" is in itself illogical. Anything is saleable.....at a price.

Is it?

Take a GM car for example. After GM has failed, the second hand car becomes unseleable scrap.

A lot of "IFs" here....but, let take them one by one:

IF GM fails, there cars will still be saleable...in fact, many may become COLLECTABLE as others have from other failed car manufacturers over the years.

It's actually what you can read in The Economist.

Consumer surveys that suggest that 80-90% of prospective customers would abandon the products of a carmaker that had filed for bankruptcy protection. When airlines went into Chapter 11, most of their passengers stuck with them, reasoning they would be at least be in business long enough for tickets bought for trips just a few weeks away to be honoured.

Cars are different. A car is the most expensive purchase many consumers make, and by buying a car they also enter into a long-term contract. Buyers expect their 60,000-mile warranties to be honoured, parts to be kept supplied and their dealers not to have disappeared. Used-car values are also a critical part of the deal. If the firm that made the car has gone bust, it becomes virtually unsellable secondhand

Interesting. My uncle buys & rebuilds Model T Fords. I'll ask him if he'll stop buying them should Ford go down.

I suspect it won't change his ways though, given that he buys them without warranty, and nobody has been making parts for the Model T for decades.

I suspect you could still sell GM cars if GM went under, but you'd need to discount them to account for the lack of warranty & limited ability to acquire spare parts.

[andyc2006]

Even if Thailand disolves into civil war, contracts remain. They will not be allowed to rejoin the global market place if personal property has been stolen. This is an aspect of international law - If things go THAT badly just hand the land ownership deeds bearing the Kings crest/seal onto your choice of individual/next of kin/children/nephews or nieces. Things will eventually return to normal - if it gets that bad, but not necessarilly in you lifetime.

Um, you never owned land in Zimbabwe or Argentina or Mexico at the "wrong" time, I take it. When things get that bad, your piece of paper, i.e., "contract," is worthless. International law isn't going to help much either.

[andyc2006]

Cash too has problems; it is sort of devaluing before your eyes. Interest rates are falling and inflation is still high. We may go into deflation (in the UK and that is the only perspective I can talk about) but I think all efforts will be made to try to put that off. Which would mean a direct impact on cash savings.

Inflation isn't still "high," unless you're measuring lagging indicators in the CPI.

Rates are low & falling, stocks have crashed around the world, credit is disappearing, and the money supply is shrinking (despite central bankers trying to stop it). This is wholly a deflationary environment, and until that trend changes, cash is king. In no way has it "devalued" before our eyes. Just the opposite.

[quiksilva]

I agree cash is king, for now, and those who are cashed up and able to time their entry back into the market well will truly be able to profit from this mess, but it is important to understand that each and every market has its own peculiarities and Thailand is not alone in this.

Most buyers here are cash buyers, both Thai and Foreign alike, so Thailand is not a highly leveraged market, and as such is quite unlike the US or UK which both have strong foreclosure laws which enables banks to seize and dispose of assets quickly, eg in the UK this process takes about 3 months.

These two factors have enormous influence on the cyclical nature of the property market and values.

Property by its very nature is an illiquid asset. There is no property index anywhere which responds to headlines as quickly as say the stock market, even in the UK with its 3 months foreclosures, values are relatively slow to respond, but in Thailand that same foreclosure practice can take upwards of 5 years.

This has an affect. Just ask any investor who was trying to buy stuff here post 1997. I can recall the same sentiments being expressed on this board, don't they know the market is dead, they should be glad I am trying to buy, cash is king etc and that's true when the other side needs your cash more than you.

But if nobody is forcing them to sell (say when they are cash buyers or even if leveraged against banks they are trying to foreclose but can be ignored) that NEED to sell on the part of the owners is greatly diminished.

[johnnyk]

Agree, in fact people pay cash for houses in many other Asian countries ($2 million cash in Korea for nice apartments!).

Property markets in the west are seized up because housing is largely sold through mortgages and lending is frozen.

Its futile for people to try and bend the Thai cash housing market to their own western notions and desires (ie. mortgage purchases).

Anyway it's all moot IMO. Just where in the world now are property assets saleable at the seller's price?

[pkrv]

Even if Thailand disolves into civil war, contracts remain. They will not be allowed to rejoin the global market place if personal property has been stolen. This is an aspect of international law - If things go THAT badly just hand the land ownership deeds bearing the Kings crest/seal onto your choice of individual/next of kin/children/nephews or nieces. Things will eventually return to normal - if it gets that bad, but not necessarilly in you lifetime.

Um, you never owned land in Zimbabwe or Argentina or Mexico at the "wrong" time, I take it. When things get that bad, your piece of paper, i.e., "contract," is worthless. International law isn't going to help much either.

Interesting - (This is going to give me problems) No I would not buy into countries commanded by religious maniacs! Do you? Or have you?

[pkrv]

Cash too has problems; it is sort of devaluing before your eyes. Interest rates are falling and inflation is still high. We may go into deflation (in the UK and that is the only perspective I can talk about) but I think all efforts will be made to try to put that off. Which would mean a direct impact on cash savings.

Inflation isn't still "high," unless you're measuring lagging indicators in the CPI.

Rates are low & falling, stocks have crashed around the world, credit is disappearing, and the money supply is shrinking (despite central bankers trying to stop it). This is wholly a deflationary environment, and until that trend changes, cash is king. In no way has it "devalued" before our eyes. Just the opposite.

I agree zero = no loss is that true? I think so? - I have not been here before have you?

Edited December 15, 2008 by pkrv

[midas]

Even if Thailand disolves into civil war, contracts remain. They will not be allowed to rejoin the global market place if personal property has been stolen. This is an aspect of international law - If things go THAT badly just hand the land ownership deeds bearing the Kings crest/seal onto your choice of individual/next of kin/children/nephews or nieces. Things will eventually return to normal - if it gets that bad, but not necessarilly in you lifetime.

Um, you never owned land in Zimbabwe or Argentina or Mexico at the "wrong" time, I take it. When things get that bad, your piece of paper, i.e., "contract," is worthless. International law isn't going to help much either.

Interesting - (This is going to give me problems) No I would not buy into countries commanded by religious maniacs! Do you? Or have you?

pkrv how do you know there will not be serious violence ? Jonathan Head on BBc world yesterday only gave the

new Prime Minister 3-6 months.

I am in Isaan right now and the mood here is grim. They will not accept the new PM up here at all

and they are still watching video footage of the Red Brigade in their huge mass rallies.

Edited December 16, 2008 by midas

[Gary A]

Agree, in fact people pay cash for houses in many other Asian countries ($2 million cash in Korea for nice apartments!).

Property markets in the west are seized up because housing is largely sold through mortgages and lending is frozen.

Its futile for people to try and bend the Thai cash housing market to their own western notions and desires (ie. mortgage purchases).

Anyway it's all moot IMO. Just where in the world now are property assets saleable at the seller's price?

In the US at a time when money was tight and loans hard to get, someone came up with a new way to sell a home. Of course the banks hated it because it cut them out of the picture. It is called a land contract. The seller takes a down payment of any amount that suits him. The interest rate is normally at or below bank rate. I bought an expensive home that way when it was impossible to finance it through a bank. I also sold two properties that way. I'm surprised that more Thai properties are not sold that way.

[johnnyk]

Agree, in fact people pay cash for houses in many other Asian countries ($2 million cash in Korea for nice apartments!).

Property markets in the west are seized up because housing is largely sold through mortgages and lending is frozen.

Its futile for people to try and bend the Thai cash housing market to their own western notions and desires (ie. mortgage purchases).

Anyway it's all moot IMO. Just where in the world now are property assets saleable at the seller's price?

In the US at a time when money was tight and loans hard to get, someone came up with a new way to sell a home. Of course the banks hated it because it cut them out of the picture. It is called a land contract. The seller takes a down payment of any amount that suits him. The interest rate is normally at or below bank rate. I bought an expensive home that way when it was impossible to finance it through a bank. I also sold two properties that way. I'm surprised that more Thai properties are not sold that way.

Same as a vendor take-back Gary?

A well-known ex-Pattaya character from Calif. (OMW) has done this many times, gets down payment and a nice income stream. He can foreclose if the buyer doesn't make payments. He said (back in the good times) he could also sell the paper to a bank at a discount if he needed cash.

[Gary A]

Agree, in fact people pay cash for houses in many other Asian countries ($2 million cash in Korea for nice apartments!).

Property markets in the west are seized up because housing is largely sold through mortgages and lending is frozen.

Its futile for people to try and bend the Thai cash housing market to their own western notions and desires (ie. mortgage purchases).

Anyway it's all moot IMO. Just where in the world now are property assets saleable at the seller's price?

In the US at a time when money was tight and loans hard to get, someone came up with a new way to sell a home. Of course the banks hated it because it cut them out of the picture. It is called a land contract. The seller takes a down payment of any amount that suits him. The interest rate is normally at or below bank rate. I bought an expensive home that way when it was impossible to finance it through a bank. I also sold two properties that way. I'm surprised that more Thai properties are not sold that way.

Same as a vendor take-back Gary?

A well-known ex-Pattaya character from Calif. (OMW) has done this many times, gets down payment and a nice income stream. He can foreclose if the buyer doesn't make payments. He said (back in the good times) he could also sell the paper to a bank at a discount if he needed cash.

Basically the buyer and seller come up with a contract that satisfies them both. The property is never transferred until the property is paid for in full so if payments are not made as per the contract, the contract is void and the down payment and payments that were made are lost. There are certain risks for the buyer in that he must make sure that the deed is free and clear and that no money is borrowed on the property after the contract is signed. I would think that a lawyer who makes a legal contract in Thailand would hold the chanote.

[sbk]

Posts have been deleted, the forum is not the place to advertise one's house for sale, please use Thai Visa classifieds.