Thai Real Estate Crash

[MeetJohnDoe]

Been a series of articles in the Post over the past few days about the crashing property market in Thailand. Seems even the brokers can't put lipstick on the Thai property pig any longer

Land and condo prices in Bangkok down 20-30% in CBD areas, and even more in suburbs. Pattaya condo prices down as much as 60% (suspect this is a reference to Raimon's discounts at new South Shore development).

Sure glad I didn't get suckered into buying Thai real estate during the 2nd bubble with the past decade "because prices never go down in Thailand."

This is only the beginning as the Thai economy will continue to falter through this year and next. I wouldn't be surprised if land/condo prices fell 50% from their peaks.

Looks like a good time for vultures to start to pick apart the carcass for some tasty morsels of cheap meat.

Edited January 16, 2009 by MeetJohnDoe

[UncleFrank]

The perfect storm. A building boom, a financial crisis, and a Government/people that chase away the investors.

Also, I notice an increase of rude behavior and blatant scamming going on. That turns off buyers.

Take Sukhumvit Soi 11. There are quite a few of high end condos down there.

I walked that Soi the other day. Had to pass 20 or 30 scammers blocking the sidewalk, hanging out harrassing every farang they see. Dozens of Taxies or Tuk Tuks that will not take you. They are there for one purpose..to scam a new arrival.

It's turing into a rotten scene. Why are all these people allowed to hang out and do this to our visitors? Who would want to invest in a place like that?

Starting to see new ghost buildings on the skyline.

Should be some property auctions on the calendar soon.

50,000 / meter was the going rate for grade A, 10 years ago.

[quiksilva]

Land and condo prices in Bangkok down 20-30% in CBD areas, and even more in suburbs. Pattaya condo prices down as much as 60% (suspect this is a reference to Raimon's discounts at new South Shore development).

Sources please and links to stories.

Edited January 16, 2009 by quiksilva

[Pattaya46]

Pattaya condo prices down as much as 60%

Ridiculous.

As an example : Last week a new advertisement in the ground floor of Center Condodel for a 50 sqm sea view apartment at a "quite normal price" of 2.9 mBaht. 4 days later, advertisement removed : condo sold ! Where is you crash ?

I do not see any sign of a future crash inside Pattaya,

but I agree that there certainly will be a "problem" for all the new/recent Condo projects around Pattaya.

[jumnien]

We have been promised a crash for over a decade now! This is maddening, how can they continually promise a never arriving bargain in real estate prices and then fail to deliver. These guys promising you a huge discount on real estate are clearly a scam!

[Gary A]

Right after the crash of 1997, shop houses in Jomtien were selling for the same price as before the crash. One point four million would buy your choice. The prices never dropped at all and in fact went up. Those same shells are now selling for about four million. After all these years there are still some shells available although not many. What does this mean? It means that if you want to buy property, buy from a panicked farang.

[LennyW]

Pattaya condo prices down as much as 60% (suspect this is a reference to Raimon's discounts at new South Shore development).

Where o where is there a 60% drop in Pattaya Condo prices??? and how do you figure it is to do with Southshore???

[Pdaz]

Dunno if it's only me that has noticed but many of the big ads for high end 20 million baht condos have been replaced by big ads for condos costing only 1.6mil, 1.8mil etc.. seems that many of the developer are aiming their condos at the budget and Thai markets again. Only my impression from the ads I see in town though.. Most of the moo bahns out where I live have stalled and i see more and more partially complete build in town too.. Sooner or later it will occur to the locals that the Worlds problems will also affect Thailand.. Pattaya has just got to reach an oversupply point at some time..

[sorensen]

Right after the crash of 1997, shop houses in Jomtien were selling for the same price as before the crash. One point four million would buy your choice. The prices never dropped at all and in fact went up. Those same shells are now selling for about four million. After all these years there are still some shells available although not many. What does this mean? It means that if you want to buy property, buy from a panicked farang.

You are right Gary that properties were still FOR SALE at pre-crash prices in years after the 1997 crash, but they were NOT SELLING. Most sellers were in total denial about falling prices, buyers simply stayed away and ownership transferes start dropping until it hit near ZERO in 1999 (see attached).

The 2008/09 crash in reale-state will be no different. Why should the average Joe sell below his own cost price? There is no yearly reale-state tax in Thailand, so better hold on to it and hope day after day, years after year, that prices will go up, but it takes a long time.

Attached file is for condo units in Bangkok:

Condo_Thailand.xls

[sorensen]

The graph is at the right in the excel sheet or here:

[MJo]

Right after the crash of 1997, shop houses in Jomtien were selling for the same price as before the crash. One point four million would buy your choice. The prices never dropped at all and in fact went up. Those same shells are now selling for about four million. After all these years there are still some shells available although not many. What does this mean? It means that if you want to buy property, buy from a panicked farang.

Very true, but we are now into year 2009 and things tend to change. Past year i have been offered discounts on new and second hand condos due the reason Thai owner has not been able to sell. I.e. Oleander in Soi 11 offered discounted prices twice last year. Also few second hand being offered to me by agents with discounts. Best being from 7M to 5.5M for "quick sale". Those who has money will wait and see but those who do not must sell at some point.

Maybe there is ordinary working and middle class owners in the game this time who can not afford to sit it out? By this i mean both Thai and foreigners who have financed their purchases by bank loans and not from the bottomless family funds. Also there seems to be loads of flippers who never had the money to complete transfer are now in trouble as they are unable to shift their contracts.

Then again i do not believe it will totally crash but propably prices will come down a bit this year and my wild guess would be that Pattaya will be hit hardest.

[12DrinkMore]

Also there seems to be loads of flippers who never had the money to complete transfer are now in trouble as they are unable to shift their contracts.

I hope these guys get burned big time.

Before I decided not to get involved in property I went to look at lots of condos. In one block, due for completion in some six months there was nothing for sale from the developer, but apparently one "flipper" had bought two and was looking to sell one. How much? For TWICE the original price and he still owed some 40% on the property. So basically he wanted some sucker to come and give him a free condo before he had even paid up the price of it himself.

I also used to get irritated that ALL the best positioned condos were already reserved/sold even if I turned up soon after the presales campaign had started. I suppose the developer keeps the nice onces for his friends or himself, or maybe just to flip them later for a bigger profit.

Just two of many reasons I am sticking to renting and advise everybody to do the same. So far NOBODY has complained to me because they rented instead of buying, but more than a few have regretted rushing into a buying "the opportunity of a lifetime", "look it's sooo cheap".

Yeah, right on.

[MeetJohnDoe]

Land and condo prices in Bangkok down 20-30% in CBD areas, and even more in suburbs. Pattaya condo prices down as much as 60% (suspect this is a reference to Raimon's discounts at new South Shore development).Sources please and links to stories.

As mentioned in OP...today's Bangkok Post...Business Section.

As to 60% drop in Pattaya...people have reported that asking prices at South Shore for the back building are in the 50-60k psm range. This would be a substantial drop from initial prices in front building of 100k range.

Such drops would be nothing unusual...similar have occurred in other over-heated markets in the West (Spain, Ireland, Vegas, Florida, So. California)...and the economic sh!ts barely hit the fan yet in LOS...wait till mid-and-late this year!

[quiksilva]

I have reviewed the paper and the site and can find no such story, perhaps I missed it..? What page and headline for the stories you mentioned? Better still provide links from the Bangkok Post's website.

[PattayaParent]

Land and condo prices in Bangkok down 20-30% in CBD areas, and even more in suburbs. Pattaya condo prices down as much as 60% (suspect this is a reference to Raimon's discounts at new South Shore development).Sources please and links to stories.

As mentioned in OP...today's Bangkok Post...Business Section.

As to 60% drop in Pattaya...people have reported that asking prices at South Shore for the back building are in the 50-60k psm range. This would be a substantial drop from initial prices in front building of 100k range.

Such drops would be nothing unusual...similar have occurred in other over-heated markets in the West (Spain, Ireland, Vegas, Florida, So. California)...and the economic sh!ts barely hit the fan yet in LOS...wait till mid-and-late this year!

As I understand it this back building was never intended to be sold for the same price as the front building because of the restricted views etc. They were alsways going to be marketed for less so no price drop there at all.

[Mali1964]

I have reviewed the paper and the site and can find no such story, perhaps I missed it..? What page and headline for the stories you mentioned? Better still provide links from the Bangkok Post's website.

News on new condo's here

http://www.bangkokpost.com/business/econom...threaten-prices

[MeetJohnDoe]

I have reviewed the paper and the site and can find no such story, perhaps I missed it..? Better still provide links from the Bangkok Post's website.

There have been several stories along the same line this past week. They include the one referenced above and another I was quoting from yesterday's Post. Here is the link:

http://www.bangkokpost.com/business/econom...es-tumble-by-20

Edited January 16, 2009 by MeetJohnDoe

[hhgz]

Why didn't bingobongo mention this?

[yabaaaa]

Right after the crash of 1997, shop houses in Jomtien were selling for the same price as before the crash. One point four million would buy your choice. The prices never dropped at all and in fact went up. Those same shells are now selling for about four million. After all these years there are still some shells available although not many. What does this mean? It means that if you want to buy property, buy from a panicked farang.

:jerk: best advice ive seen this year!!

[think_too_mut]

Why didn't bingobongo mention this?

Yes, this caught me asleep, I thought bingobongo is always there to bring news like this.

Let's snap the article in full, BKK Post used to make links useless in a day or two.

New condo projects may threaten prices

By: KANANA KATHARANGSIPORN AND PORNNALAT PRACHYAKORN

Published: 14/01/2009 at 12:00 AM

Newspaper section: BusinessDevelopers should focus on selling their remaining condominium units this year rather than launch new products into an unhealthy market, said Aliwassa Pathnadabutr, managing director of international property agency CB Richard Ellis (Thailand).

"They [developers] should rather try to sell out existing units than launch new ones as selling prices of new projects can rise if remaining units are absorbed," she said. "If you launch new projects, your selling prices should be competitive, possibly meaning the prices may not generate as much profit as they could."

New units would pull down prices as the economic crisis continues to weigh down consumer sentiment, she said.

"The absorption rate for downtown condo units has dropped by more than half to about 30%, or 3,000 units, of the total remaining units since October last year," Ms Aliwassa said. "It is now better for developers to promote the sales of their remaining units as it would help limit the supply, which would also help the market pick up sooner."

Ms Aliwassa added that consumers remain cautious and are in no mood to buy condos - especially newly launched units, which would take longer to be delivered due to construction. Buyers also anticipate a drop in selling prices.

"The political situation has eased as we are already past its peak," she said. "Now it's the Hamburger Crisis that property buyers are watching. It's all about the economic situation."

The poor market has triggered a 40% plunge in foreign and Thai speculators. Long-term foreign investors and home-buyers remain in the market but are holding on for better prices.

However, Ms Aliwassa predicted that prices would not fall below the initial selling price because units entering the market were built last year when raw material and construction costs were soaring and land prices were also high.

"Although cutting prices would be advantageous, developers had better consider their real cost of production to reduce risk," she said.

"The situation here is not as bad as in Singapore or China, where residential prices have significantly dropped. As real demand still exists here, developers only need to offer some discounts at the beginning of sales."

Despite the reduction in political unrest, high-end buyers are keeping an eye on the economy to see if worse is on its way. Poor sentiment resulted in CBRE's 60% sales drop in the fourth quarter last year, she said.

The number of CB Richard Ellis's walk-in customers has also plunged to 600-700 a month from 1,000.

"Even though the high-end market is inevitably feeling the sting of the global financial meltdown, only a small proportion has been affected. We barely see cancellation of units. Those in trouble tend to resell them instead," she said.

CBRE is currently managing the sales of 12 residential projects worth 20 billion baht.

[UncleFrank]

How much does it cost to build a high-rise condo these days?

I heard something like 65,000/ meter.

[thaimate]

dont worry,prices never go down and only rise in Thailand. ,If you own property ,repeat as necessary.

meanwhile the house i went to look at 3 years ago (then i wanted to buy )still sits there unsold now 1 million less than the offer that i made at the time . wonderfull Thailand ,land of rising house prices.

[Gary A]

Many condo projects were abandoned in 1998. Some of the projects were purchased and finished years later. Since seeing that happen first hand, I have always advised my friends to NEVER buy pre construction or off plan. Before this is finished, there will be a lot of wailing and gnashing of teeth. I can sympathize with some who were talked into buying these blocks of air by slick talking salesmen but can work up NO sympathy for the speculators.

[terryp]

Ahh nice to read the insider comments from the ever optimistic Pattaya crowd (they cr@p themselves as they might have to go back to the West)

Thailand is going into a hard resection…. whatever you dummy’s think

[sorensen]

Ahh nice to read the insider comments from the ever optimistic Pattaya crowd (they cr@p themselves as they might have to go back to the West)

Thailand is going into a hard resection…. whatever you dummy's think

Did you mean hard erection or hard recession?

[MeetJohnDoe]

Ahh nice to read the insider comments from the ever optimistic Pattaya crowd (they cr@p themselves as they might have to go back to the West)

Thailand is going into a hard resection…. whatever you dummy's think

Did you mean hard erection or hard recession?

The entire post didn't make much sense...I mean "they cr@p themselves"...what is that supposed to mean? Some ad for adult diapers or an ageist comment about many of the people living here being unable to control their movements

And "whatever you dummy's [sic] think." The point of the whole thread is a serious recession is on and will effect property prices...nobody has argued that point I don't think.

[midas]

Let us see how many can hold on this time - anyone arrogant enough to think prices

can remain unchanged in what still lies ahead are dreaming .............We are not even talking about this year now............so we have 12 more months

before things will get even WORSE............................ ohmy.gif

Why would you buy real estate now knowing this time it is muck worse

to 1997 ? Some experts are warning this " depression " could last more than

20 years ..........yes 20 !!!

Global economy to shrink; deflation greatest threat, says UN

The deepening global recession means that the world economy as a whole could shrink next year and will battle to avoid destructive Thirties-style deflation, the United Nations said yesterday.

The UN alert over what threatens to be the worst year for the global economy since the Second World War came as fears of deflation were stoked when US producer price inflation slid into negative territory, registering an annual fall of 1.5 per cent last month.

In a bleak assessment of world prospects, the UN said that the global economy was now deteriorating at such a pace that its main projections in yesterday’s grim report were already out of date.

Mr Flassbeck said that the greatest threat now came from deflation of the sort suffered during the Great Depression, when falls in wages of 10 to 15 per cent in some economies triggered a drastic slump in consumer demand and brought world growth to a virtual standstill.

With official interest rates across the West tumbling towards zero, the UN issued a call for coordinated fiscal stimulus packages in countries around the world, such as that being planned by the incoming Obama Administration in the US.

The European Central Bank yesterday stepped up its efforts to combat the eurozone recession, cutting interest rates by a further half-point to 2 per cent, equalling previous record lows for the single currency era. The ECB has now cut rates by 2.25 percentage points since October.

Jean-Claude Trichet, the ECB president, signalled that the bank was set to cut eurozone rates still further, but indicated that the next move would probably come in March. “We didn’t say that it was now the limit and we would not move any more,” he said.

[Pakboong]

We have been promised a crash for over a decade now! This is maddening, how can they continually promise a never arriving bargain in real estate prices and then fail to deliver. These guys promising you a huge discount on real estate are clearly a scam!

Edited January 18, 2009 by Pakboong

[Pakboong]

Right after the crash of 1997, shop houses in Jomtien were selling for the same price as before the crash. One point four million would buy your choice. The prices never dropped at all and in fact went up. Those same shells are now selling for about four million. After all these years there are still some shells available although not many. What does this mean? It means that if you want to buy property, buy from a panicked farang.

A classic bubble, 1.4 million to 4 million on a grand scale in 7-10 years. This bubble, as do they all, will burst and painfully so.

[quiksilva]

TTM yes I think its useful to copy the article here. The article mentions a 60% drop in residential transactions (not values) handled by CBRE over Q4, which in light of the 30% shortfall in demand, is to be expected.

The other article which quotes some guy from Harrisons referencing land value drops all over the place. Please read between the lines.

He does not actually deliver any hard research. It only references anecdotes and personal opinions. So treat those numbers as you would anyone's stories and opinions, with a grain of salt.

Now for the record I do believe that land values have fallen over the last 3 months, but in my experience land owners are in a transation phase, they still refuse to accept market conditions.

Transactions in the market (of the land parcels he is talking about) are slim to none at the moment, so building up a decent comparable database which empirically shows how land values have dropped recently, for all the areas that he mentioned would be very difficult in this market.

This is probably why he made these comments, as he's after some PR, or he is trying to get vendors to reduce pricing so he can get some transactions under his belt, that's fine, but its not research, and should not be treated as such.