Cbd Condo Prices Indestructable?

[emsfeld]

My Fiance and I just financed a condo recently (20% equity, 80% mortgaged), despite the current market uncertainty. We will be renting the condo out and contribute another 100% to service the mortgage and calculated that if everything goes to plan, the place will be ours in about 4 years.

I have been following posts on Thaivisa and other boards regarding opinions as to where property prices will be headed - seems like the opinions are divided 50-50. You would probably see such division of opinions in a 'healthy' market environment as well!

My two cents regarding the property market in BKK:

Recent news that new developments are to be put on hold or maybe stopped alltogether does not concern me that much - in the contrary. This just means that developers anticipate that the demand side has been saturated for now and it may be wiser to wait until the market finds some sort of stable equilibrium between properties on offer and properties asked for. Makes their forecasting and budgeting easier and a lot less uncertain. Until such equlibirium has been reached may well take another 2-3 yrs, no doubt about it.

Secondly, I see a lot of people on these boards arguing from the indebteness-of-the-average-Thai-person point of view, saying that most Thai people are so heavily indebted that in face of the current crisis, surely they will have to liquidate parts of their assets to finance their livelihoods. I think that's where a lot of the Farang's misconception is. Unfortunately, I do not have figures to prove this (if someone has please PM me as I am very interested), but from what I can tell is that most of Bangkok's properties and condos are equity financed. (Thai) People equity-financing these properties certainly will not have to unwind capital in property assets in order to obtain liquidity. They have capital (or cash) in more liquid assets they will resort to first - that is if they go jobless of course.

I saw some stats by the BoT for 2008 showing that mortgage-based loans account for roughly 4% of the total amount of loans extended to private households by financial institutions. The majority is attributable to hirepurchased activities (cars and motorcycles) accounting to over 90%. Unfortunately, I could not find information on the equity/debt proportion of the total amount of money tied up in BKK property. I believe that the magnitude of the debt proportion is the key to determining as to where prices will be headed! I do not think that the average-equity-financing-Thai-person will need to sell their property so desparately into a falling market! Sure - bargains can be had over the next couple of months, but you WILL HAVE TO LOOK HARD FOR them. It won't be all doom and gloom as some make it out to be. Rest assured that our average condo-building owning Thaichinese who won't even move a 1000Bt on his 20000Bt monthly lease (at an occupancy rate of less than 60%) will all of a sudden feel the urge to start a firesale frenzy! Thai economics are not so much about demand and supply as people (farangs like us) hope them to be!

emsfeld

[pkrv]

My Fiance and I just financed a condo recently (20% equity, 80% mortgaged), despite the current market uncertainty. We will be renting the condo out and contribute another 100% to service the mortgage and calculated that if everything goes to plan, the place will be ours in about 4 years.

I have been following posts on Thaivisa and other boards regarding opinions as to where property prices will be headed - seems like the opinions are divided 50-50. You would probably see such division of opinions in a 'healthy' market environment as well!

My two cents regarding the property market in BKK:

Recent news that new developments are to be put on hold or maybe stopped alltogether does not concern me that much - in the contrary. This just means that developers anticipate that the demand side has been saturated for now and it may be wiser to wait until the market finds some sort of stable equilibrium between properties on offer and properties asked for. Makes their forecasting and budgeting easier and a lot less uncertain. Until such equlibirium has been reached may well take another 2-3 yrs, no doubt about it.

Secondly, I see a lot of people on these boards arguing from the indebteness-of-the-average-Thai-person point of view, saying that most Thai people are so heavily indebted that in face of the current crisis, surely they will have to liquidate parts of their assets to finance their livelihoods. I think that's where a lot of the Farang's misconception is. Unfortunately, I do not have figures to prove this (if someone has please PM me as I am very interested), but from what I can tell is that most of Bangkok's properties and condos are equity financed. (Thai) People equity-financing these properties certainly will not have to unwind capital in property assets in order to obtain liquidity. They have capital (or cash) in more liquid assets they will resort to first - that is if they go jobless of course.

I saw some stats by the BoT for 2008 showing that mortgage-based loans account for roughly 4% of the total amount of loans extended to private households by financial institutions. The majority is attributable to hirepurchased activities (cars and motorcycles) accounting to over 90%. Unfortunately, I could not find information on the equity/debt proportion of the total amount of money tied up in BKK property. I believe that the magnitude of the debt proportion is the key to determining as to where prices will be headed! I do not think that the average-equity-financing-Thai-person will need to sell their property so desparately into a falling market! Sure - bargains can be had over the next couple of months, but you WILL HAVE TO LOOK HARD FOR them. It won't be all doom and gloom as some make it out to be. Rest assured that our average condo-building owning Thaichinese who won't even move a 1000Bt on his 20000Bt monthly lease (at an occupancy rate of less than 60%) will all of a sudden feel the urge to start a firesale frenzy! Thai economics are not so much about demand and supply as people (farangs like us) hope them to be!

emsfeld

Thanks for a great post. In a way you too also show why it is so important to show what angle you are coming from in purchasing condominiums alone let alone any other type of property.

Examples are:

1) If you are a single farang or farang/farang relationship you must buy under the farang quota and show the funds came from outside Thailand. Recomendation if you are a couple marrried or otherwise put the property in joint names. There is evidence that if you don't do that there is trouble ahead!

2) If you are farang/thai then two options seem to be available - a) If in joint names you must buy in the farang quota same rules as above. b - buy in the thai quota the property is in your thai partners name only.

3) thai/thai then two options are available a) buy in the farang quota and show the funds came from outside of Thailand - or b -simply just buy in the thai quota.

I challenge anyone to map this to buying in the west!

Now I hope I have this correct but am willing to stand corrected if wrong. Any thoughts quiksilva? It takes a long time to work this stuff out from posts that are actually correct, but incorrect for others. Such tricky stuff.

Edited February 8, 2009 by pkrv

[midas]

My Fiance and I just financed a condo recently (20% equity, 80% mortgaged), despite the current market uncertainty. We will be renting the condo out and contribute another 100% to service the mortgage and calculated that if everything goes to plan, the place will be ours in about 4 years.

I have been following posts on Thaivisa and other boards regarding opinions as to where property prices will be headed - seems like the opinions are divided 50-50. You would probably see such division of opinions in a 'healthy' market environment as well!

My two cents regarding the property market in BKK:

Recent news that new developments are to be put on hold or maybe stopped alltogether does not concern me that much - in the contrary. This just means that developers anticipate that the demand side has been saturated for now and it may be wiser to wait until the market finds some sort of stable equilibrium between properties on offer and properties asked for. Makes their forecasting and budgeting easier and a lot less uncertain. Until such equlibirium has been reached may well take another 2-3 yrs, no doubt about it.

Secondly, I see a lot of people on these boards arguing from the indebteness-of-the-average-Thai-person point of view, saying that most Thai people are so heavily indebted that in face of the current crisis, surely they will have to liquidate parts of their assets to finance their livelihoods. I think that's where a lot of the Farang's misconception is. Unfortunately, I do not have figures to prove this (if someone has please PM me as I am very interested), but from what I can tell is that most of Bangkok's properties and condos are equity financed. (Thai) People equity-financing these properties certainly will not have to unwind capital in property assets in order to obtain liquidity. They have capital (or cash) in more liquid assets they will resort to first - that is if they go jobless of course.

I saw some stats by the BoT for 2008 showing that mortgage-based loans account for roughly 4% of the total amount of loans extended to private households by financial institutions. The majority is attributable to hirepurchased activities (cars and motorcycles) accounting to over 90%. Unfortunately, I could not find information on the equity/debt proportion of the total amount of money tied up in BKK property. I believe that the magnitude of the debt proportion is the key to determining as to where prices will be headed! I do not think that the average-equity-financing-Thai-person will need to sell their property so desparately into a falling market! Sure - bargains can be had over the next couple of months, but you WILL HAVE TO LOOK HARD FOR them. It won't be all doom and gloom as some make it out to be. Rest assured that our average condo-building owning Thaichinese who won't even move a 1000Bt on his 20000Bt monthly lease (at an occupancy rate of less than 60%) will all of a sudden feel the urge to start a firesale frenzy! Thai economics are not so much about demand and supply as people (farangs like us) hope them to be!

emsfeld

emsfeld you don't say whether the condominium you purchased is in the CBD?

I wouldn't be worried about the smaller and newer style cheap condominiums such as

" The Link " at On Nut which is ] only around 2 million

and I don't think will have any problems renting those out because

it's conveniently located. And in the lower price bracket, I could imagine

Thai people would probably ride out any difficulties whether they rented it out or not.

The far bigger question is regarding the more expensive units because no one

knows for sure going forward how many foreigners will be unable or unwilling to continue to buy

or even rent condos in the 20 million plus capital value range. I think it's safe to say there would be

far less Thai tenants in this price range now and possibly even less foreigners.

And I suggest there are only so many very wealthy Thai's in Bangkok that would

own condos in 20 million plus range outright and could also afford to sit on them indefinitely

if they were not at least producing a rental income ?

[shochu]

if u have been following the recent - last 2/3 years of why the condo market in the city has become such a hit - well, high fuel prices made young urban professionals wonder why they were spending money on a car - THAT THEY WERE PAYING LOANS ON - and spending so much time in traffic. well, some savy developers decided to market condos aimed at this group with a lifestyle marketing focus. it worked. they could get for a little more than the cost of a car (or similar further out) a lifestyle condo and be near the action - where they work, hang out and ....

sorry to contradict ur assertion - but many - i would wager most (meaning more than 50%) are financed - since instead of cars they opted for condos. go to any of these sales offices and all their literature is based on financing with options on the term.

nice try - reads like an industry player trying not to.

midas,

fully agree - while the segment for local young urban professionals of some developers is doing well still - i would agree - that most directed at the foreign market will take a hit - the question being how severe a hit - enough to stall/stop the project?

lets not forget los is a manufacturing based economy for much of its growth and well, bdi index which is probably the most accurate and shows some lag time suggest los with a hefty portion of its growth tied directly to this index will suffer for a longER term than most here think. this is not a stimulus package kind of get well problem - sorry - it is a realignment of trade, consumers, etc.

i am not a doom and gloom merchant - more of a realist trying to impart more objective data so others can do as they must.

AND as some o fthese young professionals start losing their jobs, this will affect the finances of their larger household (family including mom and dad). u can already see some trying to get out of their deposits - check prakard.

[pkrv]

if u have been following the recent - last 2/3 years of why the condo market in the city has become such a hit - well, high fuel prices made young urban professionals wonder why they were spending money on a car - THAT THEY WERE PAYING LOANS ON - and spending so much time in traffic. well, some savy developers decided to market condos aimed at this group with a lifestyle marketing focus. it worked. they could get for a little more than the cost of a car (or similar further out) a lifestyle condo and be near the action - where they work, hang out and ....

sorry to contradict ur assertion - but many - i would wager most (meaning more than 50%) are financed - since instead of cars they opted for condos. go to any of these sales offices and all their literature is based on financing with options on the term.

nice try - reads like an industry player trying not to.

midas,

fully agree - while the segment for local young urban professionals of some developers is doing well still - i would agree - that most directed at the foreign market will take a hit - the question being how severe a hit - enough to stall/stop the project?

lets not forget los is a manufacturing based economy for much of its growth and well, bdi index which is probably the most accurate and shows some lag time suggest los with a hefty portion of its growth tied directly to this index will suffer for a longER term than most here think. this is not a stimulus package kind of get well problem - sorry - it is a realignment of trade, consumers, etc.

i am not a doom and gloom merchant - more of a realist trying to impart more objective data so others can do as they must.

AND as some o fthese young professionals start losing their jobs, this will affect the finances of their larger household (family including mom and dad). u can already see some trying to get out of their deposits - check prakard.

Hi - shochu -I sort of read your posts from a thai perspective, either thai income stream or thai? Is this correct? because IMO much of the material posted here is irrelevent to you.

Edited February 8, 2009 by pkrv

[emsfeld]

emsfeld you don't say whether the condominium you purchased is in the CBD?

This is correct. We are in the lower segment of the market - the 2-3 Mil Baht range. My Fiance and I are still young (both 29), so my post should be seen from this perspective. The condo is two or three subway stations from the CBD with a roughly 5-10 mins walk to the station.

@shochu

I am not sure whether your post was addressed to me, but I can ascertain you that I am not an industry player nor affiliated to one. I earn my income and live in Australia. The industry I am working in has nothing to do with real estate.

I'd be grateful if you had any statistics that back your position up. Figures released by the BoT for Q1 - Q3 2008 would contradict your opinion with regards to 'substituting' hirepurchased assets with real estate. However, I do see your point as it seems like we are referring to different segments of the market. I have never even looked at the upper market segment (and its prices), since I simply cannot afford it (just yet)!

Yes, we are checking Prakard - from what we can tell is that a lot of people (in our segment) put down first installments to the developer, signed a contract, and never got their mortgages preapproved. As a result many were hit by surprise when realising that the bank would lend them only 60% of what they had planned to be getting. I think that's actually a good thing, as the banks seem to be taking their credit ratings seriously.

@all:

From our point of view, this condo was purchased in order to generate some income once we have paid it off in 4-5 years. We found that the rent would cover the repayments at least and any additional contributions made will lower the total interest going forward. In about 5 years time, the property will generate enough income to buy my fiance and myself two return fares and four weeks of holidays (per year) which we would have otherwise had to pay for with our Australian earned income.

[cclub75]

And yet the same company, CB Richard Ellis, was saying exactly 2 months ago :

" Thailand's property market is well insulated from the global financial crisis as it is far less dependent on debt than most property markets,

said real estate firm CB Richard Ellis Thailand. "

Always give a link to your sources.

http://www.bangkokpost.com/161008_Business...t2008_biz38.php

It gives more weight... and people can't say that you're making up things.

Indeed, this woman will have a place (albeit a small one) in history books. Like (so) many other suckers.

Speaking about condos... hotels have the same problem : overcapacity, malinvestment, almost religious belief that never ending growth is due, future projections based on past performances... the same mistake, over and over, through human history, with every time the same scream : "this time it's different, it has to be different, it will be different".

Sixty-five hotels with a capacity of 11,150 rooms are scheduled to open this year and next despite the economic crisis and political uncertainty, said Prakit Chinamourphong, president of the Thai Hotels Association (THA).

http://www.nationmultimedia.com/2009/02/06...ss_30095109.php

"The horror... the horror".

Edited February 8, 2009 by cclub75

[pkrv]

@all:

From our point of view, this condo was purchased in order to generate some income once we have paid it off in 4-5 years. We found that the rent would cover the repayments at least and any additional contributions made will lower the total interest going forward. In about 5 years time, the property will generate enough income to buy my fiance and myself two return fares and four weeks of holidays (per year) which we would have otherwise had to pay for with our Australian earned income.

You have been open - There are very open posters whos viewes I deeply repected on the condominium rental side, I think in the same postion as yourself.

irene - IMO sort of in your position but further on?

and from a different perspective cmsally

Look up their posts - what can it hurt?

[ray08]

@all:

From our point of view, this condo was purchased in order to generate some income once we have paid it off in 4-5 years. We found that the rent would cover the repayments at least and any additional contributions made will lower the total interest going forward. In about 5 years time, the property will generate enough income to buy my fiance and myself two return fares and four weeks of holidays (per year) which we would have otherwise had to pay for with our Australian earned income.

The Oz market has taken a big hit in prices, and more to come ,Perth for example is getting cheaper by the day ,you can borrow at under 5% , and rent out for 5-6% yeild

Interest ,depreciation ,rates all tax deductable, WHY invest in Bangkok ?I myself live in BKK ,but only invest in OZ and Europe,everyone to their own ,but very curious why you picked Bangkok ,

Also in 4 years no one knows if you will get thb 16 to Aud or thb 35 to Aud, so foreign currency exposure as well,

Edited February 9, 2009 by ray08

[midas]

The Oz market has taken a big hit in prices, and more to come ,Perth for example is getting cheaper by the day ,you can borrow at under 5% , and rent out for 5-6% yeild

Interest ,depreciation ,rates all tax deductable, WHY invest in Bangkok ?I myself live in BKK ,but only invest in OZ and Europe,everyone to their own ,but very curious why you picked Bangkok ,

Also in 4 years no one knows if you will get thb 16 to Aud or thb 35 to Aud, so foreign currency exposure as well,

Hi ray

I completely agree with your approach because I do the same as you . There are so many disadvantages for a foreigner to buy a condominium

now compared to their own country ( and even more so for pure investment purposes ) that it baffles me?

Apart from the uncertainty of owning a property in a country where visa laws can hardly be called simple or indeed set in stone-now you have also

increased uncertainly of owning a condominium where you might even find it difficult to find a Thai buyer who doesn't want to buy

secondhand or a foreigner with cash ? it would be interesting to get an acurate picture of whether demand in the rental market

has changed also ( but not from CBRE ! ) in view of foreign companies laying off staff and many Thais losing their jobs and

heading back to the provinces ?

[sleepyjohn]

Also in 4 years no one knows if you will get thb 16 to Aud or thb 35 to Aud, so foreign currency exposure as well,

.....which may work against you when som tum stays at 20 baht......

I personally would consider buying to rent abroad when prices seem to have bottomed. The problem is efficiently running a rental remotely. This is all-important. Distance is a real factor if your agent craps the bed. So is SEAsia (non-Thailand) a possibility? Tipping my hat to Mark Twain Singapore seems to have only so much land. Have prices taken a hit there?

Edited February 9, 2009 by sleepyjohn

[emsfeld]

@all:

From our point of view, this condo was purchased in order to generate some income once we have paid it off in 4-5 years. We found that the rent would cover the repayments at least and any additional contributions made will lower the total interest going forward. In about 5 years time, the property will generate enough income to buy my fiance and myself two return fares and four weeks of holidays (per year) which we would have otherwise had to pay for with our Australian earned income.

The Oz market has taken a big hit in prices, and more to come ,Perth for example is getting cheaper by the day ,you can borrow at under 5% , and rent out for 5-6% yeild

Interest ,depreciation ,rates all tax deductable, WHY invest in Bangkok ?I myself live in BKK ,but only invest in OZ and Europe,everyone to their own ,but very curious why you picked Bangkok ,

Also in 4 years no one knows if you will get thb 16 to Aud or thb 35 to Aud, so foreign currency exposure as well,

Simply because I want to live in Bangkok in about 10-15 years time. I had lived in Bangkok before for about 4 years and absolutley loved it.

Regarding fx-rates, I suppose investing in Europe (where I come from) is not cheap right now viewed from an OZ perspective either.

Why not invest in OZ? I am Sydney based and find properties here still horrendously expensive! Other than that,

1) An investment in Sydney for something similar is simply too expensive in terms of the cut I would have to take in disposable income. Last time I checked, the gap between rents and mortgage repayments was quite substantial in order to meet the minimum repayment. In Bangkok, the rent almost takes care of the baseline repayments, so anything I can afford to contribute on top of that allows me to pay the property off quicker. Hence, anything I put on top of the rent is because I want to, not because I have to.

2) I agree with

 Interest ,depreciation ,rates all tax deductable,

which was and still is a concern of mine. I can't do that in BKK - that's why I am aiming to own as soon as possible. In OZ I'd pretty much be locked in for the next 20 odd years. Given that OZ generally has had high interest rates compared with Western counterparts, I am expecting rates to increase in due time. Maybe not this or next year, but in 3-5 years seems reasonable. Considering that rents usually lag behind interest rates, there may (or may not) be periods of months were I have to pay up more than expected causing drains on my liquidity. At the moment, I still value lifestyle over tieing up capital in illiquid assets. A condo in Bangkok seems to provide me both - ownership of a property whilst not sacrificing my lifestyle (we come to back to "want to" rather than "have to").

3) On this basis I can defer additional contributions to any point in time I like. I might get some drainage if there wont be a tenant for a while. We have already made (and will make) provisions for this case. The fx rate does not concern me much at the moment, since as long as the base repayments are covered by the rent, I won't be doing any repayments but rather have my cash in more liquid assets in OZ and Europe.

You guys might be seeing this from a different angle, because you are either older than I am and/ or have much more capital/ better means of financing at your disposal.

emsfeld

[pkrv]

You guys might be seeing this from a different angle, because you are either older than I am and/ or have much more capital/ better means of financing at your disposal.

emsfeld

you really should look back at the board on this issue - irene's post will or will not help you.

http://www.thaivisa.com/forum/search.html&...ghlite=%2Birene

[donx]

emsfeld you don't say whether the condominium you purchased is in the CBD?

This is correct. We are in the lower segment of the market - the 2-3 Mil Baht range. My Fiance and I are still young (both 29), so my post should be seen from this perspective. The condo is two or three subway stations from the CBD with a roughly 5-10 mins walk to the station.

I saw your reasons for buying a condo in BKK over other places in the world, but since you have a mortgage on the condo, can I assume that your fiance is Thai?

[shochu]

it is obvious the market creepers r out n force. r u guys that desperate. one goes - another comes and some play the interested buyer with suggestions.

pitiful!!!!

[donx]

it is obvious the market creepers r out n force. r u guys that desperate. one goes - another comes and some play the interested buyer with suggestions.

pitiful!!!!

shochu,

I have no idea what you are trying to say in the post I quoted above. It seems to me that most of the resent posts are more in agreement that the market is going to get worse than that it will be getting better soon.

Your post does, however, give me a chance to ask you a question. Is your complaint with the chart that quiksilva posted because that chart is showing the price of real estate before being adjusted for the effects of inflation? If so, is there a chart that you can direct us to that shows this?

[pkrv]

it is obvious the market creepers r out n force. r u guys that desperate. one goes - another comes and some play the interested buyer with suggestions.

pitiful!!!!

Hi shochu - I too asked the same question are you Thai? if so look up heng (s) posts, somewhat deadly poster but take a look

http://www.thaivisa.com/forum/search.html&...ighlite=%2Bheng

He is Thai and has his own perspective. It may help I don't know if it will or if it wont (I'm sure the spelling if off but that is not the point!)

Edited February 9, 2009 by pkrv

[emsfeld]

it is obvious the market creepers r out n force. r u guys that desperate. one goes - another comes and some play the interested buyer with suggestions.

pitiful!!!!

I don't quite understand where you are coming from. The topic is 'Cbd Condo Prices Indestructable?' and people have their opinions about it. I think I made it perfectly clear why it was a good investment for me! I am not enticing anyone to make the same move as I did. The condo WAS NOT financed out of speculative reasons. It is to provide an income stream once it has been paid off. If you are so convinced that prices will crash, then now and the next couple of months would be a great time for you to hunt for bargains - my opinion is you will have to look for them. They wont be served to you on a plate, wrapped with a nice ribbon, saying "Please buy me, sochu". Judging from your last post you seem to be the only person on this board trying to get his/her point across offensively which begs the question who is desparate?

@Donx

Yes, my fiance is Thai which made the whole mortgaging process quite easy and straightforward.

@midas

I think you brought up the Visa uncertainty at one stage. Well, this is something I am not so concerned about as there are cheap, legal ways to get 6 months visas. No one seems to consider these types of visas though, as they may not be too obvious (they might be in the near future though as a lot of providers seem to crop up in BKK offering these).

emsfeld

[jumnien]

If your home currency is strong when you buy and weak when you sell, you are poised to do very, very well. Brits have recently profited enormously due to favorable currency movements. Many bought condos at 70 baht/pound and sold at under 50/pound then repatriated the profits. If they bought a 7 million baht condo (100,000 pounds) and sold it for 7 million (now 140,000 pounds) they've done quite well. In my case, I'm stuck with the dollar so my investments have not done nearly as well.

[midas]

@midas

I think you brought up the Visa uncertainty at one stage. Well, this is something I am not so concerned about as there are cheap, legal ways to get 6 months visas. No one seems to consider these types of visas though, as they may not be too obvious (they might be in the near future though as a lot of providers seem to crop up in BKK offering these).

emsfeld

emsfeld

I only made reference to the Visa because of the perception things can change here at short notice.

It's not the length of the Visa -I have effectively what is a three-year Visa-but it's still doesn't change the fact

that particularly with the ongoing dispute between the redshirts and yellow shirts ( with no sign

of any resolution in sight ) it is still hard to interpret how secure or otherwise the presence of long-term farangs

on any visa will be regarded in Thailand? I guess my point is-visas can be revoked and in very

uncertain global economic times that is just another uncertainty I don't need.

I'm just throwing this in as being yet another unwanted uncertainty on top of market dynamics and economic

uncertainties to show the overall unattractiveness from my perspective of owning a property in Thailand.

Edited February 10, 2009 by midas

[ray08]

The Oz market has taken a big hit in prices, and more to come ,Perth for example is getting cheaper by the day ,you can borrow at under 5% , and rent out for 5-6% yeild

Interest ,depreciation ,rates all tax deductable, WHY invest in Bangkok ?I myself live in BKK ,but only invest in OZ and Europe,everyone to their own ,but very curious why you picked Bangkok ,

Also in 4 years no one knows if you will get thb 16 to Aud or thb 35 to Aud, so foreign currency exposure as well,

Hi ray

I completely agree with your approach because I do the same as you . There are so many disadvantages for a foreigner to buy a condominium

now compared to their own country ( and even more so for pure investment purposes ) that it baffles me?

Apart from the uncertainty of owning a property in a country where visa laws can hardly be called simple or indeed set in stone-now you have also

increased uncertainly of owning a condominium where you might even find it difficult to find a Thai buyer who doesn't want to buy

secondhand or a foreigner with cash ? it would be interesting to get an acurate picture of whether demand in the rental market

has changed also ( but not from CBRE ! ) in view of foreign companies laying off staff and many Thais losing their jobs and

heading back to the provinces ?

2 things that i find very expensive ,Private school registration and fees , and Rental on better end properties, Both of these IMO have been fueled by foreign companies paying expats all these high allowances ,therefore pushing up prices ,as these expats are now being recalled back to their home countries to cut costs, i think there will be a drop in Rental asking prices for better properties , in fact i myself have put it on the landlord for a discount on my rental,

[midas]

2 things that i find very expensive ,Private school registration and fees , and Rental on better end properties, Both of these IMO have been fueled by foreign companies paying expats all these high allowances ,therefore pushing up prices ,as these expats are now being recalled back to their home countries to cut costs, i think there will be a drop in Rental asking prices for better properties , in fact i myself have put it on the landlord for a discount on my rental,

The rental market particularly in this changing market deserves a closer look and more research

from the real estate consultants. You are right about the expat packages having probably

led the rental market upwards in the past. The Japanese car industry is just one example of where there must be at least a few executives

returning to Tokyo and probably the same for a few Korean executives.

Also there may be some but I can't see a huge number of farangs with Thai wives being interested in renting

expensive apartments because they even have the choice of buying a house in the wife's name?

That leaves mostly single guys as potential tenants and if you have a 20 million condominium what would you expect as a

minimum rental return? It seems to me that rental returns in the city are around 6 percent per annum

-maybe quicksilva or some other expert can correct me if I'm wrong. That equates to a monthly rental

of 100,000 baht. I don't know of many single expats who are paying that sort of monthly rental

when you can get something quite decent for 50 to 60,000 per month?

So who is left to pay that kind of rental? If you cannot achieve that kind of rental then you choices

as an owner of an expensive condominium are limited even further ? You can only really rely on being

able to sell it to another farang ?

Edited February 10, 2009 by midas

[jrbkk64]

Hi Gents,

In regards to Thais paying cash; From very close up I have seen dozens of Thais buying real estate all over the country and paying cash.

Thailand has a very large grey economy (food stalls, market vendors, MBK shop owners, etc) and this money is typically "laundered" through buying real estate. On top of the grey economy there are also tremendous amounts of money going around amonst all types of "officials" and a lot of this money is also used to buy real estate cash.

These type of people, as already stated by other posters, don't really care about the return on investment. (many of them don't really understand that property is not always/often their best bet).

Two examples:

1. a senior official was given a "consultancy" fee of 400 million THB + a DAILY volume related income of about 80,000 THB. Ofcourse a large part of this money needs to be given to lower level officials and his boss. He bought property/land immediately for over 200 million THB.

2. two ladies living near me, who started clothes shops in MBK 10 years ago, now are making millions and, besides a nice car, all of it goes into property. They now own at least 5 properties that I am aware of and each cost more than 5 million.

There are plenty other examples. Another major area where money for property comes from is underpaying taxes by companies faking their books. The money is taken out of the company and invested in property.

[midas]

Hi Gents,

In regards to Thais paying cash; From very close up I have seen dozens of Thais buying real estate all over the country and paying cash.

Thailand has a very large grey economy (food stalls, market vendors, MBK shop owners, etc) and this money is typically "laundered" through buying real estate. On top of the grey economy there are also tremendous amounts of money going around amonst all types of "officials" and a lot of this money is also used to buy real estate cash.

These type of people, as already stated by other posters, don't really care about the return on investment. (many of them don't really understand that property is not always/often their best bet).

Two examples:

1. a senior official was given a "consultancy" fee of 400 million THB + a DAILY volume related income of about 80,000 THB. Ofcourse a large part of this money needs to be given to lower level officials and his boss. He bought property/land immediately for over 200 million THB.

2. two ladies living near me, who started clothes shops in MBK 10 years ago, now are making millions and, besides a nice car, all of it goes into property. They now own at least 5 properties that I am aware of and each cost more than 5 million.

There are plenty other examples. Another major area where money for property comes from is underpaying taxes by companies faking their books. The money is taken out of the company and invested in property.

hi jrbkk64,

I don't think anyone living near would disagree that this sort of thing goes on a lot

but this thread is specifically about cbd condominium prices in Bangkok and what proof is there that these entrepreneurs are putting their money

into condominiums rather than land and buildings which would give them much more potential and a much bigger market?

We are talking here discussing here about how the options for CBD condominium owners could be starting to shrink.

I don't think there would be many people in numbers 1 and 2 that you have referred to would be that shortsighted as to tuck their money away

in a condominium building in the CBD- more likely if it is "laundered" as you say, they would want to hide it somewhere discrete in a nice

parcel of land that has development potential on Koh Samui or Phuket-not stuck in a condominium building?

[jrbkk64]

Midas,

Yes the ones I know or know about do invest in the CBD and also in the property you suggest. I think many of you can't really grasp how much money actually goes around in those circles.

I once bought a condo, not in CBD, from a hi-so Thai lady married to a politician. The condo was mortgaged and they hadn't paid the maintenance fee for 3 years, but at the same time they were living in a 80 million baht house on Ratchada. The house was paid for by some "tax" collected by her husband and then mortgaged. Same for the condo.

I do not really have an opinion on any particular district in terms real estate values. As far as I am concerned values are down or will go down. When and by how much is anybody's guess.

Any reasonable quality property in the right location (in BKK that means close to BTS/MRT) will be quite resilient to the downturn in my opinion.

[quiksilva]

2 things that i find very expensive ,Private school registration and fees , and Rental on better end properties, Both of these IMO have been fueled by foreign companies paying expats all these high allowances ,therefore pushing up prices ,as these expats are now being recalled back to their home countries to cut costs, i think there will be a drop in Rental asking prices for better properties , in fact i myself have put it on the landlord for a discount on my rental,

The rental market particularly in this changing market deserves a closer look and more research

from the real estate consultants. You are right about the expat packages having probably

led the rental market upwards in the past. The Japanese car industry is just one example of where there must be at least a few executives

returning to Tokyo and probably the same for a few Korean executives.

Also there may be some but I can't see a huge number of farangs with Thai wives being interested in renting

expensive apartments because they even have the choice of buying a house in the wife's name?

That leaves mostly single guys as potential tenants and if you have a 20 million condominium what would you expect as a

minimum rental return? It seems to me that rental returns in the city are around 6 percent per annum

-maybe quicksilva or some other expert can correct me if I'm wrong. That equates to a monthly rental

of 100,000 baht. I don't know of many single expats who are paying that sort of monthly rental

when you can get something quite decent for 50 to 60,000 per month?

So who is left to pay that kind of rental? If you cannot achieve that kind of rental then you choices

as an owner of an expensive condominium are limited even further ? You can only really rely on being

able to sell it to another farang ?

I think 6% is a reasonable expectation in this market, if you ignore void periods, and I agree that there are plenty of good properties out there in the 50-60K band, and certainly most of the single expats that I know tend to opt for properties at that level.

The choices are, if desperate sell it for whatever you can get to bargain hunters be they Thai (including Indian Thai a very active sector here), or Foreign.

The other choices are open to those who are in no need to sell (and not everyone is), they are

1. Rent it for whatever you can get.

2. Do nothing, until you can get your target rent / sale price, whenever that might be.

The options are not set in stone, if people's circumstances change they may pursue other options.

I have always held the belief that there will be limited transactions in the time to come (not forever) as it is a relatively under geared market, as more buy-to-let properties become available to rent but few individual owners selling at a discount, will eventually lead to a compression in rental yields.

[ray08]

I think 6% is a reasonable expectation in this market, if you ignore void periods, and I agree that there are plenty of good properties out there in the 50-60K band, and certainly most of the single expats that I know tend to opt for properties at that level.

The choices are, if desperate sell it for whatever you can get to bargain hunters be they Thai (including Indian Thai a very active sector here), or Foreign.

The other choices are open to those who are in no need to sell (and not everyone is), they are

1. Rent it for whatever you can get.

2. Do nothing, until you can get your target rent / sale price, whenever that might be.

The options are not set in stone, if people's circumstances change they may pursue other options.

I have always held the belief that there will be limited transactions in the time to come (not forever) as it is a relatively under geared market, as more buy-to-let properties become available to rent but few individual owners selling at a discount, will eventually lead to a compression in rental yields.

One interesting point i want to make about rental Yeild ,

2 People buy a same for same investment property in a building ,one a Thai ,one a foreigner , Foreigner pays THB 20 million, Thai buys Thai Quota ,say discount 20% ( Possible i take it )and pays THB 16m

Foreigner wants 6% yeild and rents out at approx THB 100 K per month

Does the Thai calculate 6% on Thb 20m or on Thb 16m which is approx Thb 80k per month ?

I would assume the Thai bases his return on the foreign quota price therefore reaping a higher return

As pressure on Rentals come into effect ,the Thai can still reduce ,but make a respectable return ,

The foreign does not have that luxury,

[thaiwanderer]

yield is an expected return useful for comparing it to other forms of investment.

I have never nor do i know anyone who has ever said 'right I want a yield of x% therefore (taking into account reasonable contingies) the rent I should charge is y'

Rather, the rent I can expect to get on that property is X therefore my yield is y -so i will buy the property and charge x or i will not.

Obviously the market conditions which set ballparks of rent brackets include the need to service loan repayments but that is one of many factors.

[TonySoprano]

You see... Le Raffine was supposed to be the alpha and the omega of the luxury condo market in central bangkok, blablabla.

It was supposed to be a bunker against any price drop, economic downturn, or whatever else.

It was the Light House of Serenity and Eternal Growth Because Bangkok Is So Different (LHSEGBBISD copyright myself).

Well... Le Raffine is nothing else than a building. And a building amid a full blown crisis.

The luxury condominium developer Le Raffine' 1989 Co Ltd plans to reduce the latest prices of condominium units at its Soi Sukhumvit 39 site by 15-20% and sell the remaining units at Soi Sukhumvit 31 that it adit kept for renting out.

Dr Pimpa Vajrabukka, the company's owner and managing director, said prices at Le Raffine' Jambu Dvipa on Soi Sukhumvit 39 would be cut to 160,000 baht per square metre from 200,000 baht due to an unfavourable market. (Bangkok Post)

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

I don't know why I think about the movie Apocalypse Now, with colonel Kurtz.... "The horror.... the horror"...

Replace with "The suckers...".

Who told you that it "was supposed to the the bunker"? LOL

Le Raffine is ALL duplexes, every single one! (Talk about having all your eggs in one basket!). I am surprised to hear that they were trying to get 200,000 per square meter (the Sukhothai has a lot to answer for) but its not much of a surprise to learn that they didn't sell out 100%.

not surprising that the more expensive condos with only huge units are seeing bigger drops than smaller units in an economic crisis.

[TonySoprano]

You see... Le Raffine was supposed to be the alpha and the omega of the luxury condo market in central bangkok, blablabla.

It was supposed to be a bunker against any price drop, economic downturn, or whatever else.

It was the Light House of Serenity and Eternal Growth Because Bangkok Is So Different (LHSEGBBISD copyright myself).

Well... Le Raffine is nothing else than a building. And a building amid a full blown crisis.

The luxury condominium developer Le Raffine' 1989 Co Ltd plans to reduce the latest prices of condominium units at its Soi Sukhumvit 39 site by 15-20% and sell the remaining units at Soi Sukhumvit 31 that it adit kept for renting out.

Dr Pimpa Vajrabukka, the company's owner and managing director, said prices at Le Raffine' Jambu Dvipa on Soi Sukhumvit 39 would be cut to 160,000 baht per square metre from 200,000 baht due to an unfavourable market. (Bangkok Post)

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

I don't know why I think about the movie Apocalypse Now, with colonel Kurtz.... "The horror.... the horror"...

Replace with "The suckers...".

Who told you that it "was supposed to the the bunker"? LOL

Le Raffine is ALL duplexes, every single one! (Talk about having all your eggs in one basket!). I am surprised to hear that they were trying to get 200,000 per square meter (the Sukhothai has a lot to answer for) but its not much of a surprise to learn that they didn't sell out 100%.

not surprising that the more expensive condos with only huge units are seeing bigger drops than smaller units in an economic crisis.