Chiang Mai Land Prices

[lifeincnx]

This is my opinion but land prices here in Chiang Mai generally seem to be artificially high. Is it a lack of an economic reality check on the part of land owners or could this be tied to the Thai baht also being kept artificially high, supposedly due to a flood of foreign money into the Thai stock market? The latter we've seen worldwide is a proven formula for a house of cards waiting to collapse. Looking forward to the comments, bashings and witicisms.

[lannarebirth]

Maybe you should give some examples of what you're talking about.

[LennyW]

What are you saying is high?? Price, size, location, "artificially high" Says who??

[lifeincnx]

Maybe you should give some examples of what you're talking about.

Great idea!

In Hang Dong for example, one rai plots, which were selling for 600-700k baht last year, are now on the market for 1.2- 1.4m baht. This is in a down market today where in Central Chiang Mai, one can see many empty shops, commercial and residential leases remaining vacant, the Night Bazarre is half of what it was in terms of vendors, etc.

[gotlost]

I see as the population of farangs has increase and the middle income Thai has gone up they have lost touch with fact that the housing market is down because people overall all not relocating to Chiang Mai. Real estate in general is not moving only the price they want is in their head. (T.I.T)

[hhgz]

Are you interesting in buying, or just complaining? For YEARS, TVers have been predicting that the Thai real estate market was going to crash. The plethora of "reasons" never played out: strong baht, weak baht, rice crisis, coup, weak PM, high inflation, deflation, war, famine and, finally, the global economic crisis. Despite the market not crashing, there's a recent thread predicting a final, cataclysmic, shock-and-awe, crash to end all crashes. Ho hum.

[Benjie]

1.2 million a rai doesn't sound very expensive to me.

[gotlost]

If it's rice land 400k to 500k a rai if it's been filled for development that 1.2m is not far off.

[stevejones123]

Another thing you must remember is that Thais need to invest in something. If they're suspicious of the stock market then they'll invest in land and the price will go up.

[canopy]

If it's rice land 400k to 500k a rai

How much profit does a rai of rice land typically make a year?

[lifeincnx]

If it's rice land 400k to 500k a rai if it's been filled for development that 1.2m is not far off.

I would agree with the scenario that rice land should be priced well below filled or developed land. But in my example (which I was not clear) the land sold a year ago in the 600-700k baht range and was ready to build (though needing to be graded but not not filled). Within one year the price more than doubled. From my way of thinking this is an inflationary recipe for disaster as these spiraling prices cannot be sustained. It happened in Bangkok in the early 90's and in the US in 2007 which has had global ramifications which are just beginning to roost here in the land of smiles.

[lifeincnx]

Are you interesting in buying, or just complaining? For YEARS, TVers have been predicting that the Thai real estate market was going to crash. The plethora of "reasons" never played out: strong baht, weak baht, rice crisis, coup, weak PM, high inflation, deflation, war, famine and, finally, the global economic crisis. Despite the market not crashing, there's a recent thread predicting a final, cataclysmic, shock-and-awe, crash to end all crashes. Ho hum.

I take it you were not around to see what happened to the commercial and residential income development in Bangkok in the early 90's. The empty, half-built shells of that real estate market collapse still stand as a haunting reminder. Not complaining at all but history does repeat itself.

[glegolo]

If it's rice land 400k to 500k a rai

How much profit does a rai of rice land typically make a year?

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I think you are into something here.. there is no revenue even remotly like the prices earned from a rai of a ricefield.

I am convienced (my opinion) that the high prices reflect more the desire to sell to some stupid falang who do not care about the money erspecially much.

Glegolo

[canopy]

Thank you, I am glad to see someone got my point. The prices of farmland do not seem to have a relationship to what they are capable of returning. Fork out millions of baht for a muddy field and it seems dubious the investment could ever be returned by farming. The only possibility is the speculation keeps escalating which it seems it will and then hit the jackpot by finding a sucker so you can get out. I sometimes wonder if a property tax of just 100 baht a rai would cause the most massive property dumping ever seen on the planet as all the dirt poor sellers sitting pat on land they got for free or next to nothing dreaming of becoming rich from the speculation suddenly all race to dump it.

[lannarebirth]

It's true that Chiang Mai land prices have been creeping up over the past few years. I disagree that the target buyers are foreigners however. The vast majority of sales are to other Thais and in the case of the more expensive parcels, most likely Bangkok Thais. Foreigners like to think they are the wealthy segment of the real estate market here but that is a fallacy.

[lifeincnx]

It's true that Chiang Mai land prices have been creeping up over the past few years. I disagree that the target buyers are foreigners however. The vast majority of sales are to other Thais and in the case of the more expensive parcels, most likely Bangkok Thais. Foreigners like to think they are the wealthy segment of the real estate market here but that is a fallacy.

I concur. The rumor mill seems to be that farangs are the raw land buyers - not true as it is the upper echelon Thais. However I disagree that it's farangs who think they themselves are the wealthy segment. In my opinion it's the Thais who assume farangs have deep pockets and money to burn which, in part, is why there is a two tier pricing system.

[lannarebirth]

It's true that Chiang Mai land prices have been creeping up over the past few years. I disagree that the target buyers are foreigners however. The vast majority of sales are to other Thais and in the case of the more expensive parcels, most likely Bangkok Thais. Foreigners like to think they are "seen as" the wealthy segment of the real estate market here but that is a fallacy.

I concur. The rumor mill seems to be that farangs are the raw land buyers - not true as it is the upper echelon Thais. However I disagree that it's farangs who think they themselves are the wealthy segment. In my opinion it's the Thais who assume farangs have deep pockets and money to burn which, in part, is why there is a two tier pricing system.

That's better.

[glegolo]

I concur. The rumor mill seems to be that farangs are the raw land buyers - not true as it is the upper echelon Thais. However I disagree that it's farangs who think they themselves are the wealthy segment. In my opinion it's the Thais who assume farangs have deep pockets and money to burn which, in part, is why there is a two tier pricing system.

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YES that is what I said earlier, Thai think´s .... reflect a desire... I sincerely do not believe that Thai is paying this creepy high costs

of buying some small piece of land. I.e. 3 km outside Chaiyaphum a friend of me just bought land. This piece of mudland cost him 430.000 baht!!!!! The area he bought is like 12 meter x 33 meter = about 400 m2. and this lot is out on the ricefield areas, not inside Chaiyaphum city limits..

This pices of land sold by a thai to a thai cost?????

Glegolo

[clinique]

Like the guy who bought the soon to be opened hum.."alternative lifestyle hotel and entertainment centre" in CM.

Was told he's paying 500k a month (plus all operating costs and utilities) to lease it for 6 years. This figure was arrived at by the owners "averaging" their monthy profits over the past years - <deleted>...

And he is renovating and upgrading from his own wallet... total about 30 mill...

ANd he has never heard what happens at the end of a lease here,, once youve spent all the money to upgrade it..

Guess what suddenly the owner wants it back !!!

Deep pockets but where is the busines sense..

[LivinLOS]

Artificially high ?? At 1.2 mil ?? In a desirable area of town ??

Come have a look round phuket for a while..

[quiksilva]

Values are at their natural level when transactions occur.

[Bemused]

Values are at their natural level when transactions occur.

What do you mean by 'natural level'?

[clinique]

Values are at their natural level when transactions occur.

What do you mean by 'natural level'?

I suppose he means supply and demand determine the price,,,,, willing buyer , willing seller.. same as it works in the west. If you pay too much for something you either havent done your research, or you have something special in mind,, or you dont care because you like it !

[Bemused]

Values are at their natural level when transactions occur.

What do you mean by 'natural level'?

I suppose he means supply and demand determine the price,,,,, willing buyer , willing seller.. same as it works in the west. If you pay too much for something you either havent done your research, or you have something special in mind,, or you dont care because you like it !

Thanks Clinique - the 'natural level' means whatever someone decides they will pay for it.

Property is indeed only worth as much as someone is willing to pay for it. However, as you suggest, this doesn't really answer the OP's question which is whether the market is overpriced and whether as a consequence someone who purchases now will lose money through a price correction in the near future.

Price corrections don't really seem to happen in Thailand. People just sit on property until someone comes along who is prepared to pay a price which gives a profit to the owner. The absence of a healthy level of prospective purchasers at the current pricing level seems to be of no concern whatsoever to sellers in Thailand.

So long as you don't want to make any money out of Chiang mai land by re-selling anytime soon then the price is just fine. Of course it is overpriced.

[lannarebirth]

Price corrections don't really seem to happen in Thailand. People just sit on property until someone comes along who is prepared to pay a price which gives a profit to the owner. The absence of a healthy level of prospective purchasers at the current pricing level seems to be of no concern whatsoever to sellers in Thailand.

So long as you don't want to make any money out of Chiang mai land by re-selling anytime soon then the price is just fine. Of course it is overpriced.

You may very well be right, but one thing I would point out is, people were saying the same thing a few years ago when prices were cheaper than they are now.

Here are my obsevations. Prices don't come down, ever.

The exception to my last statement was when banks were unloading properties en masse after the late 90's economic implosion. The only other exceptions I have seen have been situational, where a specific seller desperately needed the money, NOW.

[Bemused]

Here are my obsevations. Prices don't come down, ever.

The exception to my last statement was when banks were unloading properties en masse after the late 90's economic implosion. The only other exceptions I have seen have been situational, where a specific seller desperately needed the money, NOW.

To add to your point here...

The key to understanding the absence of price corrections in Thailand (in my opinion) is the credit markets. A very low percentage of land in Thailand is leveraged. The absence of leverage means there are very few costs to holding land.

Where we see price corrections, like the reduction in the price of new build in BKK and the early 1990s firesales, the owners have debts to service. Holding costs encourage owners to make active attempts to sell.

The thinking behind the current administration's plans to impose taxes on people who hold land is to increase the costs associated with holding land, and therefore rationalise the property market by forcing price corrections. The level at which the taxes will be levied, and the inefficiency of collection, will of course mean the policy only has a marginal effect. Still a step in the right direction and certainly an indication that the administration understands land in Thailand won't be utilised to stimulate economic growth until owners are forced to price their land at a more realistic level.