Yields Are Dropping Substantially, So Why Not Prices ?

[beginner]

No, but you are really way off. I accept that you are trying to position the pattaya market as a hard and an over-rated sector, which it very much is, but:

Northpoint really is virtually finished, quite a few re-sales recently - fact - you may not know but others do, and I have no vested interest. It will finish very soon and a huge number of buyers are transferring right now. If some (or many) foriegn quota bookers were to pull out this is where the 'open' market demand is (for foreign quota) - how this is a problem? as the developer keeps the substantial deposit and re-sells very easily.

QUOTE Pattaya Mail advertisement Friday 12th March 2010 page 36.

Northpoint Bargain! one bedroom 67m2 in foreign name,on 22nd floor,now complete,cost 7.3million baht 3 years ago off-plan,willing to accept 7.3million baht now for quick sale. For further info..........

[AddictedToThai]

Northpoint Bargain! one bedroom 67m2 in foreign name,on 22nd floor,now complete,cost 7.3million baht 3 years ago off-plan,willing to accept 7.3million baht now for quick sale. For further info..........

Only when we'll see at least 20-30 ads like this then we can talk about trend.

[beginner]

Advertising flyer inserted in Pattaya papers this week.

Hyde Park Residence Building 2Located on Thrappraya Soi 4

All suites only 1,590,000 baht.

Fully furnished

from original 2,590,000 baht

12 payments of 132,500 baht

50% Contract 50% Upon Completion

10% Discount for cash

etc...........

[Pakboong]

Northpoint Bargain! one bedroom 67m2 in foreign name,on 22nd floor,now complete,cost 7.3million baht 3 years ago off-plan,willing to accept 7.3million baht now for quick sale. For further info..........

Only when we'll see at least 20-30 ads like this then we can talk about trend.

The key to success is to anticipate the trend, not to wait until everyone has figured it out.

[123ace]

Good stuff and we do not disagree here. I see a miniature version of this scenario developing here. Similar considerations but on a much smaller scale. Thais will have to borrow more money to take up the slack in the Foreign drop off in demand. If Thais who are eligible to borrow money are already over leveraged, they will be unable to take up that slack. There are signs that the number of Thais who make enough money to pay taxes and be otherwise eligible to borrow is over leveraged then the problem of drop off in foreign demand has nowhere to hide. The number of condos being developed is in to full swing according to December registrations.

The numbers of mortgages by Thais will always be small because the vast majority do not pay taxes because they make less than the baht 150,000 minimum. They are esentially not eligible to borrow from a bank to buy a house or condos. So, from where will the buyers come?

This problem is always affected by the 51/49 rule. Thais will be less able to get mortgages;Foreign demand has dropped and is likely to continue to do so; and building projects continue to increase as if nothing has changed. An over supply has to result. Now the builders have to default. Doesn't matter which of the groups defaults, the result is likely to be the same.

I have no idea what the proportion of foreigners is that are investing in the Thai property market. Obviously a drop of 90% in foreign demand sounds impressive, but how does that relate to total demand? My guess would be that for 8 Thai buyers there are maybe 2 foreign buyers. Is that going to have an impact? Don't think so, but then again, I don't know what the impact of foreign demand really is. Anyone have figures on that?

What I do think though is that developers erecting condos with a foreign quota take into account that the foreign quota takes longer to be filled. My guess is that filling the foreign quote will always take longer than filling the Thai quota - at least in Bangkok. I don't know the Pattaya property market at all, so I cannot really comment on that.

In regards to Thai demand - I do believe the "myth" that the vast majority of Thai buyers purchase cash rather than through credit. As I argued in my OP, the credit financing ratio is rather small providing some proof to my argument. You have a valid point though in arguing that supply might be outstripping demand - at some stage total demand will be saturated.

How condo registrations relate to supply? Not sure, I think these are rather an indication of demand, eg the condos are registered when purchased from the developer by the consumer. That's how I'd interpret that item at least. The number of land development licenses would give an indication of supply, I reckon, and that has dropped from 2008 to 2009.

A few points:

Thai developers do not factor in or make any allowance for foreign buyers aside from in Pattaya, however there are virtually no professional thai developers in pattaya (like Major Group rather than like the foreign focused Raimon Land etc).

In Pattaya foreign quoata fills more easily and Thai quoata fills slow. Elsewhere this is not an issue and Thai's are not restricted to any quoata, so this is in fact not an industry problem at a national level, but more a problem for foreign developers that concieve a 'too foreign' product, in markets where there is limted Thai demand. Such as Pattaya in isolation.

Foreign demand is not down by 90%. Somebody on here has said that CBRE allegedly quoted this, but that does not mean it is, or was ever accurate and whatever the number was at that time it has improved clearly this year compared to last year. So be assured it is no longer 'off' by 90%.

No reseach is made to compare overall foreign vs Thai buying trends and as a huge proportion of foreign sales are leases these do not register on the same basis. These leases are often foreign buyer and foreign developer, and are not seen as part of the market.

Post 1997 one of the biggest problem areas in the market was office space in Bangkok. There was at one point over 44% vacant office space. Arguably the biggest vacancy decline of any developed markets. This is where the pain for the banks to real estate was felt hardest, and was followed by residential but mostly suburban low end housing. There were dozens of dilapidated half built hosuing estates all over the place and not just in Bangkok but also Pattaya, where many of these can still be seen today. Many golf courses have these remnants still in place, now owned by banks and unable to free up their cash.

We would need to see huge numbers of home owning locals becoming unemplyed in order for a credit crisis to develop. This does not seem likley at this present time.

Office space occupancy levels ar every high , so no pressure on that front in 2010.

The political turmoil is discouraging buyers

"Political turmoil has made Thailand significantly less attractive to buyers, especially to foreign buyers. CBRE reported that foreign demand for residential properties had dropped by up to 90% by June 2009. Real house prices in Thailand were 34.2% below their 1992 peak, as of Q2 2009."

A quote taken from the below reference:

http://www.globalpropertyguide.com/Asia/Th...d/Price-History

I don't even know who CBRE actually is, I can only assume the last two letters of the Acronym are for Real Estate and a publication called the global property guide chose to use them as a source. There is no reason to believe they would collaborate to deceive the buying public when their publication speaks to all of Asia and appears quite well researched.

So you are saying demand is not off by 90% so who are we to believe and why?

I don't know what it looks like when you step outside your house but, when I step outside of mine, it looks like demand is off 90%.

CBRE has no acronym for real estate in its name.

What you may miss by reviewing residential data in isolation is that the 97 crisis was triggered as much by office space lending as by residential. This will not show in your study and the wider financial burden created post ’97 by 44% vacant office spaces, currency devaluation and halved office rents. Many developers had US dollar debt pre ’97 and this exacerbated the problem for banks and developers during the Asian financial melt down. The 97 situation in itself was not due to a residential oversupply scenario in isolation.

There is no collaborative study of residential demand, no sharing of statistics amongst agents or developers. A ‘current level of demand’ observation is based on volume of enquires at any given time and sentiment. I fail to see why you are comparing a comment made by one agent in June 2009 with the prevailing market.

How things may appear when you step outside your door is not a reflection of the market, neither is one agent’s opinion from 9 months ago.

[beginner]

Northpoint Bargain! one bedroom 67m2 in foreign name,on 22nd floor,now complete,cost 7.3million baht 3 years ago off-plan,willing to accept 7.3million baht now for quick sale. For further info..........

Only when we'll see at least 20-30 ads like this then we can talk about trend.

The key to success is to anticipate the trend, not to wait until everyone has figured it out.

An Alan Bolton classified advertisement

An 80sqm 1 Bedroom, 1 Bathroom Condominium offered for sale at just 7,200,000Baht. Just 90,000 per sqm compared to the average price of 110-120 Baht sqm. Get on the phone..............

[Pakboong]

What you may miss by reviewing residential data in isolation is that the 97 crisis was triggered as much by office space lending as by residential. This will not show in your study and the wider financial burden created post ’97 by 44% vacant office spaces, currency devaluation and halved office rents. Many developers had US dollar debt pre ’97 and this exacerbated the problem for banks and developers during the Asian financial melt down. The 97 situation in itself was not due to a residential oversupply scenario in isolation.

There is no collaborative study of residential demand, no sharing of statistics amongst agents or developers. A ‘current level of demand’ observation is based on volume of enquires at any given time and sentiment. I fail to see why you are comparing a comment made by one agent in June 2009 with the prevailing market.

How things may appear when you step outside your door is not a reflection of the market, neither is one agent’s opinion from 9 months ago.

I do not know what I am missing. But, I am able to admit to that. I am searching for unbiased information and the Global Property Guide is the most unbiased I have found and was not written by one agent. It reflects the market in all of Asia. The data is statistical and derived from sources such as BOT and yes, CBRE. The data when analyzed stands pretty much alone when I look at it. You will likely look at it differently. If you have unbiased information, please post it as I would be very interested. I am not saying it is accurate but it sounds accurate based upon what is happening in our world.

The fact that the Global Property Guide was last printed in September 2009 matters not if there are trends that stand to continue through this year or next.

What percentage of the Thai real estate market is foreign matters only to those who are foreign and trade more or less exclusively in that percentage of the market. If it 2% or 50% doesn't really matter.

[mjohnson282]

Umm, yeah Global Property Guide. There is a reliable source. Usually effective or actual rent and vacancy are factored into determining yield, but not in fantasy land.

The participation in this real estate cycle has been much greater. Probably more than a few under capitalized speculators. Will they be able to close and will they sit on vacant units or capitulate. It seems unlikely that you will be able to rely on theory that vacant units are owned by old money thais that will hold onto these units with negative yields as supply continues to ramp.

New buildings and no lights on - welcome to asian real estate.

What are the sources of the Guide´s price data? Can these sources be trusted?

We draw our figures from our own, in-house analysis. Our research is based on a simple yet effective method - we systematically scan web advertisements for residential property, looking at offers for sale, and offers for rent, of good (but not new) apartments.

Despite its simplicity, with care and commitment to consistency this method can produce quality results. We begin by defining key upper-end rental districts in the capital city. We take care to keep a database of where the properties are located, so as to ensure consistency in subsequent years. We carefully select appropriate price ranges. We take average prices, rejecting deviant outliers. Buyers of the full data set have access to these comparability specifications.

The data measures up well to data provided by national statistical organizations, where these are available for comparison, and usually performs better than multi-housing organization data.

[Pakboong]

Umm, yeah Global Property Guide. There is a reliable source. Usually effective or actual rent and vacancy are factored into determining yield, but not in fantasy land.

The participation in this real estate cycle has been much greater. Probably more than a few under capitalized speculators. Will they be able to close and will they sit on vacant units or capitulate. It seems unlikely that you will be able to rely on theory that vacant units are owned by old money thais that will hold onto these units with negative yields as supply continues to ramp.

New buildings and no lights on - welcome to asian real estate.

What are the sources of the Guide´s price data? Can these sources be trusted?

We draw our figures from our own, in-house analysis. Our research is based on a simple yet effective method - we systematically scan web advertisements for residential property, looking at offers for sale, and offers for rent, of good (but not new) apartments.

Despite its simplicity, with care and commitment to consistency this method can produce quality results. We begin by defining key upper-end rental districts in the capital city. We take care to keep a database of where the properties are located, so as to ensure consistency in subsequent years. We carefully select appropriate price ranges. We take average prices, rejecting deviant outliers. Buyers of the full data set have access to these comparability specifications.

The data measures up well to data provided by national statistical organizations, where these are available for comparison, and usually performs better than multi-housing organization data.

Their data is largely obtained from the BOT (Bank Of Thailand) property indicators. I have said that at least 4 times in this thread. I have no idea if they can be trusted. I expect that you think they can't be but I truly don't know.

[mjohnson282]

You may have said it but apparently you did not bother to read their website and methodology. According to their website they use the newspaper and internet and they use asking prices with apparently little to no consideration for vacancy and therefore existing and future inventory.

Probably should have put that in quotes but here it is again below. Also here is the web address:

http://www.globalpropertyguide.com/faq/squ...and-yields#ans5

Here is paragraph copied and pasted if you do not want to look for yourself.

"What are the sources of the Guide´s price data? Can these sources be trusted?

We draw our figures from our own, in-house analysis. Our research is based on a simple yet effective method - we systematically scan web advertisements for residential property, looking at offers for sale, and offers for rent, of good (but not new) apartments.

Despite its simplicity, with care and commitment to consistency this method can produce quality results. We begin by defining key upper-end rental districts in the capital city. We take care to keep a database of where the properties are located, so as to ensure consistency in subsequent years. We carefully select appropriate price ranges. We take average prices, rejecting deviant outliers. Buyers of the full data set have access to these comparability specifications.

The data measures up well to data provided by national statistical organizations, where these are available for comparison, and usually performs better than multi-housing organization data."

[123ace]

You may have said it but apparently you did not bother to read their website and methodology. According to their website they use the newspaper and internet and they use asking prices with apparently little to no consideration for vacancy and therefore existing and future inventory.

Probably should have put that in quotes but here it is again below. Also here is the web address:

http://www.globalpropertyguide.com/faq/squ...and-yields#ans5

Here is paragraph copied and pasted if you do not want to look for yourself.

"What are the sources of the Guide´s price data? Can these sources be trusted?

We draw our figures from our own, in-house analysis. Our research is based on a simple yet effective method - we systematically scan web advertisements for residential property, looking at offers for sale, and offers for rent, of good (but not new) apartments.

Despite its simplicity, with care and commitment to consistency this method can produce quality results. We begin by defining key upper-end rental districts in the capital city. We take care to keep a database of where the properties are located, so as to ensure consistency in subsequent years. We carefully select appropriate price ranges. We take average prices, rejecting deviant outliers. Buyers of the full data set have access to these comparability specifications.

The data measures up well to data provided by national statistical organizations, where these are available for comparison, and usually performs better than multi-housing organization data."

With all due respect, but that method is not how you research real estate. On the basis described your results will be incorrect by a margin of 10 to 30% on the assumption that most sales and lease rates are negotiable, no factor for rent free etc is made.

To provide this data accurately you need access to actual transaction evidence. By forming an opinion based on advertised rates only you are establishing a market value in excess of actual performance.

Advertised rates for unsold property can not form the basis of a valuation or market benchmark and as such is inherently misleading. The value can only be determined upon sale and an unsold property may arguably be over priced, and hence remains unsold.

Frankly this is best left to the professional international firms that understand the market place, have access to recent sales data and have a greater knowledge of how to differentiate between actual property grades. It is quite easy for the untrained eye to misread a buildings grade and place it in the wrong category, I see this quite frequently with apples being compared with oranges.

[Pakboong]

You may have said it but apparently you did not bother to read their website and methodology. According to their website they use the newspaper and internet and they use asking prices with apparently little to no consideration for vacancy and therefore existing and future inventory.

Probably should have put that in quotes but here it is again below. Also here is the web address:

http://www.globalpropertyguide.com/faq/squ...and-yields#ans5

Here is paragraph copied and pasted if you do not want to look for yourself.

"What are the sources of the Guide´s price data? Can these sources be trusted?

We draw our figures from our own, in-house analysis. Our research is based on a simple yet effective method - we systematically scan web advertisements for residential property, looking at offers for sale, and offers for rent, of good (but not new) apartments.

Despite its simplicity, with care and commitment to consistency this method can produce quality results. We begin by defining key upper-end rental districts in the capital city. We take care to keep a database of where the properties are located, so as to ensure consistency in subsequent years. We carefully select appropriate price ranges. We take average prices, rejecting deviant outliers. Buyers of the full data set have access to these comparability specifications.

The data measures up well to data provided by national statistical organizations, where these are available for comparison, and usually performs better than multi-housing organization data."

I am talking about BOT property indicators, which the Global Property guide apparently used to create some of their numbers. I am not sure how accurate they are as Banks do not like bad news in housing and if the numbers can be manipulated to create a more positive picture, perhaps the BOT would have a reason to do that. There is however, no motive on the part of any of these sources, accurate or not, to paint a bleaker than real picture of the housing market in Thailand. I am not arguing the accuracy of anything. I am however considering the logic of their findings and their motives for slanting one way or another if that would be possible.

These people whoever they are, I would think depend on a positive picture, apparently as you do. I don't care one way or the other. I am simply interested for personal investment reasons. I think there will be a double dip recession with world wide housing taking another hit. That hit is likely to include Thailand. You may not agree and both of us have put our opinion with supporting information on record here and time will tell which if us is correct.

If you have raw data that supports your logic, please post it. Otherwise, you are coming across as a snake oil salesman.

I simply want the duck to quack a few times, waddle around in a duck like manner, and maybe flap it's wings a few times before I buy it. You apparently want me to buy the duck because you say it is a duck.

[Pakboong]

You may have said it but apparently you did not bother to read their website and methodology. According to their website they use the newspaper and internet and they use asking prices with apparently little to no consideration for vacancy and therefore existing and future inventory.

Probably should have put that in quotes but here it is again below. Also here is the web address:

http://www.globalpropertyguide.com/faq/squ...and-yields#ans5

Here is paragraph copied and pasted if you do not want to look for yourself.

"What are the sources of the Guide´s price data? Can these sources be trusted?

We draw our figures from our own, in-house analysis. Our research is based on a simple yet effective method - we systematically scan web advertisements for residential property, looking at offers for sale, and offers for rent, of good (but not new) apartments.

Despite its simplicity, with care and commitment to consistency this method can produce quality results. We begin by defining key upper-end rental districts in the capital city. We take care to keep a database of where the properties are located, so as to ensure consistency in subsequent years. We carefully select appropriate price ranges. We take average prices, rejecting deviant outliers. Buyers of the full data set have access to these comparability specifications.

The data measures up well to data provided by national statistical organizations, where these are available for comparison, and usually performs better than multi-housing organization data."

With all due respect, but that method is not how you research real estate. On the basis described your results will be incorrect by a margin of 10 to 30% on the assumption that most sales and lease rates are negotiable, no factor for rent free etc is made.

To provide this data accurately you need access to actual transaction evidence. By forming an opinion based on advertised rates only you are establishing a market value in excess of actual performance.

Advertised rates for unsold property can not form the basis of a valuation or market benchmark and as such is inherently misleading. The value can only be determined upon sale and an unsold property may arguably be over priced, and hence remains unsold.

Frankly this is best left to the professional international firms that understand the market place, have access to recent sales data and have a greater knowledge of how to differentiate between actual property grades. It is quite easy for the untrained eye to misread a buildings grade and place it in the wrong category, I see this quite frequently with apples being compared with oranges.

Ace, i have been reading your posts on the housing market for some time. Many of your comments suggest you are a knowledgeable and more importantly objective, professional who could be trusted to represent a client accordingly

[donx]

You may have said it but apparently you did not bother to read their website and methodology. According to their website they use the newspaper and internet and they use asking prices with apparently little to no consideration for vacancy and therefore existing and future inventory.

Probably should have put that in quotes but here it is again below. Also here is the web address:

http://www.globalpropertyguide.com/faq/squ...and-yields#ans5

Here is paragraph copied and pasted if you do not want to look for yourself.

"What are the sources of the Guide´s price data? Can these sources be trusted?

We draw our figures from our own, in-house analysis. Our research is based on a simple yet effective method - we systematically scan web advertisements for residential property, looking at offers for sale, and offers for rent, of good (but not new) apartments.

Despite its simplicity, with care and commitment to consistency this method can produce quality results. We begin by defining key upper-end rental districts in the capital city. We take care to keep a database of where the properties are located, so as to ensure consistency in subsequent years. We carefully select appropriate price ranges. We take average prices, rejecting deviant outliers. Buyers of the full data set have access to these comparability specifications.

The data measures up well to data provided by national statistical organizations, where these are available for comparison, and usually performs better than multi-housing organization data."

With all due respect, but that method is not how you research real estate. On the basis described your results will be incorrect by a margin of 10 to 30% on the assumption that most sales and lease rates are negotiable, no factor for rent free etc is made.

To provide this data accurately you need access to actual transaction evidence. By forming an opinion based on advertised rates only you are establishing a market value in excess of actual performance.

Advertised rates for unsold property can not form the basis of a valuation or market benchmark and as such is inherently misleading. The value can only be determined upon sale and an unsold property may arguably be over priced, and hence remains unsold.

Frankly this is best left to the professional international firms that understand the market place, have access to recent sales data and have a greater knowledge of how to differentiate between actual property grades. It is quite easy for the untrained eye to misread a buildings grade and place it in the wrong category, I see this quite frequently with apples being compared with oranges.

I think there is a bit of confusion going on here.

The method that mjohnson282 is talking about is not his/her method. It is the Global Property Guide's method. mjohnson282 is simply quoting what they say on their own website.

[quiksilva]

It should be noted that the BOT figures that are used by the Global Property Report, include a wide variety of different residential property types, of all grades.

So you have data for single / terraced homes in fringe locations that cost less than 1 million a piece grouped together with luxury condominiums over looking Lumpini Park, when clearly they are very different beasts, driven by very different factors.

As such they are not useful for anyone, except at a macro level where they may be of interest to economists and the government.

As Ace said, for most people you would be far better served reading the free research reports that are issued by the leading international property consultants. Oh and dont just read one, read them all, and so have a better informed opinion.

Edited March 16, 2010 by quiksilva

[123ace]

You may have said it but apparently you did not bother to read their website and methodology. According to their website they use the newspaper and internet and they use asking prices with apparently little to no consideration for vacancy and therefore existing and future inventory.

Probably should have put that in quotes but here it is again below. Also here is the web address:

http://www.globalpropertyguide.com/faq/squ...and-yields#ans5

Here is paragraph copied and pasted if you do not want to look for yourself.

"What are the sources of the Guide´s price data? Can these sources be trusted?

We draw our figures from our own, in-house analysis. Our research is based on a simple yet effective method - we systematically scan web advertisements for residential property, looking at offers for sale, and offers for rent, of good (but not new) apartments.

Despite its simplicity, with care and commitment to consistency this method can produce quality results. We begin by defining key upper-end rental districts in the capital city. We take care to keep a database of where the properties are located, so as to ensure consistency in subsequent years. We carefully select appropriate price ranges. We take average prices, rejecting deviant outliers. Buyers of the full data set have access to these comparability specifications.

The data measures up well to data provided by national statistical organizations, where these are available for comparison, and usually performs better than multi-housing organization data."

With all due respect, but that method is not how you research real estate. On the basis described your results will be incorrect by a margin of 10 to 30% on the assumption that most sales and lease rates are negotiable, no factor for rent free etc is made.

To provide this data accurately you need access to actual transaction evidence. By forming an opinion based on advertised rates only you are establishing a market value in excess of actual performance.

Advertised rates for unsold property can not form the basis of a valuation or market benchmark and as such is inherently misleading. The value can only be determined upon sale and an unsold property may arguably be over priced, and hence remains unsold.

Frankly this is best left to the professional international firms that understand the market place, have access to recent sales data and have a greater knowledge of how to differentiate between actual property grades. It is quite easy for the untrained eye to misread a buildings grade and place it in the wrong category, I see this quite frequently with apples being compared with oranges.

I think there is a bit of confusion going on here.

The method that mjohnson282 is talking about is not his/her method. It is the Global Property Guide's method. mjohnson282 is simply quoting what they say on their own website.

Apolologies to mjohnson282.

[Gary A]

I lived in a Thai owned new two bedroom house in a gated community. It was for sale for a long time. The asking price was 3.5 million baht. I ended up renting it for 3,500 baht per month. That's not much of a return on investment.

[Pakboong]

You may have said it but apparently you did not bother to read their website and methodology. According to their website they use the newspaper and internet and they use asking prices with apparently little to no consideration for vacancy and therefore existing and future inventory.

Probably should have put that in quotes but here it is again below. Also here is the web address:

http://www.globalpropertyguide.com/faq/squ...and-yields#ans5

Here is paragraph copied and pasted if you do not want to look for yourself.

"What are the sources of the Guide´s price data? Can these sources be trusted?

We draw our figures from our own, in-house analysis. Our research is based on a simple yet effective method - we systematically scan web advertisements for residential property, looking at offers for sale, and offers for rent, of good (but not new) apartments.

Despite its simplicity, with care and commitment to consistency this method can produce quality results. We begin by defining key upper-end rental districts in the capital city. We take care to keep a database of where the properties are located, so as to ensure consistency in subsequent years. We carefully select appropriate price ranges. We take average prices, rejecting deviant outliers. Buyers of the full data set have access to these comparability specifications.

The data measures up well to data provided by national statistical organizations, where these are available for comparison, and usually performs better than multi-housing organization data."

With all due respect, but that method is not how you research real estate. On the basis described your results will be incorrect by a margin of 10 to 30% on the assumption that most sales and lease rates are negotiable, no factor for rent free etc is made.

To provide this data accurately you need access to actual transaction evidence. By forming an opinion based on advertised rates only you are establishing a market value in excess of actual performance.

Advertised rates for unsold property can not form the basis of a valuation or market benchmark and as such is inherently misleading. The value can only be determined upon sale and an unsold property may arguably be over priced, and hence remains unsold.

Frankly this is best left to the professional international firms that understand the market place, have access to recent sales data and have a greater knowledge of how to differentiate between actual property grades. It is quite easy for the untrained eye to misread a buildings grade and place it in the wrong category, I see this quite frequently with apples being compared with oranges.

I think there is a bit of confusion going on here.

The method that mjohnson282 is talking about is not his/her method. It is the Global Property Guide's method. mjohnson282 is simply quoting what they say on their own website.

NO confusion here. All are just opinion. It is motive that clouds the discussion. As Quciksilva says, BOT reflects macro economic factors regarding housing in Thailand which are important to me personally as macro in my mind, determines the trends I care about. Those who need a micro version may need a different view. But, I have used the macro reference more than once in posting to this thread. I care about the health of the total, not whether Bangkok is different than Pattaya. Of course it is and we do not need to be told that. We also know that the foreign market only represents a fraction of the total market. It is however, that fraction within which we foreigners trade so it in some respects it becomes an independent market as does the Pattaya market, whether it makes up 2% of the total or 30% of the total.

Nobody needs to apologize for the figures we read in the various publications. If they make sense, consider them. If they, on the other hand, sound like sales promotion double speak be cautious at least.

[mjohnson282]

It should be noted that the BOT figures that are used by the Global Property Report, include a wide variety of different residential property types, of all grades.

So you have data for single / terraced homes in fringe locations that cost less than 1 million a piece grouped together with luxury condominiums over looking Lumpini Park, when clearly they are very different beasts, driven by very different factors.

As such they are not useful for anyone, except at a macro level where they may be of interest to economists and the government.

As Ace said, for most people you would be far better served reading the free research reports that are issued by the leading international property consultants. Oh and dont just read one, read them all, and so have a better informed opinion.

Global Property Report DOES NOT USE BOT figures, if they do please provide the link. I gave you the link two times. Stating that implies some level of credibility, which the site does not merit.

Not sure why I need to reiterate but here:

"According to their website they use the newspaper and internet and they use asking prices with apparently little to no consideration for vacancy and therefore existing and future inventory."

Pakboong, if the statement above sounds bullish to you I suggest you look at some other investment. What Global Property Guide gives you is the worst form of "research" and the fact that people continue to cite it as a due diligence reference is laughable.

Ace, the factors you mentioned in regards to discounts on rent and price I totally agree with. Concessions and discounts, assuming non-distressed assets, are a factor of inventory, current vacancy and future supply. If the market was at stabilized occupancy (92.5%+) you could make the argument this data set is somewhat useful although I would still not rely on it. As it is today its complete trash.

If you assume the market is 90% occupied (its not even close) any pro forma analysis should incorporate this into your model. Simply put your unit would be vacant 1 out of every 10 months. If you want to be aggressive and assume you can outperform adjust it accordingly. Global Property Guide does not factor this into their yield. In addition, Global Property Guide does factor operational costs in their yield analysis (maintenance fee, leasing commissions, repairs & maintenance, etc...). Also since you are talking yield consider your transactions costs of 5-6% (or whatever they are here) on exit. I could go on but you get the point.

As to the real estate firms you can use their "research" as initial due diligence but take it with a huge grain of salt. Research is not a revenue driver for them. Probably very little time or money is spent on the data collection and you have very little idea about their methodology. They have a vested interest in a more bullish outlook as increased optimism leads to transaction volume. Further, they compete for listings and painting a negative outlook will not secure new business.

[123ace]

[

As to the real estate firms you can use their "research" as initial due diligence but take it with a huge grain of salt. Research is not a revenue driver for them. Probably very little time or money is spent on the data collection and you have very little idea about their methodology. They have a vested interest in a more bullish outlook as increased optimism leads to transaction volume. Further, they compete for listings and painting a negative outlook will not secure new business.

This is certainly valid for 'off the shelf' research, however any reseach tailor made and paid for should reflect the real situation, with no bias towards ultimate sales. All the intl firms provide these for a fee and these reports are often highly critical of the market with almost no similarity with what is quoted in the press etc.

[quiksilva]

It should be noted that the BOT figures that are used by the Global Property Report, include a wide variety of different residential property types, of all grades.

So you have data for single / terraced homes in fringe locations that cost less than 1 million a piece grouped together with luxury condominiums over looking Lumpini Park, when clearly they are very different beasts, driven by very different factors.

As such they are not useful for anyone, except at a macro level where they may be of interest to economists and the government.

As Ace said, for most people you would be far better served reading the free research reports that are issued by the leading international property consultants. Oh and dont just read one, read them all, and so have a better informed opinion.

Global Property Report DOES NOT USE BOT figures, if they do please provide the link.

The following image was taken directly from the first page of your link.

^^ see the source at the bottom of the image.

I'm not defending their numbers, far from it. I think this index is far too macro in scope to be of any use to most people. I can see why they use it, as it is probably the only, truly, independent property index available in the country. Not that this means much.

The truth is you will get a far better understanding on specific market dynamics of the various sub-markets from the research teams of the various international property consultants who have well qualified, dedicated staff who are paid to gather data and analyse it, all day, every day.

These teams are valuable resource for the company. They apply internationally accepted techniques as prescribed by the regional and global heads of their service lines and, as Ace said, are most certainly not a cost center. Although some reports are made available, free of charge, to everyone.

I understand that its natural to want to mistrust those who work in the industry but as said before, if we are too bullish on the market we will lose credibility and thereby in the long run, lose revenue, so its actually in our interest to be objective and frank when reporting our observed market stats and views, and, yes, even when that means upsetting people.

Edited March 16, 2010 by quiksilva

[AddictedToThai]

From yesterdays news: "Sansiri opened its Pyne condominium project on Ratchathewi Road last week and it sold out in a brief two hours. It has a market value of Bt2.1 billion."

http://www.nationmultimedia.com/worldhotne...-transit-routes

[Pakboong]

It should be noted that the BOT figures that are used by the Global Property Report, include a wide variety of different residential property types, of all grades.

So you have data for single / terraced homes in fringe locations that cost less than 1 million a piece grouped together with luxury condominiums over looking Lumpini Park, when clearly they are very different beasts, driven by very different factors.

As such they are not useful for anyone, except at a macro level where they may be of interest to economists and the government.

As Ace said, for most people you would be far better served reading the free research reports that are issued by the leading international property consultants. Oh and dont just read one, read them all, and so have a better informed opinion.

Global Property Report DOES NOT USE BOT figures, if they do please provide the link. I gave you the link two times. Stating that implies some level of credibility, which the site does not merit.

Not sure why I need to reiterate but here:

"According to their website they use the newspaper and internet and they use asking prices with apparently little to no consideration for vacancy and therefore existing and future inventory."

Pakboong, if the statement above sounds bullish to you I suggest you look at some other investment. What Global Property Guide gives you is the worst form of "research" and the fact that people continue to cite it as a due diligence reference is laughable.

Ace, the factors you mentioned in regards to discounts on rent and price I totally agree with. Concessions and discounts, assuming non-distressed assets, are a factor of inventory, current vacancy and future supply. If the market was at stabilized occupancy (92.5%+) you could make the argument this data set is somewhat useful although I would still not rely on it. As it is today its complete trash.

If you assume the market is 90% occupied (its not even close) any pro forma analysis should incorporate this into your model. Simply put your unit would be vacant 1 out of every 10 months. If you want to be aggressive and assume you can outperform adjust it accordingly. Global Property Guide does not factor this into their yield. In addition, Global Property Guide does factor operational costs in their yield analysis (maintenance fee, leasing commissions, repairs & maintenance, etc...). Also since you are talking yield consider your transactions costs of 5-6% (or whatever they are here) on exit. I could go on but you get the point.

As to the real estate firms you can use their "research" as initial due diligence but take it with a huge grain of salt. Research is not a revenue driver for them. Probably very little time or money is spent on the data collection and you have very little idea about their methodology. They have a vested interest in a more bullish outlook as increased optimism leads to transaction volume. Further, they compete for listings and painting a negative outlook will not secure new business.

Residential property prices in Thailand dropped further in 2009, because of continuing political tensions and the recession. House prices fell 3.7% during the year to Q2 2009 (1% in real terms), according to the Bank of Thailand (BOT).

http://www.globalpropertyguide.com/Asia/Th...d/Price-History

This is a cut and paste from one of the Global Property guide sections. If you follow the Bot link it will take you to property indicators from BOT at this link

IF it is the Property Guide that has you disturbed, skip it and go directly to the BOT property indicators in the links below:

http://www.bot.or.th/English/Statistics/Ec...ndicators.aspx#

These number and I have studied them in detail make up the chart on the first link. They are provided by BOT and are usually updated quarterly.

[trogers]

Residential property prices in Thailand dropped further in 2009, because of continuing political tensions and the recession. House prices fell 3.7% during the year to Q2 2009 (1% in real terms), according to the Bank of Thailand (BOT).

http://www.globalpropertyguide.com/Asia/Th...d/Price-History

This is a cut and paste from one of the Global Property guide sections. If you follow the Bot link it will take you to property indicators from BOT at this link

IF it is the Property Guide that has you disturbed, skip it and go directly to the BOT property indicators in the links below:

http://www.bot.or.th/English/Statistics/Ec...ndicators.aspx#

These number and I have studied them in detail make up the chart on the first link. They are provided by BOT and are usually updated quarterly.

Questions - Were the prices built up from offplan bookings or from title transfers of recently completed projects? Do prices include existing/older properties that are bought and sold during the same period?

[Pakboong]

Residential property prices in Thailand dropped further in 2009, because of continuing political tensions and the recession. House prices fell 3.7% during the year to Q2 2009 (1% in real terms), according to the Bank of Thailand (BOT).

http://www.globalpropertyguide.com/Asia/Th...d/Price-History

This is a cut and paste from one of the Global Property guide sections. If you follow the Bot link it will take you to property indicators from BOT at this link

IF it is the Property Guide that has you disturbed, skip it and go directly to the BOT property indicators in the links below:

http://www.bot.or.th/English/Statistics/Ec...ndicators.aspx#

These number and I have studied them in detail make up the chart on the first link. They are provided by BOT and are usually updated quarterly.

Questions - Were the prices built up from offplan bookings or from title transfers of recently completed projects? Do prices include existing/older properties that are bought and sold during the same period?

I honestly don't know as I am not connected to the industry in any way, just an interested individual and my views are simple and personal.

I do, however, expect that BOT could in no way keep track of any thing that is not in some way registered at some governmental level such as the land office or participating banks. If you take a look at the raw data. They keep track of fees and registrations as well as mortgage numbers. The mortgage numbers interest me most and many here have pointed out that this number is not significant. I think it is. The total number is not that large for any given month but the individual number and the developer number now exceeds a trillion baht and the individual number had doubled in a very short period of time.

They produce an index that is simply a number computed from apparently many factors. The index has dropped significantly in the last few years and if you look at their adjusted for inflation numbers, the index claims that prices are dropping to levels not seen since the early 90s. If you look at the last two quarters the index dropped around 30 pts which is huge since the index is based upon a standard of 100. Their price index puzzles me somewhat as I assume they like good news as all banks practicing fractional reserve banking do. There is absolutely no reason to paint a bleak picture if they have any choice. Bad housing news means defaults and defaults are not good for banks.

Last quarter for example was delayed for some reason. I was expecting the total index number to drop below 100 which it hadn't done for some time. (in the middle of the last decade the index ran above 160) The index was down some 13 points but the index number went up from 107 to 110. Quite suspicious really and probably why many on here have stated they don't believe the numbers. Problem is, if the numbers are not legit, they would be slanted to the positive and not to the negative. If they are not legit, the housing problem is much worse than thought not, better. That is where I am on this matter. If the numbers are manipulated, things are actually worse than they appear. If the numbers are legit, things are still very bad in a relative sense.

[quiksilva]

The BOT figures relate to fluctuations in the prices reached for new transactions, not values of existing stock.

Recall too that this includes many different forms of property, if we look at the market as a whole then by far the largest residential segment (in terms of quantity) will be properties that are aimed at the low income sector, based in fringe locations where land values make such developments feasible.

Drawing conclusions from these figures might perhaps aid you if you are making a decision to buy in a Baan Ua Athorn project, but if you are in the market for a condominium in Bangkok or a villa in any of the major resort destinations then these figures are carry little weight.

If anything the figures suggest that developers have their switched their focus from higher value projects to properties that cater to the low and middle income segment.

Edited March 17, 2010 by quiksilva

[mjohnson282]

It should be noted that the BOT figures that are used by the Global Property Report, include a wide variety of different residential property types, of all grades.

So you have data for single / terraced homes in fringe locations that cost less than 1 million a piece grouped together with luxury condominiums over looking Lumpini Park, when clearly they are very different beasts, driven by very different factors.

As such they are not useful for anyone, except at a macro level where they may be of interest to economists and the government.

As Ace said, for most people you would be far better served reading the free research reports that are issued by the leading international property consultants. Oh and dont just read one, read them all, and so have a better informed opinion.

Global Property Report DOES NOT USE BOT figures, if they do please provide the link. I gave you the link two times. Stating that implies some level of credibility, which the site does not merit.

Not sure why I need to reiterate but here:

"According to their website they use the newspaper and internet and they use asking prices with apparently little to no consideration for vacancy and therefore existing and future inventory."

Pakboong, if the statement above sounds bullish to you I suggest you look at some other investment. What Global Property Guide gives you is the worst form of "research" and the fact that people continue to cite it as a due diligence reference is laughable.

Ace, the factors you mentioned in regards to discounts on rent and price I totally agree with. Concessions and discounts, assuming non-distressed assets, are a factor of inventory, current vacancy and future supply. If the market was at stabilized occupancy (92.5%+) you could make the argument this data set is somewhat useful although I would still not rely on it. As it is today its complete trash.

If you assume the market is 90% occupied (its not even close) any pro forma analysis should incorporate this into your model. Simply put your unit would be vacant 1 out of every 10 months. If you want to be aggressive and assume you can outperform adjust it accordingly. Global Property Guide does not factor this into their yield. In addition, Global Property Guide does factor operational costs in their yield analysis (maintenance fee, leasing commissions, repairs & maintenance, etc...). Also since you are talking yield consider your transactions costs of 5-6% (or whatever they are here) on exit. I could go on but you get the point.

As to the real estate firms you can use their "research" as initial due diligence but take it with a huge grain of salt. Research is not a revenue driver for them. Probably very little time or money is spent on the data collection and you have very little idea about their methodology. They have a vested interest in a more bullish outlook as increased optimism leads to transaction volume. Further, they compete for listings and painting a negative outlook will not secure new business.

Residential property prices in Thailand dropped further in 2009, because of continuing political tensions and the recession. House prices fell 3.7% during the year to Q2 2009 (1% in real terms), according to the Bank of Thailand (BOT).

http://www.globalpropertyguide.com/Asia/Th...d/Price-History

This is a cut and paste from one of the Global Property guide sections. If you follow the Bot link it will take you to property indicators from BOT at this link

IF it is the Property Guide that has you disturbed, skip it and go directly to the BOT property indicators in the links below:

http://www.bot.or.th/English/Statistics/Ec...ndicators.aspx#

These number and I have studied them in detail make up the chart on the first link. They are provided by BOT and are usually updated quarterly.

Ok I see what you are saying. Well I guess its just semantics but I was talking about GLOBAL PROPERTY GUIDE as being a reliable source and not BOT. I see where Global Property Guide reprints BOT information on pricing but the comment was on THEIR research, which is totally flawed as it relates to yield (and pricing --- read their articles).

Is someone really going to pay $$$ for their in house research to buy a condo. I doubt it. You might get it as part of a development feasibility study or acquisition.

[quiksilva]

I agree, buyers will not commission research reports to buy a condo, usually as you say, commissioned reports are part of the due diligence process for major acquisitions or feasibility studies.

This is why I suggest reading the free research papers that are available from the various international property consultancies, and note too that I suggest that buyers read all of the reports they can find and draw their own conclusions from the data presented therein, and be sure to look carefully at the assumptions each has made.

[mjohnson282]

In real estate economics, this phenomenon is called 'Sticky Prices', especially in a market where majority of the property units are purchased though cash and not mortgages.

In the developed world, majority of property purchase is financed by mortgages, and resales of many foreclosed properties at the same time will force prices down.

If you are looking for foreclosed properties in Bangkok, try the auctions by the Legal Execution Department. I acquired a 3-bedroom unit from there over a year ago.

http://www.led.go.th/

Reality is yields are not 6%+ in Bangkok. Some people may achieve this number but most do not. Those that do achieve this number are probably doing it on their acquisition price and not the market value. The "dead equity" is not achieving 6%. In addition, these yield calculations typically omit vacancy, R&M, LCs, TIs, closing costs, and may or may not include maintenance fees. Its really more of a gross rent yield which is complete BS.

Those people that tell you prices will never go down are self serving. Of course if you are buying as a primary residence or for personal use than the choice is more difficult. This market is supported by buyers that view real estate as a commodity without regard to utility or yield. Not typically a sound real estate investment strategy and probably due in part to a lack of alternative investments and a low interest rate environment. In addition, this cycle seems to have much greater participation. Vacancy and its negative impact on effective rent will become more of an issue with continuing additions to supply.

If you are buying as income property you will do much better elsewhere. Just about any fixed income investment will outperform a single condo purchase. Real Estate is cyclical and developers always over build. The optimists here will tell you Bangkok is different, prices never go down. Anytime someone tells you an investment defies market theory you can pretty much assume they are full of it.

There is an interesting theory about how the tallest building ever built in a market marks the peak of the real estate cycle.

[trogers]

Reality is yields are not 6%+ in Bangkok. Some people may achieve this number but most do not. Those that do achieve this number are probably doing it on their acquisition price and not the market value.

Older properties in reasonably good location (ie. high demand and minimal vacancy period) can achieve 9-10% gross yield and 6-7% net yield. Projects completed in the last couple of years are probably achieving around 3-4% net yield when taking period of vacancy into consideration.

The reason is as you have said - lower acquisition price. But acquisition price for older properties (10 years or older) are quite close to market price, with only some at 10-15% lower, due to owners looking to sell fast, or in auctions.