Condominium Boom Slows

[george]

Condominium boom slows

BANGKOK: -- When Raimon Land’s chief executive Nigel J Cornick last year warned that the company’s residential firm was avoiding investing in the speculative bubble forming along Sukhumvit Road, he had a bad feeling many projects there wouldn’t get built.

A year after his prediction, the chickens have come home to roost.

Over the weekend, one Sukhumvit project was offering a 50-per-cent discount on its units. Many other projects are stalled and marketing movements have slowed at a number of sites.

In his real estate report last week on the local condominium market, Cornick expressed some optimism that less speculative projects with locations that did not face an over-supply were better poised to find buyers.

“We are beginning to see a slowdown in new projects launched as developers are concerned about the effects of rising development and construction costs,” he said. “The developers are focussing, instead, on making sales at existing projects.”

Last year, 42 projects were launched offering 7,428 units. Nearly 3,000 of these units, or 42 per cent of the supply, were located in Sukhumvit.

In the first quarter of this year, however, only five new projects were launched. These projects offered just 950 units.

The drop is most pronounced in the Sukhumvit zone, where less than 250 new units were launched in the past quarter.

“Construction has slowed at many projects,” said Raimon Land’s report, “creating doubts as to whether such projects will be completed.”

At the same time, Raimon saw a shift in locations of new projects, to new areas that are being connected to mass transit lines.

Some developers in Sukhumvit are doing better than others, only because of superior locations and competitive prices.

But those that had marked up to extremely lofty levels and are located in chronically traffic-snarled areas are finding it harder to offload units.

Cornick said the inflationary trends for real estate has also been tough on builders.

“Higher cost has forced prices up by Bt72,000 a square metre on average for Grade-A units,” he said.

Meanwhile there is also a surge in new supply coming in the Ratchadaphisek area this quarter. Almost 3,000 units will be offered in this zone later this year. These apartments will have plenty of smaller studio units selling for under Bt1 million. They are being launched soon and their developers are targeting the lower middle-income segment.

“For the Ratchadaphisek area, developers cannot charge more than Bt40,000 a square metre because the population there are mostly fixed income and they cannot support high-priced homes,” said one builder in the area.

“One project last year tried to sell units at Bt50,000,” he said, “but soon discovered no one was booking them.”

At the same time Raimon Land remains optimistic that quality homes at reasonable prices will find purchasers.

After sounding the alarm on Sukhumvit last year, the company developed sites outside of Bangkok, such as Pattaya and Phuket. Both areas have found lucrative niche markets.

But the company is now poised to return to tap the Bangkok front later this year. After riding out a rough patch and as “get-rich-quick operators” fall by the wayside, the real estate market should favour more balanced and sound players.

“There’s still a healthy demand for homes, but less so in the luxury end,” said a mid-income housing developer. “But competition should intensify as there are now many players.”

--The Nation 2005-05-30

[~G~]

A temporary slowdown or the beginning of the crash?

[billd766]

Deja vu all over again.

The rich get richer, the poor don't change and what will happen to the middle class again?

There are still dead projects from 1997 along Sukhumvit road in prime positions and who will want to develop the Soi 10 area and Asoke corner now?

Edited May 30, 2005 by billd766

[ray23]

A temporary slowdown or the beginning of the crash?

<{POST_SNAPBACK}>

Now theis is the real question, do you suppose the real estate market will come back into the reality of costs here. From what I can see at things juncture in my area or way over priced. 400 Baht for a ria of land within 20 Kms of Udon road or no road. or utilties. Seems way beyond what land prices should be. Hence I doubt that they could hold there value overtime. Udon has many many buidlign left vacant for the last crash that no one has done anything with, but yet they are builiding right next to them. Doesn't seem like a good move for the local economies.

Financing has gotten crazy as far as I can tell for the Thais, many of the homes that in the complex purchased by Tais are already being abandoned because they simply can't make the payments. Banks are still holding properties from the last crash. I don't think these are good indicators for the economy overall. But to be honest I undestand absolutely nothing about this business. So mine is nothing more then a guess.

But I will wait a little longer before I buy

[Elysium]

There are still dead projects from 1997 along Sukhumvit road in prime positions and who will want to develop the Soi 10 area and Asoke corner now?

Asoke corner will be developed soon. Plans are drawn and it is confirmed that a 12 storey boutique hotel will be build on this corner.

So, someone will want to develop those projects....

[aletta]

Banks are still holding properties from the last crash.

Spot on.Huge porfolios of properties are held by the banks who refuse to sell below inflated book values.

They hold no minimum bid auctions but can bid on the properties themselves.

Edited May 30, 2005 by aletta

[Teach]

I warned of this a year, and again recently on the forum of home purchase advice. High end purchases will see a tumble in prices soon as interest from the market wanes. Lower end however will see a resurgence as confidence shrinks.

You will see a lot of skeletons developing soon as developers in for the kill pull out. '97 all over again.

When will the government learn????

If anyone is interested there will be soon super bargains in the mid-high range around August.

T.

[Tiger7Moth]

I warned of this a year, and again recently on the forum of home purchase advice. High end purchases will see a tumble in prices soon as interest from the market wanes. Lower end however will see a resurgence as confidence shrinks.

You will see a lot of skeletons developing soon as developers in for the kill pull out. '97 all over again.

When will the government learn????

If anyone is interested there will be soon super bargains in the mid-high range around August.

T.

<{POST_SNAPBACK}>

Well, since I read that 2 times as many new development units were due to come online in 2005 as the entire number sold in 2004, it seemed unlikely that business conditions would be so favorable in Thailand that such an explosive "boom" would be matched by demand.

Now, unfortuanately, rather than business conditions being favorable, the opposite has occurred (due to Tsunami, rising oil prices, etc). So, there remains a building boom (OK , supposedly few new projects have begun in 2005 (although I can look out my living room window and see one in progress and one with a splashy new advertisement) - but, many, many 2004 projects still under way with completion yet to come (if ever).

Although I did read in the Nation that one project on Sukumvit was selling at 50 percent advertised price, I have also read of banks reluctance to sell anything below book value.

So, will bargains be available or won't they? And, how does one find these bargains?

As Teach said, "If anyone is interested there will be soon super bargains in the mid-high range around August.". Well, I am interested and hope this thread remains active and informative.

[charles]

Condominium boom slows

“Construction has slowed at many projects,” said Raimon Land’s report, “creating doubts as to whether such projects will be completed.”

Seeing as newspaper reports won't tell you, anyone know the names of the projects that are doing badly and likely to stall?

[westcoastnative]

What about financing. I have heard it is hard for foreigners to get a loans from the Thai banks and cash purchases were the norm. Also, what do high end units go for and what are the average size of the units in sq. feet?

Edited May 30, 2005 by westcoastnative

[simon_derv]

Condominium boom slows

“Construction has slowed at many projects,” said Raimon Land’s report, “creating doubts as to whether such projects will be completed.”

Seeing as newspaper reports won't tell you, anyone know the names of the projects that are doing badly and likely to stall?

<{POST_SNAPBACK}>

the report can be downloaded from main corporate website: www.raimonland.com

[simon_derv]

What about financing. I have heard it is hard for foreigners to get a loans from the Thai banks and cash purchases were the norm. Also, what do high end units go for and what are the average size of the units in sq. feet?

<{POST_SNAPBACK}>

if you look at Pattaya and Phuket market which are foreign buyers market, financing is low as they are still nothing available. for Bangkok, banks have already lowered financial opportunities for units oiver 10 million baht last year(250,000 USD). From 'Condominium Focus' published by Raimon Land, average price of gradeA condo in Bangkok is approx 72,000 baht/sq.m (US$168 psf).

[mnoorsapl]

Condominium boom slows

“One project last year tried to sell units at Bt50,000,” he said, “but soon discovered no one was booking them.”

--The Nation 2005-05-30

<{POST_SNAPBACK}>

It definately very cheap and no one is booking

something must be wrong .

[Rhys]

Steady.. Wait for it.. Ka Boom

[Artisan]

What about financing. I have heard it is hard for foreigners to get a loans from the Thai banks and cash purchases were the norm. Also, what do high end units go for and what are the average size of the units in sq. feet?

<{POST_SNAPBACK}>

Cash purchases are the norm. The Condominium Act of 1999 defines who can buy a condominium here and Section 19 (1)/5 one condition as (quote) "An alien or a juristic person, which the law treats as an alien, who imports foreign currency into the Kingdom or withdraws money from a deposit account of Thai Baht of a person having residence abroad or withdraws money from a deposit account of foreign currency"(unquote).

In plain English.......a buyer must use 'new' money brought into Thailand!

[jrincon17]

What about financing. I have heard it is hard for foreigners to get a loans from the Thai banks and cash purchases were the norm. Also, what do high end units go for and what are the average size of the units in sq. feet?

<{POST_SNAPBACK}>

if you look at Pattaya and Phuket market which are foreign buyers market, financing is low as they are still nothing available. for Bangkok, banks have already lowered financial opportunities for units oiver 10 million baht last year(250,000 USD). From 'Condominium Focus' published by Raimon Land, average price of gradeA condo in Bangkok is approx 72,000 baht/sq.m (US$168 psf).

<{POST_SNAPBACK}>

THats nutz , might as well stay in the states for that kind of money .

[bkk_mike]

Remember that price is grade A condos on Sukhumvit...

Comparing those prices with the rest of Thailand is like taking the price of a condo in midtown Manhattan and extrapolating it to house prices in Alabama.

As a rule, Bangkok is more expensive than other places in Thailand, and the western end of Sukhumvit is more expensive than most of the rest. (barring a few tourist places like parts of Phuket and Koh Samui).

Edited May 30, 2005 by bkk_mike

[thaigene2]

I agree with Artisan. I've given up on the idea of ownership here for the time being anyway. The Government has thrown up way too many roadblocks for foreigners even for condos. In answer to the question about financing, I've been told by several in-the-know bankers in BKK that they will only lend to you once you have purchased the condo and REGISTERED it in your own name. (Of course, if you had a rich daddy or lots of your own money you wouldn't need a mortgage now would ya.)

Some bankers will lend, but usually these branches are in the suburbs where they don't encounter farangs very often and don't understand the rules (or 'practice') that 100% of the condo purchase price must be wired into the country from offshore for the foreigner to make the purchase legally.

So..yes some will lend to you, but try to register in your name and the trouble begins..especially so if you already paid the money over to the seller..Now you've got a mortgage on a place you don 't really own..at least your name isn't registered as such. You're in limbo..not sure if you could ever sell it..or whether the former 'seller's' name is still the legal owner as listed at the registry.

As someone else here said the prices are stupid anyway now..there's pretty clearly oversupply for a minority of foreign buyers with cash in hand, and the increasingly shrinking number of rich or middle-class chinese thai kids moving out of the family nest.

Rent..and save...and wait at least that's my advice for what it's worth.

[simon_derv]

Condominium boom slows

“One project last year tried to sell units at Bt50,000,” he said, “but soon discovered no one was booking them.”

--The Nation 2005-05-30

<{POST_SNAPBACK}>

It definately very cheap and no one is booking

something must be wrong .

<{POST_SNAPBACK}>

i think it is in baht per sq. meter

[simon_derv]

THats nutz , might as well stay in the states for that kind of money . 

<{POST_SNAPBACK}>

but who wanna be in the States, here you have good quality of construiction and services, cheap daily life and nice views on the tropical sea!!! if you want the same in US, you will have to pay more than that!!!

[westcoastnative]

Thanks for the info. Please keep us posted as news becomes available.

[aletta]

Sales of distressed property assets have been very poor for some time now,with only a small percentage sold to the few developers with a few quid.

[Martin]

From George's original posting:

.......new supply coming in the Ratchadaphisek area this quarter. Almost 3,000 units will be offered in this zone later this year. These apartments will have plenty of smaller studio units selling for under Bt1 million....

for a 'smaller studio unit'!!!!!

######'s bells, George. For that, up here, you can go to a really convenient little township on the Highway, buy a 400 sq m plot and have a lovely two-bedroomed bungalow built. BKK is a place to retire from!!

[strobolus]

I agree with Artisan. I've given up on the idea of ownership here for the time being anyway. The Government has thrown up way too many roadblocks for foreigners even for condos. In answer to the question about financing, I've been told by several in-the-know bankers in BKK that they will only lend to you once you have purchased the condo and REGISTERED it in your own name. (Of course, if you had a rich daddy or lots of your own money you wouldn't need a mortgage now would ya.)

Some bankers will lend, but usually these branches are in the suburbs where they don't encounter farangs very often and don't understand the rules (or 'practice') that 100% of the condo purchase price must be wired into the country from offshore for the foreigner to make the purchase legally.

So..yes some will lend to you, but try to register in your name and the trouble begins..especially so if you already paid the money over to the seller..Now you've got a mortgage on a place you don 't really own..at least your name isn't registered as such. You're in limbo..not sure if you could ever sell it..or whether the former 'seller's' name is still the legal owner as listed at the registry.

As someone else here said the prices are stupid anyway now..there's pretty clearly oversupply for a minority of foreign buyers with cash in hand, and the increasingly shrinking number of rich or middle-class chinese thai kids moving out of the family nest.

Rent..and save...and wait at least that's my advice for what it's worth.

<{POST_SNAPBACK}>

Hi guys, what do you think of the project in the silom/sathorn area? Do you think it's worthy buying? I was quoted prices of around 100.000 bht per sq/mt. I am investigating a little bit the real estate market and it seems a really too expensive for bangkok.

[simon_derv]

i think if you looking for unique location in main Sathon road, it is the price you will have to pay and i don't think that waiting to have lower prices is a good solution. However if it is in soi such as suan plu, or Narathiwat, Yenakart don't put more than 60,000-70,000. only salaaeng that is a 'wanted soi' and 85,000 - 90,000 appears to be acceptable. if you refer to Infinity, the Met or even Urbana Sathorn (even if i am less enthousiactic on that one), in my opinion 100,000 / m2 is a good price, and expected gross yield are high (850 baht/m2/month at least). Tchiss

[Tornado]

BTB, the average price for a new condo per sqm is 55,000 baht in Phuket.