30% Fall In Property Market ?

[Buff-horns]

i saw the article in the BKK Post about a 30% fall ,is there going to be another crash on prices ? Thais tighten their belts due to gasoline prices?

[Tiger7Moth]

i saw the article in the BKK Post about a 30% fall ,is there going to be another crash on prices ? Thais tighten their belts due to gasoline prices?

<{POST_SNAPBACK}>

Would you provide some information on the article to which you are referring? I am interested in the possibilty of a fall in prices as I would like to buy a condo sometime in the next year.

[Fanta]

What about drops to rents?? As I am looking for a rental property like a house or town house later this year. in three markets: outskirts/inskirts bkk, chang mai, and maybe khon kaen ??? Is this all just speculation on a price drop? 30% where does this number come from? What is the substance behind this? I never figured a housing bubble in thailand? Anybody got current insights into these markets.. Ideally looking for 2-3bedrooms and as cheap as possible with 6month leases.

[buadhai]

I think the article referred to was in the Post on Thursday. It talked about a 30% drop in the demand for housing in Bangkok. This is based on the number of units of "newly launched" housing projects this year as opposed to last.

There was no discussion of a drop in prices, but, if demand goes down then prices are also bound to fall.

The article speculated that the cause of the drop in demand was the increase in fuel costs.

Frankly, I don't think this is the time to invest in property. But, my GF thinks differently....

[Sumitr Man]

Fanta - rentals, at least in BKK, never come down.

All - something of interest regarding depreciation of land value: Did you know that the Revenue Department will not allow you to mark-down a depreciation in land value for company account purposes? The Courts in Thailand have consitently held that real property [land] cannot depreciate in value.

So, no there won't be a 30% fall in land value - at least, not officially

SM

[ThaiPauly]

I read this article, can't remember what date, you have to take your own view, but I would not spend anything more than 1m on a Condo in BKK right now. They said that there was something like 2,700 Condos built last year and this year it was going to be more like 700. Reason being they can't sell 'em.

Say for example you buy a brand new Studio Condo in "On Nut" you can't go to far wrong at about 1m baht, but anything from probably 3m-15m could see you getting your fingers burnt.

With so many Condo Units for sale the builders cannot hold out forever before they sell them or go bust, so at some point they are going to have to drop their prices to shift them.

I am not giving MY personal opinion here, it is what I have read but this is Thailand and we just don't know truth from fiction do we?

As far as Rentals go, I would personally not worry to much if you are going for a six month lease. Everything has to reflect supply and demand, but out here Builders and Landlords will hold out for their price much longer than Western Countries as dropping prices means a loss of face.

Again I re-itterate, this is only MY opinion, other Posters may see things differently, I am no expert.

Cheers

TP

[Neeranam]

i saw the article in the BKK Post about a 30% fall ,is there going to be another crash on prices ? Thais tighten their belts due to gasoline prices?

Thais tighten their belts due to the gasoline rise as it affect nearly everyone.

Most Thais, once they buy a house they keep it. A drop in prices therefore is good??

[Steve2UK]

With so many Condo Units for sale the builders cannot hold out forever before they sell them or go bust, so at some point they are going to have to drop their prices to shift them.

<{POST_SNAPBACK}>

Not sure how true that is. After '97, when the banks ended up owning a lot of property, my understanding is that many would not drop the price - so that they maintained their asset value on paper? Couple that with individual Thai preference/insistence for holding out for the price they've decided and it starts to look less like the way a western market would function. Just another opinion, of course.

[Heng]

As a Thai land owner with relatively modest holdings... IMO, it doesn't matter what happens to the economy (short of a revolution/war that renders the old title/deed system invalid), we're not going to reduce the price of anything. And yes, we do have a few for sale signs up... but those are pretty much there so that we can guage the market price "X million? well... we'll have to think about it... there's another bid for Y million at the moment... and my granddad is really pressuring me not to sell... you see it was one of the first properties he bought... sentamental value, you know."

You have a significant portion of society here with small holdings (let's say... less than 100 rai) that do not have any downward finance/mortgage pressure, hence no real need or desire to sell or lower prices when he economy heads south. We'll certainly sell if the profit margin is outrageous... but otherwise, you have a lot of families that have "do not sell land" as the house policy.

It's this same kind of thinking (that land is the end all of finite/valuable assets... more finite than oil, gold, etc.) that extends to most of the higher ups in the banks, CPB, etc. Don't get me wrong, you can get some good deals from the banks on foreclosed properties and even the CPB has auctions once in awhile... but they certainly pick through the good stuff first among themselves.

[dr_Pat_Pong]

There are still loads of circa 1997 houses deteriorating away for this very reason. The logic is baffling.

[Heng]

Just concrete, wood, nails, tiles... nothing compared to the value of well located dirt.

Example: Sukapibal 3, 13 rai (between soi 12X and 12X). 1980's price (before Sukapibal 3 existed actually) = XXX,000 Baht. Current 2005 asking price from the public = 80 million Baht. So who cares if there are a X hundred thousand Baht of bricks/concrete/wood weathering away? Still not for sale.

[ThaiPauly]

There are still loads of circa 1997 houses deteriorating away for this very reason. The logic is baffling. 

<{POST_SNAPBACK}>

Defies Logical Reasoning Doctor

[kreon]

as they say history repeats...this crash is going to be worse than 1997, including the stock markets

a vulture in waiting

[Erwin1011]

as they say history repeats...this crash is going to be worse than 1997, including the stock markets

a vulture in waiting

<{POST_SNAPBACK}>

Get of my post Kreon !

[Sumitr Man]

On the issue of the next crash, I beg to differ.

The next crash in Thailand, when it comes, will be driven by consumer credit, not corporate credit & exchange rates. The next crash in Thailand will hurt the average, middle-class, Thai family a lot harder than the last one.

Just my humble opinion.

SM

[Khun Larry]

There are still loads of circa 1997 houses deteriorating away for this very reason. The logic is baffling. 

<{POST_SNAPBACK}>

Defies Logical Reasoning Doctor

<{POST_SNAPBACK}>

Agreed.

Logic is a rare commodity in Thailand as it has to be imported and there are strict quotas. I heard Mr. Spock was denied a visa on this basis.

[charles]

There was no discussion of a drop in prices, but, if demand goes down then prices are also bound to fall.

As explained, not necessarily in Thailand!

Perhaps it would be better to say "if demand goes down then transactions go down." As for prices they will largely stay where they are. It's just that noone is paying them.

So everyone just sits on their land/propertys. This applies not only to individuals but also banks who've inherited propertys from defaulting developers/individuals. Better for their balance sheet to keep it than sell at a low price.

As for builders/developers they will just cease developing for a while (already beginning to happen it seems).

I would imagine big drops in asset values are much more likely as regards the stock market (as seen in the past).

[kreon]

as they say history repeats...this crash is going to be worse than 1997, including the stock markets

a vulture in waiting

<{POST_SNAPBACK}>

Get of my post Kreon !

<{POST_SNAPBACK}>

graag gedaan(with pleasure)

[TokyoT]

There are still loads of circa 1997 houses deteriorating away for this very reason. The logic is baffling. 

<{POST_SNAPBACK}>

Defies Logical Reasoning Doctor

<{POST_SNAPBACK}>

It is quite amazing in regard to how inflexible the market is in relation to price – especially for units owned by locals. Many seem quite content to allow the units to sit empty rather than lower asking prices – even holds true for rental of a unit.

It may be a bit different this time as compared to ’97. The financing behind current project may allow for significant reductions in asking price.

[Sumitr Man]

Let us not forget people, we are talking about a nation of people who would rather borrow at 18-28% than spend savings earning less than 3%.

Logic has never, and will never, be in the equation (so far as I am concerned)

SM

[baht&sold]

It is quite amazing in regard to how inflexible the market is in relation to price – especially for units owned by locals.  Many seem quite content to allow the units to sit empty rather than lower asking prices – even holds true for rental of a unit. 

It may be a bit different this time as compared to ’97.  The financing behind current project may allow for significant reductions in asking price.

<{POST_SNAPBACK}>

Not so amazing really-

The money 'behind the money' mostly fell off a truck in one form or another so the rich/connected who came into easy money could care less if their multiple units sit empty. There's no 'real' pressures to drop prices/rents etc.

As for the 'new' money post '97, there is a slightly healthier CAR (capital adaquecy ratio) at some banks and lending/depreciation/overhead/interest costs paradigms are becoming more of a 'real' factor. Still, the 'old money' rules the day.

[Tiger7Moth]

There was no discussion of a drop in prices, but, if demand goes down then prices are also bound to fall.

So everyone just sits on their land/propertys. This applies not only to individuals but also banks who've inherited propertys from defaulting developers/individuals. Better for their balance sheet to keep it than sell at a low price.

<{POST_SNAPBACK}>

Although there is a valid reason for banks to retain book value, I don't understand how this would apply to individuals. There has certainly been speculative buying on the part of individuals who hope to flip the property or obtain rents. For an individual, the balance sheet reason does not apply. So, why wouldn't an individual be willing to drop the asking price, even taking a "small" lose now instead of a "big" lose latter.

Also, a farang owner, now relocating or whatever, needs to make a sale not save face. So, why wouldn't their be opportunities for bargains from individuals, particulary from farangs?

And, what about the asking price for new building projects (OK, less building will occur) but wouldn't the new building projects reflect market realities?

[charles]

Also, a farang owner, now relocating or whatever, needs to make a sale not save face.  So, why wouldn't their be opportunities for bargains from individuals, particulary from farangs?

And, what about the asking price for new building projects (OK, less building will occur) but wouldn't the new building projects reflect market realities?

<{POST_SNAPBACK}>

I agree, maybe a farang would, don't know how big a group such farangs are though. Imagine most relocating farangs will have been renting or if not might be under the influence of a Thai partner.

New projects are unlikely to drop in price in current conditions of undeniably higher construction costs. Those holding prices are probably cutting their profit margins (or reducing specs). But again, if they can't get margins they're happy with they just won't build/pull the plug.

[Sumitr Man]

Charles:

And a number of projects in Bkk where there was not enough interest to meet the minimum reserve have done exactly that - pulled the plug.

In such a case, I feel sorry for those who have already paid a deposit trying to get their money back, which is why I have always cautioned against buying into a new project - at least till the minimum reserve factor has gone away.

SM

EDIT: as for farangs leaving who have bought property here - many retain ownership in the proprty as a holiday home.

Edited June 17, 2005 by Sumitr Man

[Steve2UK]

Although there is a valid reason for banks to retain book value, I don't understand how this would apply to individuals.  There has certainly been speculative buying on the part of individuals who hope to flip the property or obtain rents.  For an individual, the balance sheet reason does not apply.  So, why wouldn't an individual be willing to drop the asking price, even taking a "small" lose now instead of a "big" lose latter. 

<{POST_SNAPBACK}>

1) In the case of (many) Thai's, it is just not their "way" because it would mean losing face for one thing. Western rules/attutudes don't apply. The small loss now is what counts to most Thai's - and never mind the risk of a bigger loss later.

2) Take another look at Heng's post earlier.

[Heng]

Face is a non-issue when you're looking at long term real estate values here with 100% equity in one's holdings. Land: they aren't making any more of it. People: multiplying as fast as nature allows.

It's not the stock market. Stock certs CAN go to zero. Title deeds do not. Baffling logic perhaps for the finance/mortgage crowd, those who start sweating when the exchange rates head up or down, those who have never received and are unlikely to leave any inheritance, etc.

[Clip_My_Wings]

Fanta - rentals, at least in BKK, never come down.

All - something of interest regarding depreciation of land value: Did you know that the Revenue Department will not allow you to mark-down a depreciation in land value for company account purposes?  The Courts in Thailand have consitently held that real property [land] cannot depreciate in value.

So, no there won't be a 30% fall in land value - at least, not officially 

SM 

<{POST_SNAPBACK}>

this is applicable to uk law as well with regards to land value .. you can however depreciate the value of the buliding in company accounts .. the only case where you can depreciate the value of the land ids where the land is used specificlly for the purposes of the business operation, for instance for oil extraction, etc.

[bkk_mike]

Farang's returning home aren't going to sell - because it's too much hassle to sell...

i.e. They couldn't get a mortgage in the first place, so there's no mortgage to clear that's forcing a sale. And with the virtual absence of estate agents any sale usually needs to be organised privately which is a lot of hassle for someone moving away. Add in the fact that Thais don't want to buy "used" houses and that reduces the price - keeping the place for retirement / holidays / or for selling at some point in the dim and distant future starts to look like a good option.

I'll admit - Pattaya's turning into an exception - they have estate agencies all over the place for a start - but I think that's mainly because there's a farang market there that doesn't have the Thai dislike of used properties.

In the long run - demographics say that Thailand is a country with a growing population, that is getting wealthier, and that is moving from the countryside into the big cities...

Under those circumstances, the LONG-TERM view will always be that prices will be higher in the future, at least in Bangkok.

If anything - the demographics are better for Bangkok than they are for London... - After all, the UK population is static, and the mass migration from the country to the cities took place a long time ago...

[Erwin1011]

In the long run - demographics say that Thailand is a country with a growing population, that is getting wealthier, and that is moving from the countryside into the big cities...

Under those circumstances, the LONG-TERM view will always be that prices will be higher in the future, at least in Bangkok.

<{POST_SNAPBACK}>

You better have a look at the demographics again... Thailand has an aging population. It showing similar patterns as some European countries and the USA. Less active people carrying the burden of of a growing bunch of oldies....

[Buff-horns]

maybe they will hold out for top price and not cut ,but if the speculators who buy offplan vanish then what happens ? Piles of rotting buildings again and illiquidity in the market.

ie no farang will be able to sell up ? Those who think they might get a cheap bargain get fingers burnt when the property companies go bust and they end up with nowt .

Many condo units are bought by speculators who never live in them and just sellon years later .if they can.

a veritable pack of cards !