Almost Certainly Done To Death Elsewhere - But Not Amongst Thouse Who Are Directly Impacted - Property Owners

[pkrv]

Hmmm this is going to be a tough topic and may indeed be removed by the mods given the current situation.

I have chosen not to post to the general forum because the property forum is mostly a Farang forum with interested parties, many of whom are from Bangkok – And yes we were in the middle of it.

Digesting all that has happened I recall that in the UK the queen's speech/address was presented before every film that was played – this was of course some time ago perhaps 30/40 years. But people stopped standing up and caused a national embarrassment. The queen's speech/address is no longer shown in UK cinemas and has not been for decades.

Am I correct in the following time line?

The yellow shirts took over the airport and caused chaos losing the country millions?

Military coup

Redshirts get annoyed and stage demonstrations

Redshirts stupidly fail to find the moral high ground by not accepting a date for elections.

Redshirts leadership arrested

Without Redshirts leadership riots

Yellow shirts do not take the moral high ground – no elections now planned

Is this not a score of redshirts 0 – yellow shirts – 0 –Thailand -0?

I am not happy because I am in the middle of this. Yes I am not Thai and I have no reason or desire to meddle in Thai politics, but I have sort of an interest in remaining rational. Perhaps the world has moved on?

much of this has already been reflected in the old books

http://en.wikipedia.org/wiki/Gormenghast_series

Edited June 3, 2010 by pkrv

[kikoman]

You are correct ,It is a Thai Problem!

Do not meddle in Thai Politics.

[trogers]

You have got the initial events wrong.

Military coup was in 2006, to oust Thaksin while he was a caretaker PM.

There was an interim govt and then an election.

Thaksin's new party won the election with a slim majority. Thaksin came back and then fled before the verdict on his land acquisition case when he was jailed for 2 years.

Thaksin's new party was still the government and appointed 2 PMs - Samak and then Somchai.

Yellow shirts protested climaxing in the closure of the airport.

Constituitional court disqualified Somchai as PM. A parliamentary vote for a new PM saw a faction of Thaksin's party splintering off to support the present PM.

Red shirts then protested to dissolve parliament and called for new election deeming the splintering is not democratic.

Edited June 3, 2010 by trogers

[Jingthing]

So how does this effect property owners? The other stuff, yes, done to death!

[trogers]

So how does this effect property owners? The other stuff, yes, done to death!

No impact on my 4 rented out condos so far - one in Sukhumvit 24 and three near BTS Prakhanong.

But no info on those looking to sell, esp. flippers...

[pkrv]

So how does this effect property owners? The other stuff, yes, done to death!

Interesting – for me I wish to refine what I know, and there are some great posters on TV. Surely this is not about bog standard absolutes, but about what Thailand does in the future, how it signals?

[quiksilva]

I think we may as well leave the recent and historical events to one side otherwise this thread will be closed sharpish.

But it is perhaps useful to take stock of the current situation that we now find ourselves in and look at what the future might hold for the property sector, particularly in residential condo's.

This is my personal take on the situation as it pertains to Bangkok.

The initial fall out over the past few weeks has been terrible for property developers, but in truth it hasn't been good for some time now (however exceptions do prove the rule). Now I cant imagine there will be too many tears in this forum upon reading this, or much surprise either.

New sales are now even harder to come by, although those that have already committed to a purchase, are by and large proceeding with transfers (again there are some exceptions to both of these cases, new sales are still being recorded, and some don't proceed with transfers).

So how does it all affect the average Bangkok based condo owner? Well, one could argue if that you live in your condo and have no plans to sell it, it won't affect you at all (unless you have to patch up bullet holes in your windows)

If however, you are looking to sell, then you must be prepared for the fact that most of the active buyers at the moment are driving a hard bargain, subscribers to Buffet's rule, "buy when others are fearful', they are few and far between and want the best at the lowest possible price.

Developers recognise this and as such they are offering increasingly larger discounts, however there is a limit to what they can discount to. I don't know any, that will sell at a loss just to complete the project. "Cutting your losses" is an alien term in Thailand, and seldom adopted.

Residential landlord's leasing condo's will face similar issues as before, there is still a lot of competition in the market place, and your success in this venture will continue to be dependant upon your initial choice of project, location and purchase price.

I don't think anyone is expecting a flood of new expats any time soon, so I don't think we can say that demand for leased units, in lieu of new sales, will increase, even though manufacturing remains buoyant, it has little direct impact on residential lets, in Bangkok.

The service sector is much more closely aligned with residential leasing but its still in hibernation. Very few firms are expanding their business in this sector at the moment, actually many have been and are continuing to surrender surplus space.

This will only reverse when there is more business confidence in the economy. But it will take months of uninterrupted peace and progress for that to happen, and when that will begin is truly anyone's guess.

Edited June 4, 2010 by quiksilva

[pkrv]

Hi - quiksilva - Yes you have come to the same conclusions I have - The situation has polarised - not good news for the future of the Bangkok Condominium market at all, Thai or Farang.

For us I guess it is watching the wounds heal:

Physically - for me it is Central World - you know I loved Zense (and ZEN)

http://www.zensebangkok.com/restaurant/index.html

Somehow I don't think that someone using the BTS between Chit Lom and Siam is going to feel comfortable buying a condo in Bangkok.

Socially - well rubbing salt into the wounds, is not actually going to help. I actually do not envy Thailand in this respect IMO they have faced huge social changes in a very short period of time. But you know there many historical precedents that they can draw on. Thailand's course will be interesting to watch, and I note some people are saying from afar!

But yes we have no plans to sell, and don't need to sell. We are going to be back over in the last two weeks of August. We were actually over at the start of the demonstrations and actually it was a carnival type atmosphere!

So yes the impact on us personally as owners is actually zero, apart from the fact we have lost a local restaurant and shop, which is very sad.

Edited June 4, 2010 by pkrv

[johnnyk]

I've just lost my long-term renter. A good guy, great renter in every way, he was in my house 2 1/2 years. He's heading to the Phillippines.

I'm sure many others are in the same boat as me.

[london]

Great topic PKRV and a top post quiksilva: IMO 100% on the money.

IMO the problems are not over and are just simmering under the surface. Sadly, I feel that there is a larger issue not too far away, but thats for another time.

Certainly, prices and rentals have and will be affected, but luckily my units are still being rented to long-term professional tenants (lawyers predominantly) who have no intention of leaving ....... yet !!

To buy now? I cant see why one would want to with this much uncertainty.

There will always be buyers and sellers...at a price. Its always the same.

Another members Topic has this exact issue (perhaps....or perhaps he's just wanting to find a buyer here) and seems to have a lot of interest.

The fallout has hit the Bangkok Thais most, and it is them whom I feel for.

The staff, thousands of them in Central World and other centres and businesses are now without income....therefore without food and accommodation in many instances.

I'm sure that almost all of us can survive this downturn. In our lives we've been through many already. Our thoughts and concerns and actions must be to support those locals who have been hit so badly by this whole business.

[LennyW]

I dont think the current political situation has had as much bearing on property owners/developers as people might think, a few individuals certainly but not in general terms, Thailand has been in pretty much of an upheval politically for many many years - yes, current events have highlighted the situation, but in reality it is nothing new.

The main effect on most property owners/developers seems to be the current weakness of foriegn currencies, the UK and Europe have historically been the most active buyers in the Thai property market, and now that is the two weakest currencies, until there is some change in that direction i cannot see much change in the property market.

Yes it would be nice to blame it all on the local political situation, but i feel that it is a mere blip that will soon be forgotten about as has always been the case.

[hhgz]

"He's heading to the Phillippines."

I find it amusing the number of TVers who claim that they will move there, evidently not understanding the political situation. If your condo was a good investment when you bought it PKRV, it still is. Although the recent difficulty was "the worst in 30 years, less than 100 people died - twice that many people perish in traffic accidents in Thailand every year. There is an ebb and flow of politics, and during the past decade there have been a half-dozen situations where farangs have been threatening to run for the hills, and dire predictions of dropping real estate values - all for naught.

[pkrv]

hi hhgz - Perhaps another way of saying this is that the vultures seem to be having mean pickings?

[johnnyk]

I'm consoling myself that I still have a very nice house for my own vacation use at a fraction of what I would pay for same in falangland.

[midas]

If however, you are looking to sell, then you must be prepared for the fact that most of the active buyers at the moment are driving a hard bargain, subscribers to Buffet's rule, "buy when others are fearful', they are few and far between and want the best at the lowest possible price.

Developers recognise this and as such they are offering increasingly larger discounts, however there is a limit to what they can discount to. I don't know any, that will sell at a loss just to complete the project. "Cutting your losses" is an alien term in Thailand, and seldom adopted.

I don't think anyone is expecting a flood of new expats any time soon, so I don't think we can say that demand for leased units, in lieu of new sales, will increase, even though manufacturing remains buoyant, it has little direct impact on residential lets, in Bangkok.

Let us pretend there aren't even any problems within Thailand and that things were back to what they before

the recent protests. What about the the economic picture that is slowly building up around the world i.e.

austerity and weak employment in Europe ? The double dip warnings are getting louder and louder.

Tradditionally, where have most of the foreign buyers come from ? USA, Australia and Europe ?

I would have thought there may have been a reduction in Japanese buyers as they will also be facing austerity?

Going forward I can only see an even further dramatic reduction in foreign buyers because they simply wont

have the disposable income ? So a condo owner will be relying more and more on Thai's to purchase their property if they need to sell?

Will this not lead to a very stagnant market ?

[cmsally]

Seeing as Quicksilva has pretty much summed up my view of the market; maybe something on a more local perspective.

I must admit to being somewhat a worst case scenario investor and have to admit my choice of condo was somewhat based on anticipation of political troubles and other associated factors we can't talk about

Hence although I had to buy in central BKK I chose up a small soi, near no govt offices, large malls, BTS station (close to but out on main road).

The only landmark close to me is JIm Thompson's house and I don't think anyone will be targeting that.

Seems to have worked well throughout the crisis (apart from the fact you needed an army pass to get in )

Interestingly though it seems many other buyers/renters have followed over the past month.

Throughout the last 2 years the car park has pretty much been empty with many unused rooms (though not for sale). Starting around March the car park is chocka block and every room seems to be occupied. I guess this could also be because BKK investors have suffered and have turned empty rooms they have invested in, into rentals to make them a bit of extra income.

But anyway that is a local perspective.

May I also add that if you are still thinking of buying and are worried about the foreign market, then university areas seem to be a solid choice, for resale and rentals. Especially at lower end of market.

Edited June 9, 2010 by cmsally

[quiksilva]

If however, you are looking to sell, then you must be prepared for the fact that most of the active buyers at the moment are driving a hard bargain, subscribers to Buffet's rule, "buy when others are fearful', they are few and far between and want the best at the lowest possible price.

Developers recognise this and as such they are offering increasingly larger discounts, however there is a limit to what they can discount to. I don't know any, that will sell at a loss just to complete the project. "Cutting your losses" is an alien term in Thailand, and seldom adopted.

I don't think anyone is expecting a flood of new expats any time soon, so I don't think we can say that demand for leased units, in lieu of new sales, will increase, even though manufacturing remains buoyant, it has little direct impact on residential lets, in Bangkok.

Let us pretend there aren't even any problems within Thailand and that things were back to what they before

the recent protests. What about the the economic picture that is slowly building up around the world i.e.

austerity and weak employment in Europe ? The double dip warnings are getting louder and louder.

Tradditionally, where have most of the foreign buyers come from ? USA, Australia and Europe ?

I would have thought there may have been a reduction in Japanese buyers as they will also be facing austerity?

Going forward I can only see an even further dramatic reduction in foreign buyers because they simply wont

have the disposable income ? So a condo owner will be relying more and more on Thai's to purchase their property if they need to sell?

Will this not lead to a very stagnant market ?

Ok I'll play, and I can see where you are heading with this. The following comments are purely hypothetical, based on ignoring all of Thailand's significant local political problems.

Traditionally most buyers are Thai. Yes, that varies by market with resort destinations being much more heavily influenced by foreign buyers. That is not to say that there is an insignificant amount of foreign buyers in Bangkok because there is, however there are fewer foreign buyers than Thais.

You are right when you say that these mostly come from Europe (a great many of which are expats based here and in places like Hong Kong and SG), after that ASEAN based buyers of condos are the most important. Japanese do buy condo's but not a huge amount as they tend to be on short term contracts and usually lease space, they are however huge investors in industrial real estate. (A wholly different matter we can discuss separately).

A period of political stability will lead to confidence returning to the service sector, which is in turn mostly (but not entirely) based on serving ASEAN's second largest economy, as well as other smaller Indochina markets which are also occasionally served out of Thailand. There is as we know a lot of room to improve and grow the service sector here (think of industries like IT, and life insurance which despite its already large size has very minimal market penetration), firms are out there and want to capitalise on that.

As I said before confidence in the service sector here is closely correlated with the performance of the residential leasing sector. This is because it is a large employer of the traditional foreign tenant and condo buyer. This time around (whenever that time does come around) they may not be queuing up to buy themselves but if the service sector expands (and it hasn't expanded for several years) then this will lead a larger tenant base.

This leads me to the crux of your carefully crafted question.

How much fall out there will be from the austerity measures that are being taken in the West, and how will it affect Thailand, and in particular Bangkok's condominium market?

I agree that many people in the West will suffer from the proposed measures that will have dramatically reduce personal disposable income. I fear though that despite the purported good intentions, to 'spread the pain around', that this will most greatly impact the very poorest in their societies, especially those on benefits etc.

I don't suspect that this will have a huge impact on the expats in HK or SG. Although who knows? In desperation home governments might wind up taxing all of us wherever we are, just as they do with US citizens. If that happens in our hypothetical political golden world, and the service sector grows then this will lead to a growth in the number tenants and fewer foreign buyers, initially, until investors (local and foreign, although mostly local) identify this trend and move to exploit it.

So yes Thais will therefore continue to play the most important role in the market, but I don't think it will lead to stagnation, although if the political problems don't resolves themselves I think stagnation is a very real possibility and it could be even worse.

There are of course a large amount of scary what if arguments we could add but its all speculation, and I dont think adds anything to the discussion.

Hope for the best, but plan for the worst.

Edited June 9, 2010 by quiksilva

[midas]

Ok I'll play, and I can see where you are heading with this. The following comments are purely hypothetical, based on ignoring all of Thailand's significant local political problems.

Traditionally most buyers are Thai. Yes, that varies by market with resort destinations being much more heavily influenced by foreign buyers. That is not to say that there is an insignificant amount of foreign buyers in Bangkok because there is, however there are fewer foreign buyers than Thais.

You are right when you say that these mostly come from Europe (a great many of which are expats based here and in places like Hong Kong and SG), after that ASEAN based buyers of condos are the most important. Japanese do buy condo's but not a huge amount as they tend to be on short term contracts and usually lease space, they are however huge investors in industrial real estate. (A wholly different matter we can discuss separately).

A period of political stability will lead to confidence returning to the service sector, which is in turn mostly (but not entirely) based on serving ASEAN's second largest economy, as well as other smaller Indochina markets which are also occasionally served out of Thailand. There is as we know a lot of room to improve and grow the service sector here (think of industries like IT, and life insurance which despite its already large size has very minimal market penetration), firms are out there and want to capitalise on that.

As I said before confidence in the service sector here is closely correlated with the performance of the residential leasing sector. This is because it is a large employer of the traditional foreign tenant and condo buyer. This time around (whenever that time does come around) they may not be queuing up to buy themselves but if the service sector expands (and it hasn't expanded for several years) then this will lead a larger tenant base.

This leads me to the crux of your carefully crafted question.

How much fall out there will be from the austerity measures that are being taken in the West, and how will it affect Thailand, and in particular Bangkok's condominium market?

I agree that many people in the West will suffer from the proposed measures that will have dramatically reduce personal disposable income. I fear though that despite the purported good intentions, to 'spread the pain around', that this will most greatly impact the very poorest in their societies, especially those on benefits etc.

I don't suspect that this will have a huge impact on the expats in HK or SG. Although who knows? In desperation home governments might wind up taxing all of us wherever we are, just as they do with US citizens. If that happens in our hypothetical political golden world, and the service sector grows then this will lead to a growth in the number tenants and fewer foreign buyers, initially, until investors (local and foreign, although mostly local) identify this trend and move to exploit it.

So yes Thais will therefore continue to play the most important role in the market, but I don't think it will lead to stagnation, although if the political problems don't resolves themselves I think stagnation is a very real possibility and it could be even worse.

There are of course a large amount of scary what if arguments we could add but its all speculation, and I dont think adds anything to the discussion.

Hope for the best, but plan for the worst.

Oh thank you for playing

I was actually trying to visualise what could happen to the market for “ second hand “ condo’s as opposed to those in new developments.

So in response to your carefully crafted reply isnt it the case that very many ( maybe even the majority of Thai’s ) will not buy secondhand condo’ s ? So won’t this severely dilute the number of potential buyers of existing condo’s ? Hence my question about potential stagnation?

Edited June 9, 2010 by midas

[quiksilva]

I see, and yes I think that's the case when they are buying for their own use, but if (and that's a big "IF" and a long way out) the rental market strengthens then I think we could see more investors enter the market.

Investors tend to have no qualms about buying units in locations that are easy to rent out, even if they are second hand. However this is a smaller market segment than say owner occupiers.

There will of course also always be some owner occupiers who will buck the trend too, so whilst the market on the whole wont be completely stagnant, I think you'd struggle to describe it as particularly buoyant.

[pkrv]

Hi Midas and quiksilva - I see you two are getting on just as well as ever . You do realise I will have to issue a marriage certificate shortly .

All that has been said so far is that - no the vultures do not have a feeding ground – Possibly mostly because Farangs have to bring in the cash and have secured themselves – we are not stupid.

Edited June 9, 2010 by pkrv

[quiksilva]

lol I thought we were playing well together

[bangkokburning]

I think wise foreigners will not invest in any manner in Thailand. The situation imo appears irreconcilable. What that means in concrete terms, how everything will play out in the years ahead, few have that crystal ball.

Also, given the currency issues. I find the condo market a poor value. I think of what similarly can be bought in a number of coastal areas in USA outside California. After 17 years on/off in Asia - I have a solid girlfirend and first time I think about going back to states.

Finally- thuge economic mess in UK/USA that has been swept under the rug. And EU ...anything can happen from malaise to a blow-up.

But, Thailand has huge issues - it's not just the politics. Water for starters.

[trogers]

I see, and yes I think that's the case when they are buying for their own use, but if (and that's a big "IF" and a long way out) the rental market strengthens then I think we could see more investors enter the market.

Investors tend to have no qualms about buying units in locations that are easy to rent out, even if they are second hand. However this is a smaller market segment than say owner occupiers.

There will of course also always be some owner occupiers who will buck the trend too, so whilst the market on the whole wont be completely stagnant, I think you'd struggle to describe it as particularly buoyant.

Will depend on the class and location of '2nd hand'. For example those that were transferred within the last 5 years and priced above Bt65k/m2 in Sukhumvit will have a slower market than those that were transferred during 2001-2005 and in the Bt55k/m2 range. Sukhumvit condos that are over a decade old have the least impact, if located near to the BTS and have a decent neighbourhood. Many are being bought and sold presently at the range of Bt35k-45k/m2.