Mexican Standoff In Phuket Property Market

[Boater]

I studied A level economics. Although I say studied, I only did one year and in the final exam for that first year I achieved the lowest grade ever in the college’s history: 10%. And I am sure 5% of that was getting my name and date correct. Now I am not blaming my professor for my failed attempt at economics as he was a great teacher, I was just not that interested in something that I never thought would help me out in my love of football, clubbing, and girls.Now of course I did learn that economics is the branch of social science that deals with the production and distribution and consumption of goods and services and their management. However the main thing that I learned and possibly the only part of economics that anyone needs to know is SUPPLY and DEMAND.

This is perhaps the most fundamental concept of economics and is the back bone of market economy. Now I will get to my point.

Currently Phuket has a huge supply of property – both new developments and re-sales – but the demand is no way near close to the supply, thus causing a major issue within the property market. There are some clients out there still looking for property but as a close friend of mine told me, who also happens to work for CBRE, most potential clients are looking for West Coast property and there just is not that much available and if it is available (many re-sales) the owners are asking far too much. No one is interested in the huge amount of property that lies inland and everything is also overpriced across the whole of Phuket.

Price is a reflection of supply and demand and until many of the owners and developers realize this there is small hope for the property market getting back as quickly as we all want it too.

This, lets say, Mexican standoff is also affecting the rental market, although many hotels and resorts have dropped their prices to try to encourage more holidaymakers. Whether or not this is good for Phuket only time will tell, but it might be time now for the owners and developers to look at what they are offering and look at the markets and realize that keeping prices high is not the way to go.

Maybe I should have used this in my economics exam as I may have got 15%.

http://www.property-report.com/site/mexican-standoff-in-phuket-property-market-8815

[H2oDunc]

Boater on this side of the country some bargains are to be had at the moment if you look about. Take this place. 5 bedroomed mountain villa with stunning sea views big pool, gym and private cinema with seperate 2 bed staff quarters set on 2 Rai was 50 mill now 38 with a twin engined speedboat and Fortuna thrown in and staffed for the first year. I just wish I had an extra couple of Mill lying around

A lot of the owners here are just going to sit it out rather than reduce the price. OK for those who can afford to do it but some owners need to sell and have reduced the price a lot.

I think the last redshirt protest put a lot of investors off but there are some brave ones who can see that things will pick up her in Thailand again soon.

[moe666]

I think it is called a Thai stand off. If it doesn't sale at 30baht it must be to cheap I will raise the price to 40baht.

[yogi100]

I don't know about Phuket but there lots of people now coming to Pattaya from the emerging Asian economic powerhouses. Indian speculators are beginning to show an interest in the property market in Pattaya and their interest may spread to Phuket in due course. However they are renowned for their shrewd business acumen and are unlikely to pay the over inflated prices that Westerners were willing to part with before the recent financial catastrophe. A friend of mine has an Indian acqaintance who is in Pattaya on business and is paying 15,000 baht a night to stay in a luxury suite at a new hotel between Pattaya and Jomtien. He has not revealed the purpose of his visit or what business he is here to conduct.

Indians and Chinese seem to face less financial restrictions placed upon them than Falangs by the Thai authorities. In years to come the major foreign property speculators in the LOS may well be Indian and Chinese rather than the Westerners who have hitherto monopolised that market.

Times change, who'd have thought a decade ago that Indians would one day own the prestigous Jaguar Car company and that one of the richest men in England would be an Indian steel magnate!

[petercallen]

Unfortunately people here do not seem to understand supply and demand

or a sellers market or buyers market, it is now a buyers market and is not

likely to change in the near future.

A lot of farangs when looking for a property are told they can purchase property

here by the sellers, The put a non refundable deposit down and when they find

this is not true they walk away from the deal and lose there deposit.

There are people selling property's here who do very well out of putting property's

on the market,keeping the deposit then offering the property for sale again.

Only Thai Nationals can own land in Thailand, there are ways around this but

you will be sailing very close to the wind and may regret it in the future

Hopefully in the future farangs living here will be allowed to own up to 1 rai

of land here with the provision that if they stop living here the property has

to be sold within a reasonable time .

People say then farangs will own Phuket, this is not true there are only a

few of us who would really like to own there own home in Thailand

There are correctly priced property's around but you have to look for them

they sell very quickly, an example is a property in Khatu reduced from

8.5 million to 5.5 and it sold in about 2 weeks.

[stevenl]

From what I see, quite a few of the people selling don't really need to sell. They offer their property for sale, and if somebody is willing to pay their price they sell, if not, no problem. They simply keep it on the market and sell it next year, the year after or even further in the future.

The same goes for rental property. Quite a few properties for rent, and if nobody is willing to pay the requested price, they simply keep it empty and wait. A wait of a few years seems to be no problem.

[123ace]

Two comments - Firtsly mainland Chinese are NOT buying property here in any sort of trend. Just becasue you see some tourists does not make them a new demographic market! Indians are not buying either, I am really lost at what people think is taking place.

Secondly - As most Phuket villa owners do not have mortgages on their property they are not under the traditional pressure to sell. No risk or repossesion etc. Therefore, until or unless their domestic overseas home markets crash and places pressue on the owners collectively and simultaneously - do not expect prices to drop uniformly.

Surely if the fabled new chinese or Indians were in fact buying, then the glut of overpriced and unsold property would have sold and there would be no problems with a lack of demand? The reality is that the gross volume of unsold and built villas / condos in the resorts is not in the high thousands, so any new cash in hand buying group could solve the crisis almost immediately Also, as Thai's are very unlikely to co habitate in condos with ethnic Indians, and mainland chinese can't speak a word of english or Thai, please eductae me with how the buggerey this scenario is playing out??

[petercallen]

From what I see, quite a few of the people selling don't really need to sell. They offer their property for sale, and if somebody is willing to pay their price they sell, if not, no problem. They simply keep it on the market and sell it next year, the year after or even further in the future.

The same goes for rental property. Quite a few properties for rent, and if nobody is willing to pay the requested price, they simply keep it empty and wait. A wait of a few years seems to be no problem.

In the soi where i live the are reducing the rent on vacant property's to get tenants.

A few are for sale/rent , its not they do not care if they sell the property's, the fact

is the property's are over priced and they cannot sell them.

They think property's should increase in value at 20% a year like when it was a

sellers market, If they do not get realistic in there pricing the and cannot afford

to pay the mortgage the people who have lent the money will take the property

and sell it to get there money back, and probably sell it by auction where the

highest bid as long as it covers the outstanding dept will buy the property

[Jimi007]

In the soi where i live the are reducing the rent on vacant property's to get tenants.

A few are for sale/rent , its not they do not care if they sell the property's, the fact

is the property's are over priced and they cannot sell them.

They think property's should increase in value at 20% a year like when it was a

sellers market, If they do not get realistic in there pricing the and cannot afford

to pay the mortgage the people who have lent the money will take the property

and sell it to get there money back, and probably sell it by auction where the

highest bid as long as it covers the outstanding dept will buy the property

I have to agree with Peter, the market here in Phuket, is in a bubble and it will eventually burst as it has in other countries. My land lord has had a house vacant for at least a year now and they are now making it into a two bedroom and other improvements, plus reduced the rent 25%. There is a condo project that was 80% complete and construction stopped well over a year ago. They keep building somewhat upscale shop house that have sat empty for about 2 years with for sale signs. Another few houses have had a for sale sign out for 3 years now. But I still see developments being built for who knows what reason, to depress the housing market even further?

[ilyelol]

you can still get a huge 3br house with sea view in cape panwa for 4mil. Quality of consutrction is higher than most of the things i have seen in thailand(even the stairs are straight)

I just bought a lake view twin house with lake view in a very small project from boat lagoon for 2.6 (when smaller twin house in shitty dog infested moobans go for 3-3.5mil)

it's 5mins from 2 hospitals and 2mins from an other 1.. 2mins to drive to boat lagoon for when i get my boat and 2mins to drive to a fresh farmer's maket..

There's still a load of good deals

As far as rentals.. most houses with very good furniture and construction are always rented from what i have seen, but yes.. the thai don'T seem to get that there is no demand for expensive dirty houses with 1990's tv and tesco furniture

[LivinLOS]

While there are some rich Thai property owners, in the villa market here I think they are a very small percentage..

Many of the westerners 'owning' property here, just went through a wild ride on the markets / recession, they came from a deacde plus of western 'property will never go down' mindsets and the idea of buying a second home to retire too, while things were good, with the idea it was a safe investment appealed.

Now their 401k's are tattered, global markets have made a headfake recovery (based on western hot money which is all simply future taxes) and if my bets are right will be taking a major dive to double dip and worse levels. People have been holding on by a thread but one thing they really can cut out of their lives is the idea of a non performing holiday home and dreams of early retirement. I say its going to get a lot more ugly, not only for phuket property but global economic hardship.

As to the local market.. I know one mondo villa, was 38m asking, had a 28mil offer that was turned down, and is now 18m without being sold. If you speak to owners they seem continually in denial about the lack of buyers, and if they dont need to sell more power to them, but some people will, and those ones are not getting anyone hitting the bid.

[thaiwanderer]

Well there's certainly an insufficient supply of reasonably priced property that people actually want

- but that's more to do with unreasonable expectations of potential buyers. ('I want west coast but I can't afford it').

Do sellers have unreasonable expectations?

No more than they ever did (I can 'sell' that and get it back lease in 30 years (if not before) for how much???).

The rate of arrival of bubble headed investors /dream chasers has slowed but they do still come.

I'm a little uncertain as to the OP's suggestion that 'we all' want the property market to get back to what it was while at the same time bemoaning the bubble continuing despite the lack of buyers?

In any case I view it more as pyramid selling and don't see any problem with it unless the OP is someone who overextended themselves in purchasing and is now having trouble offloading or missed the boat and now cannot afford to buy what they want.

The only other people who may feel disgruntled about the rate of sales slowing is real estate agents but I cannot shed a tear for them.

[wordchild]

Having always said i would never buy property in this country i have just broken my own rule and bought a condo (farang quota) in a completed new developement on the west coast. One of the main attractions was the price which we got down to some 35% under the developers advertised (and over-hyped) price. Its a small developement and there were only a couple of units left after previous buyers had pulled out and the developer was keen to get them shifted. we first bid on the property 4/5 months ago but were told the price was way to low, we just bided our time and in the end got it for our original bid. I think there are some deals to be done as a cash buyer if you are patient.

Edited August 30, 2010 by wordchild

[123ace]

Most foreign buyers in phuket are from Hong Kong and have not suffered at all with the ongoing global economic sitution, do not have 401 k's to worry about (as they are mostly not Americans), do not have mortgages and purchased with cash. Cash that they would rather park in real estate than leave as cash in a currency backed by the USD.

Yes there is a lot of unsold and over valued property in Phuket - the end result is - so what? markets are cyclical and eventualy the Phuket market will return. In the meantime existing owners have a nice holiday home.

For those that have to sell, the story is different, but as the wider trend is not to devalue, as its not for sale, as there is no pressure to sell, then it is hard for people to crash their investment.

In this instance a lack of demand does not lead to a market crash.

However, if the HK economy was to falter it would have a dramatic impact on the Phkt market...

[LivinLOS]

Most foreign buyers in phuket are from Hong Kong and have not suffered at all with the ongoing global economic sitution, do not have 401 k's to worry about (as they are mostly not Americans), do not have mortgages and purchased with cash. Cash that they would rather park in real estate than leave as cash in a currency backed by the USD.

I used 401k as short hand for pension fund..

HK will have a rude awakening when chinese property pops, which it might be in the process of doing if looking at recent indicators.

[thaiwanderer]

On first read I hadn't actually realised this was from Property Report.

The author is: 'Jay Walker is sales and marketing manager at The Village Coconut Island Resort.'

yet his missive seems in conflict with the Village website claim 'Enjoy year-on-year capital appreciation as well as annual rental returns of up to 12.6%.'

Unless of course its all part of differentiating the Village's 'unique' position or some such claims?

[ESB7]

'Thai Propert Market'......just who is it attracting, Chineese, Japaneese, Dirty Knees or any other Johnny Foreigner.NO!!! A few foreigners are purchasing either high or at the bottom end....Thais are purchasing like there is no tomorrow. Hua Hin/Cha am condos and free standing houses are selling like hot cakes.....Phuket, Samui, Hua Hin etc gated communities just hasnt got an interested market so will not sell, no matter what price. 65 million Thais and a few hundred thousand foreigners, which is the likely market to pitch and sell too?

[wordchild]

On first read I hadn't actually realised this was from Property Report.

The author is: 'Jay Walker is sales and marketing manager at The Village Coconut Island Resort.'

yet his missive seems in conflict with the Village website claim 'Enjoy year-on-year capital appreciation as well as annual rental returns of up to 12.6%.'

Unless of course its all part of differentiating the Village's 'unique' position or some such claims?

"Jay Walker" I think i met this guy,( he used to sell gym memberships in the Uk) is he a respected authority on the potential of the Phuket property market?

Edited August 30, 2010 by wordchild

[powderpuff]

With the amount of burgulary that goes on I would want to be in a gated community.

[ESB7]

With the amount of burgulary that goes on I would want to be in a gated community.

And of course with one security guy that sleeps most of the time looking after a few rai of houses, thats a sure thing you wont get burgaled in a gated community.....gated communities are a magnet for burglars

[ESB7]

Most sellers need to take a reality check, they own something that noone wants...ok, they got a great house with pool and air con 'built to western standards' :lol: and all the extras but who wants to buy it???...There just isnt a market for the amount of properties that are for sale and wont be for a long long time to come, and by then the properties will be too old to sell as a new generation of up to date properties will be on the market....Take a look at the amount of empty delapadated properties that lay to waste from the crash of 97.....thats what will happen to all the properties of the last 5 or so years.....Any agent will tell you, they will show a prospect buyer 3 houses knowing they will always find something wrong with them, so the other option is purchase land and build your 'DREAM' home......cheap or top end is ok...mid market....no chance of selling.

[LivinLOS]

'Thai Propert Market'......just who is it attracting, Chineese, Japaneese, Dirty Knees or any other Johnny Foreigner.NO!!! A few foreigners are purchasing either high or at the bottom end....Thais are purchasing like there is no tomorrow. Hua Hin/Cha am condos and free standing houses are selling like hot cakes.....Phuket, Samui, Hua Hin etc gated communities just hasnt got an interested market so will not sell, no matter what price. 65 million Thais and a few hundred thousand foreigners, which is the likely market to pitch and sell too?

The ones with the money..

And while cha am and hua hin have a bangkok middle class playing the condo flipping game still, the rest of the country doesnt have that musical chairs game n operation.

[LivinLOS]

With the amount of burgulary that goes on I would want to be in a gated community.

And of course with one security guy that sleeps most of the time looking after a few rai of houses, thats a sure thing you wont get burgaled in a gated community.....gated communities are a magnet for burglars

While they happen, I would bet the rate of break ins is far lower then in the general community.

[Piengrudee]

If there market is large enough, there is no such thing as a Mexican standoff. You should read about the General Equilibrium Theory. http://en.wikipedia.org/wiki/General_equilibrium

[LivinLOS]

If there market is large enough, there is no such thing as a Mexican standoff. You should read about the General Equilibrium Theory. http://en.wikipedia.org/wiki/General_equilibrium

Supply and demand can get out of sync tho.. Thats especially true when there are no penalty costs (rates, property taxes, etc) to holding the property vacant.

Combine this with aspirational pricing among the locals, who perhaps need little in the way of income to get by, and they can hang on a long time ignoring the lack of buyers in the hope the market comes back. Add in a sprinkling of starry eyed cashed up farangs and the Thai tendency to both exaggerate prices gained for face and also assume any completed sale price applies directly to their land value and a series of false expectations feed on one another.

One way that a Agent in Krabi explained to me that 'this time it IS different' is that the Thais are more into the bank than ever before, via loans made on land and things like car credit, that wasnt as available until recently and at some point that will come due and forced sales will be made to happen and set some true price levels.

I wonder if anyone has been following bank repo sales (usually not very high end) lately ??

[barka]

Lets be honest

1 Supply outstrips demand

2 bargains are to be had by the minesweepers who have cash..

3 the value of a property is worth what you can get for it on a given date..eg when you need the money.

We can all say what we want and our opinions and the real estate guys opinions mean nothing..The buyer is boss...MONEY TALKS..

[wordchild]

Lets be honest

1 Supply outstrips demand

2 bargains are to be had by the minesweepers who have cash..

3 the value of a property is worth what you can get for it on a given date..eg when you need the money.

We can all say what we want and our opinions and the real estate guys opinions mean nothing..The buyer is boss...MONEY TALKS..

right on the money! great post!

[chiang mai]

you can still get a huge 3br house with sea view in cape panwa for 4mil. Quality of consutrction is higher than most of the things i have seen in thailand(even the stairs are straight)

I just bought a lake view twin house with lake view in a very small project from boat lagoon for 2.6 (when smaller twin house in shitty dog infested moobans go for 3-3.5mil)

it's 5mins from 2 hospitals and 2mins from an other 1.. 2mins to drive to boat lagoon for when i get my boat and 2mins to drive to a fresh farmer's maket..

There's still a load of good deals

As far as rentals.. most houses with very good furniture and construction are always rented from what i have seen, but yes.. the thai don'T seem to get that there is no demand for expensive dirty houses with 1990's tv and tesco furniture

I'll be keen to know where you can buy a decent 3 bed in Cape Panwa, PM me if you wish.

[madmitch]

I'll be keen to know where you can buy a decent 3 bed in Cape Panwa, PM me if you wish.

Me too. Chiang Mai and I can start a bidding war.

[katabeachbum]

I'll be keen to know where you can buy a decent 3 bed in Cape Panwa, PM me if you wish.

Me too. Chiang Mai and I can start a bidding war.

Me three. really, this is time to buy, not sell:)