/Featured Quiz11 October - Weekly Featured Quiz - General Knowledge

[Chunky1]

BANGKOK, THAILAND - From its business district to leafy suburbs, new condominiums are sprouting almost daily across Bangkok, but developers and investors alike seem little concerned about a property bubble developing.

The country's real estate stocks have been on the boil with the index of property stocks up 28 per cent in the last three months and many listed companies have raised profit forecasts, confident of capitalising on what they say is insatiable local demand.

Other Asian governments, worried about asset bubbles and housing affordability, have tried to yank back their respective markets, with Thailand's nearby neighbour, Singapore, the latest to unveil a slate of tightening measures. But Thailand is unlikely to follow suit, analysts said.

The number of new condominiums in Bangkok more than tripled to 13,028 in Q1, from only 3,389 in Q2 when Thailand rebounded.

'Interest rates are still low. There's still huge demand, particularly with units from listed companies. Growth in the property market tends to move in tandem with GDP and the economic fundamentals are more sound now,' said Sorapong Jakteerungkul, a property analyst at Kasikorn Securities.

He pointed out that the government's only move has been to raise its key policy rate from a record low of 1.25 per cent by half a percentage point, a rate is still low amid rebounding consumer spending.

'Lifestyles are changing and there's not been many obstacles for young workers and first-time buyers with low purchasing power to get credit,' he said.

The number of new condominium units in Bangkok more than tripled to 13,028 in the first quarter, compared with only 3,389 in the second quarter of 2009, when Thailand emerged from its first recession in 11 years, according to Bank of Thailand data.

The resurgence of the Thai market revives memories of a 1997 bubble that touched off an economic storm in Asia, whipping Malaysia, South Korea, Indonesia and the Philippines as credit dried up even to reputable developers with fully booked projects.

Across Bangkok, buildings were abandoned midway through construction. Asian banks struggled for years to shed bad loans.

Fast-forward to 2010. Construction is surging. But economists and equity strategists say that Thailand's economy is healthier, boasting a large trade surplus instead of its deficit of the 1990s, large foreign exchange reserves, robust financial markets, low corporate debt and nearly record low interest rates.

Thais also have 6.4 trillion baht (S$276.5 billion) in deposits, which pay a low interest of about 1-2 per cent at major banks and need a place to park their funds.

The central bank has forecast economic growth of 6.5-7.5 per cent for 2010 while the International Monetary Fund predicts growth of as much as 8 per cent, the best in 15 years and one of the highest in South-east Asia.

And, crucially, there's a lot less hot money from foreign fund inflows.

Lertchai Kochareonrattanakul, a Fitch Ratings analyst whose specialist areas include property, sees more room for growth because of high demand.

'The speculation we see is different from in the past. It's less than before and it's Thais with a lot of liquidity, buying and looking for asset prices to appreciate,' he said.

LPN Development, which specialises in small units close to rail links with starting prices of around one million baht, was the frontrunner in tapping that demand.

It said that two projects launched in March sold out in the first day, with sales of 4.7 billion baht. It launched two more projects and will start work this month on a riverside condominium. LPN shares are up 33 per cent this year.

Part of the reason is the new type of home buyer: young professionals with unprecedented access to long-term credit at local banks. Developers say that they outnumber speculators hunting for quick profits in sharp contrast to 1997's meltdown when property buyers borrowed short term from nervous foreign banks.

Still, the central bank remains watchful. Bank of Thailand governor Tarisa Watanagase said last month that the central bank was keeping an eye on possible oversupply in the condominium projects.

'Although there is no sign of bubbles, condominium projects have risen steadily since 2007, unlike detached houses.'

She said that it was difficult to tell if there was speculation, but purchases for non-living purposes were 25 per cent of the total. 'The 25 per cent bears watching because if it's not real demand, when the economy turns in a different direction while interest rates are moving higher, it could affect buyers.'

There are also concerns about the higher end of the Bangkok housing market, where analysts say there are more new units that are not owner-occupied, suggesting purchases were intended as second homes, or speculation.

CB Richard Ellis expects a limited number of new launches in prime areas. Like CBRE, Mr Lertchai, of Fitch Ratings, said that developers would hold back new developments at the luxury end. 'There needs to be demand before there's a supply.'

Thai property stocks such as Pruksa Real Estate, where pre-sales have hit record high for six straight quarters, have seen strong demand. The stock is up 32 per cent this year - and 60 per cent in the last three months alone.

-------------------

Cliff Notes

Property is being purchased by young professionals with access to low interest credit because interest rates are currently low.

25% of condominiums are not occupied by their owners. It has not yet been determined if these are speculators. Rofl

The "young professionals who purchased with low interest credit" out number the 25% of speculators.

:whistling: :whistling: :whistling:

Edited September 22, 2010 by Chunky1

[wintermute]

It's real questionable and has been for quite some time now.

However at the low to mid range 1 mill -3 mill baht there's still quite a few good deals if you just want a holiday crash pad or a rental unit.

The high end is when things seem sketchy. Lots of manipulation going on and speculators.

[emsfeld]

It's an interesting situation. I do wonder where all the demand is coming from, especially considering that mortgage loans from a local bank are NOT easy to get. I've seen the process first hand and it's much, much tougher and more prudent than in a lot of first world countries. Leveraging is possible, but only when sufficient collateral is being provided. From what I have seen, the bank will loan you up to 75% of the property's assessed value, if you put up another asset as collateral.

Friend of ours did not have a collateral, so the bank only loaned her 55%, plus asked for two more co-signees to the mortgage whose combined monthly income was quite a substantial cashflow - especially when contrasting with the size of her monthly repayments (only 25% of her own monthly income).

Compare this with what I have seen here in OZ where a working couple mortgages themselves to 90% plus, on a balloon type loan structure (essentially betting on rising property prices), repayments (after interest only term expires) making up 50% of their COMBINED monthly income and then tell me what seems more out of whack? Note how this is even encouraged by the banks here...

Edited September 22, 2010 by emsfeld

[spud1]

I suspect a high proportion of the property is being bought for investment by the small percentage of Thai's that hold all the money.

[Chunky1]

It's an interesting situation. I do wonder where all the demand is coming from, especially considering that mortgage loans from a local bank are NOT easy to get. I've seen the process first hand and it's much, much tougher and more prudent than in a lot of first world countries. Leveraging is possible, but only when sufficient collateral is being provided. From what I have seen, the bank will loan you up to 75% of the property's assessed value, if you put up another asset as collateral.

Friend of ours did not have a collateral, so the bank only loaned her 55%, plus asked for two more co-signees to the mortgage whose combined monthly income was quite a substantial cashflow - especially when contrasting with the size of her monthly repayments (only 25% of her own monthly income).

Compare this with what I have seen here in OZ where a working couple mortgages themselves to 90% plus, on a balloon type loan structure (essentially betting on rising property prices), repayments (after interest only term expires) making up 50% of their COMBINED monthly income and then tell me what seems more out of whack? Note how this is even encouraged by the banks here...

Thanks for the response. The article implies that credit is easier to come by than before in the past year.

"Part of the reason is the new type of home buyer: young professionals with unprecedented access to long-term credit at local banks."

'Lifestyles are changing and there's not been many obstacles for young workers and first-time buyers with low purchasing power to get credit,' he said.

I myself do not have any first hand knowledge of mortgage practices in Thailand.

[Chunky1]

"You can also borrow up to 100% of the purchasing price but not over 100% of the property’s appraisal value.

(If the purchasing price of the property is from 10 millon, the maximum credit limit is up to 80% of the purchasing price.)"

http://www.bangkokbank.com/Bangkok%20Bank/Personal%20Banking/Loans/Home%20Loans/Interest%20Rates/Pages/Default.aspx

**Bangkok Bank's MLR presently is 6.00% as of July 19, 2010.

Note that these are NOT fixed payment loans. The interest rate on these loans will vary after the first two years depending on MLR. As you probably know, global interest rates are currently at all time lows. Looking around the website, I don't even think fixed payment 30 year mortgages are available.

Edited September 23, 2010 by Chunky1

[thaimate]

Just what we need here in Pattaya ,more property built ,homes near us are coming on the market and being snapped up at a rate of one or two every 3/4 years ,why one that was built in the next street has only been on the market 6 years and its had a viewing already

[sillyman99]

Just what we need here in Pattaya ,more property built ,homes near us are coming on the market and being snapped up at a rate of one or two every 3/4 years ,why one that was built in the next street has only been on the market 6 years and its had a viewing already

How about The Condominium market ?

There must be hundreds of Condos available in Wong Amart alone.

W Condominium.

North Point Tower 1 & 2. Massive towers, very expensive units.

Plus more going up, and more in the pipeline, and then of course are the existing condo buildings.

Though these Condos are generally quite expensive, they must be getting sold to someone.

I can't see Holiday Inn and The Hilton group building New Hotels in a flagging market, I think some people know things that the rest of us don't.

Pattaya to get Casinos ?

[Chunky1]

"The President of Thailand’s Agency for Real Estate Affairs has warned against the possible formation of a bubble in the kingdom’s property market.

Dr. Sopon Pornchokchai expressed his opinion that, during 2011-2012, a bubble could form because of rapid construction of low-priced housing as developers rush to take part in the county’s Board of Investment homes project.

He said: “When there is more supply, it is likely that there would be more speculation,” adding that the Royal Thai Government should not support any “unnecessary” purchases of second homes which could lead to speculation in the sector. He also urged home buyers to manage their finances well, and for lenders to be prudent with their financing, especially in the case of projects being constructed in poor locations.

The Agency has forecast the value of new homes being launched during 2010 will be worth THB158.4 billion (US$4.84 billion) – down 15 per cent on the value of homes launched during 2009."

But

The number of new condominiums in Bangkok more than tripled to 13,028 in Q1, from only 3,389 in Q2 when Thailand rebounded.

I do not know what the definition of homes was in the first paragraph and how it may or may not relate to the drastically increased production of condominiums in 2010.

[roamer]

Last month I spent a week or two wandering around areas such as Ari & Sanam Pao. Rarely were the lights on in the evenings in more than 10% of the condo units and night after night it was more or less just the same units. And yet the units in these blocks all been sold. When you see this pattern being continually repeated its hard not to believe that there is a massive amount of speculation going on. You can argue all day long about the source of financing, whether a bubble is being created, should you live in one of these places one thing you won't have to argue about is getting a space in the underground car park.

OP. You didn't quote your source but believe it was Business Times ?

Edited September 23, 2010 by roamer

[Rooo]

Moved to business forum as per OP's request.

[lannarebirth]

I think it is a segmented market. I have people calling me almost everyday about property I own, none of which is listed anywhere for sale. You have to ask yourself if you are a seller, "do I have something special, worth buying?" If a buyer, "will I be happy I bought this a year from now?"

[FarangBuddha]

Just what we need here in Pattaya ,more property built ,homes near us are coming on the market and being snapped up at a rate of one or two every 3/4 years ,why one that was built in the next street has only been on the market 6 years and its had a viewing already

How about The Condominium market ?

There must be hundreds of Condos available in Wong Amart alone.

W Condominium.

North Point Tower 1 & 2. Massive towers, very expensive units.

Plus more going up, and more in the pipeline, and then of course are the existing condo buildings.

Though these Condos are generally quite expensive, they must be getting sold to someone.

Russians.

[emsfeld]

"You can also borrow up to 100% of the purchasing price but not over 100% of the property’s appraisal value.

(If the purchasing price of the property is from 10 millon, the maximum credit limit is up to 80% of the purchasing price.)"

http://www.bangkokba...es/Default.aspx

**Bangkok Bank's MLR presently is 6.00% as of July 19, 2010.

Note that these are NOT fixed payment loans. The interest rate on these loans will vary after the first two years depending on MLR. As you probably know, global interest rates are currently at all time lows. Looking around the website, I don't even think fixed payment 30 year mortgages are available.

I checked out the BKK Bank link, admittedly only briefly, but cant see any mention of one being able to borrow up to 100% of purchasing price. They however state on this link, http://www.bangkokbank.com/Bangkok%20Bank/Personal%20Banking/Loans/Home%20Loans/How%20to%20Apply/Pages/Lending%20Criteria.aspx that

"The maximum loan amount that will be granted is approximately 80% of the appraised value, or the balance of a refinanced loan and not more than 40% of net income per month."

which is in line with what I have experienced. When you actually go through the process you will find out that they are even less lenient than stated on the website. Again, this is my experience. By the way, interest rates are capped at 10% by law so in the end of the day the loan rate is variable only within the 0%-10% range.

[Chunky1]

that was under "professional loans" for certain professions.

[asiawatcher]

I love the way the article is headed as property sector booming and all it speaks about is Condo's.

[CaptHaddock]

 

Note that these are NOT fixed payment loans. The interest rate on these loans will vary after the first two years depending on MLR. As you probably know, global interest rates are currently at all time lows. Looking around the website, I don't even think fixed payment 30 year mortgages are available.

  

As far as I know, 30-year fixed rate mortgages are unknown outside the US.

[ianguygil]

Note that these are NOT fixed payment loans. The interest rate on these loans will vary after the first two years depending on MLR. As you probably know, global interest rates are currently at all time lows. Looking around the website, I don't even think fixed payment 30 year mortgages are available.

As far as I know, 30-year fixed rate mortgages are unknown outside the US.

Sorry, I just saw this thread.

I did not read all the way back, but just to confirm to everybody, foreigners can not borrow to buy a property (condo) unless they have permanent residence in Thailand. Normally you need to bring the money in from overseas in foreign currency and convert it here in Thailand. There are other threads with much more detail on this I have read before. There are some foreigners who setup a company in Thailand to buy the property and guarantee the loan, and I will not comment on the pros, cons and legality of that. But the fact is that major Thai banks will not make those kinds of loans.

You correctly stated that these are not fixed 30 year loans. Some loans have fixed rates for a certain period of normally no more than a few years, I think 2-4 is the most I have seen. If there is a promotional (teaser) rate you still need to qualify at the actual full rate for the loan. And I do not believe there are any caps on the loans in each year or for the lifetime of the loan, but I may be wrong there depending on the product. I know such caps are common in the US for ARMs, but not here that I have seen.

One last point, most mortgages in Thailand determine the term partially based on the age of the borrower. Normally you need to pay off the loan by the time you are 60. So if you are 54 and you go in for a mortgage, it will be a 6 year loan. If you are 44, 16 year loan. And so on. So the closer you are to the normal retirement age in Thailand the shorter the term of your loan and the faster the amortization of the principal.

Edited September 24, 2010 by ianguygil

[Chunky1]

 

Note that these are NOT fixed payment loans. The interest rate on these loans will vary after the first two years depending on MLR. As you probably know, global interest rates are currently at all time lows. Looking around the website, I don't even think fixed payment 30 year mortgages are available.

  

As far as I know, 30-year fixed rate mortgages are unknown outside the US.

Thanks for pointing this out. It goes to show you what a wild ride it's going to be for the Planet during this time of expanding money supply and low interest credit.

[bkk_mike]

"You can also borrow up to 100% of the purchasing price but not over 100% of the property’s appraisal value.

(If the purchasing price of the property is from 10 millon, the maximum credit limit is up to 80% of the purchasing price.)"

http://www.bangkokba...es/Default.aspx

**Bangkok Bank's MLR presently is 6.00% as of July 19, 2010.

Note that these are NOT fixed payment loans. The interest rate on these loans will vary after the first two years depending on MLR. As you probably know, global interest rates are currently at all time lows. Looking around the website, I don't even think fixed payment 30 year mortgages are available.

I checked out the BKK Bank link, admittedly only briefly, but cant see any mention of one being able to borrow up to 100% of purchasing price. They however state on this link, http://www.bangkokbank.com/Bangkok%20Bank/Personal%20Banking/Loans/Home%20Loans/How%20to%20Apply/Pages/Lending%20Criteria.aspx that

"The maximum loan amount that will be granted is approximately 80% of the appraised value, or the balance of a refinanced loan and not more than 40% of net income per month."

which is in line with what I have experienced. When you actually go through the process you will find out that they are even less lenient than stated on the website. Again, this is my experience. By the way, interest rates are capped at 10% by law so in the end of the day the loan rate is variable only within the 0%-10% range.

I personally know someone that borrowed 95% (Thai), and my wife borrowed 80% with me as guarantor based on my income from abroad.

[givenall]

It's real questionable and has been for quite some time now.

However at the low to mid range 1 mill -3 mill baht there's still quite a few good deals if you just want a holiday crash pad or a rental unit.

The high end is when things seem sketchy. Lots of manipulation going on and speculators.

Beware In Thailand, it is very easy to buy and very difficult to sell. It seem everyone is looking for new house, condo, and it is very difficult to find a buyer even it you are trying to sell below market

[hhgz]

"The number of new condominiums in Bangkok more than tripled to 13,028 in Q1, from only 3,389 in Q2 when Thailand rebounded."

As it takes 3-4 years for a condominium building to be built, what's the problem? Many TVers have predicted that the Bangkok condo market would collapse...for the past 6 years. There are people who don't own a home, have never owned a home, and will never own a home...and they call themselves experts.

[Chunky1]

I personally know someone that borrowed 95% (Thai), and my wife borrowed 80% with me as guarantor based on my income from abroad.

How to did they have you prove your income abroad?

[Chunky1]

"The number of new condominiums in Bangkok more than tripled to 13,028 in Q1, from only 3,389 in Q2 when Thailand rebounded."

As it takes 3-4 years for a condominium building to be built, what's the problem? Many TVers have predicted that the Bangkok condo market would collapse...for the past 6 years. There are people who don't own a home, have never owned a home, and will never own a home...and they call themselves experts.

They are already sold out so what does it matter when they will be built?

[roamer]

"The number of new condominiums in Bangkok more than tripled to 13,028 in Q1, from only 3,389 in Q2 when Thailand rebounded."

As it takes 3-4 years for a condominium building to be built, what's the problem? Many TVers have predicted that the Bangkok condo market would collapse...for the past 6 years. There are people who don't own a home, have never owned a home, and will never own a home...and they call themselves experts.

Speak for yourself. There are more than one or two folk here who own property in LOS and who wouldn't touch today's prices with a barge pole.