Is Phuket Property Market Inflated?

[stevenl]

That is one of the unique aspects of phuket property market: in the non commercial real estate there is hardly any financing, one of the reasons sellers don't have to sell and simply sit on their properties at their price.

But the longer they "sit on their property at their price" - the years are ticking over on their 30 year land lease, and as we have discussed on TV before, who knows what the Thai landowner will do upon the residential land 30 year lease renewal.

So, who will buy a 20 year old, poorly constructed house, with 10 years left to run on a 30 year land lease with the unknown factor of what the Thai landowner will do after that 30 year lease expires????

These Thai owners, of residential land, will probably do the same as the commercial Thai landlords and raise the rent by a considerable amount.

A check on the internet of some of the bigger real estate agents on Phuket show there are currently hundreds and hundreds of properties on the market. It appears these vendors are "holding out" for the price they want but I'm thinking the longer they hold out, the less their property will be worth.

Basically, for both commercial and residential, farang can not own land in Thailand. We all know that. So, there is always that "unknown factor" of what the Thai landlord will do at the expiry of your lease, and, in my opinion, they play a BIG part in the market whilst having very little education, knowledge or care of market forces.

I also believe, in the next few years, when some of these 30 year leases start to expire, we will see many farang just walk away from their house, just as bar owners are walking away from their bars, due to unrealistic rent demands from Thai landlords.

There are not that many houses on 30 year leases i think (anybody some reliable numbers?), let alone for sale. Also don't forget their is a very, very big part of the household market owned by thais, no farang involved whatsoever.

[stevenl]

Oh, and for commercial property it is all done on the company name, so there are no 30 year leases there.

[petercallen]

Oh, and for commercial property it is all done on the company name, so there are no 30 year leases there.

May be you should check the amended company rules, and see how secure you feel then.

Believe it or not, there is still property being sold on 30 year leases.

There again i do not think you are involved in building spec houses to sell as a lot of people

on this forum are.

The market here is no different to anywhere else in the world.

It has been a sellers market for a very long time,it is now a buyers market and is going to stop that way for the foreseeable future

[NamKangMan]

Oh, and for commercial property it is all done on the company name, so there are no 30 year leases there.

Smal beer bars, guest houses and shop houses - lease in the farang owners name and alcohol, music licences etc in his Thai girlfriends name. Very common. Most don't set up a Thai Company for this sort of small operation due to the taxes involved with having a Thai Company.

These leases are shorter than 30 years, therefore, offering the Thai own the opportunity to increase the renewal lease price and key money on a more regular basis which leads to leasees walking away and/or going broke and the premises becoming vacant.

Also, as we all know, the farang owner can't serve a beer from his own bar. :) :)

Edited February 4, 2011 by NamKangMan

[NamKangMan]

i think Spain had some similar laws regarding land ownership and leasing....i was talking to one old-timer from the UK and he said a lot of people got fleeced there after the Spanish government changed the law. This could happen in Thailand. There are some very influential and soon to be very influential leaders in Thailand who are rumoured to not like Falangs. This is because they probably arent receiving a direct kickback from any foreigners

I can see the day when the loop hole involving sitting on "those letters" from your Thai partners gets closed. Then, the fun and games will begin.

Edited February 4, 2011 by NamKangMan

[stevenl]

Oh, and for commercial property it is all done on the company name, so there are no 30 year leases there.

Smal beer bars, guest houses and shop houses - lease in the farang owners name and alcohol, music licences etc in his Thai girlfriends name. Very common. Most don't set up a Thai Company for this sort of small operation due to the taxes involved with having a Thai Company.

These leases are shorter than 30 years, therefore, offering the Thai own the opportunity to increase the renewal lease price and key money on a more regular basis which leads to leasees walking away and/or going broke and the premises becoming vacant.

Also, as we all know, the farang owner can't serve a beer from his own bar. :) :)

Beer bars, yes, will sometimes be not in a company name. But guesthouses, shophouses, nearly always in a company name, unless if done as a present to the girl.

But that is again commercial property, for private houses the 'farang' owned market is very small compared to the Thai owned market. Let alone the 30 year lease market. You're way overestimating the effect of that small part of the market.

May be you should check the amended company rules, and see how secure you feel then.

Peter, these rules have changed (well, not even really but are checked more critically) to prevent companies being started with the only goal of owning land. Here we're talking about legit companies that own land/property, and that is no problem at all.

[steelepulse]

Back to original topic: I found this info from propertywire.com and from the stats shown, property is indeed moving and not overinflated.

"It estimates that approximately 84% of units in completed of condominiums buildings have been sold and the average asking price of condominiums by developers was approximately THB 90,000 per square meter.

There was no new supply of villas in this quarter and the total stock of completed villas in was 2,787 units. There are a total of 133 villas that are expected to be completed in the fourth quarter of 2010, with 343 villas expected in 2011.

‘Based on our new survey, the sales performance of total existing and future units was 77%. Out of 3,749 villas, 2,897 units have been sold and 852 units are still for sale. The sales rate of all existing and future luxury and high-end units was 74%. Out of 880 luxury and high end units, 653units were sold, leaving 227 units remained unsold,’ the report adds."

[katabeachbum]

Back to original topic: I found this info from propertywire.com and from the stats shown, property is indeed moving and not overinflated.

"It estimates that approximately 84% of units in completed of condominiums buildings have been sold and the average asking price of condominiums by developers was approximately THB 90,000 per square meter.

There was no new supply of villas in this quarter and the total stock of completed villas in was 2,787 units. There are a total of 133 villas that are expected to be completed in the fourth quarter of 2010, with 343 villas expected in 2011.

'Based on our new survey, the sales performance of total existing and future units was 77%. Out of 3,749 villas, 2,897 units have been sold and 852 units are still for sale. The sales rate of all existing and future luxury and high-end units was 74%. Out of 880 luxury and high end units, 653units were sold, leaving 227 units remained unsold,' the report adds."

Property is indeed moving, in Phuket, in BKK and in Hua Hin, the markets I follow. Anyone in doubt, simply check the land office revenue on transfer and register(lease/usufruct/loans) taxes.

For land in these areas it is still sellers market, hard to buy lower than asking price. Some houses have of course to high asking prices.

[petercallen]

All i can suggest is if you have the time and you are interested in buying/leasing a house

or apartment in Phuket take a good look around all over the island.

Explore the side streets, there are housing estates and small developers everywhere

with finished houses ready to move in to almost completed houses and half built houses.

In most places building has stopped and the buildings are sitting there in there current

level of construction.

Check for yourself and no not believe what people tell you, more often than not they are

involved in developing or selling real estate.

Prices can very a lot, as a example, in the soi where i live there are 2 almost identical houses.

One owned by a Thai person who genuinely wants to sell has been reduced to 1.9M, the other

which is being renovated because it was poorly maintained by the ex tenants is going on the

market at 3.5M.

I have found a huge variation in the value of equal properties all over the island

[thaiwanderer]

In the west, commercial lease increases are usually linked to the CPI and "key money" does not exist.

Rents in the west are not increased based on the landlord's suspicion of what he thinks the tenant is able to pay.

If a tenant fails to factor in key money in assessing the total rental that is entirely their own look out.

A sensible landlord anywhere in the world (invluding 'the west' wherever that is) will charge whatever the market will bear, in amongst other considerations.

Any rental market that has a number of outsiders will full pockets and muddled minds will likely have a sector charging far more than the local market would even consider.

I see other posters talk about the insignificance of the non-Thai market in Phuket - but is that based on property size or cost ratio?

[NamKangMan]

Beer bars, yes, will sometimes be not in a company name. But guesthouses, shophouses, nearly always in a company name, unless if done as a present to the girl.

But that is again commercial property, for private houses the 'farang' owned market is very small compared to the Thai owned market. Let alone the 30 year lease market. You're way overestimating the effect of that small part of the market.

May be you should check the amended company rules, and see how secure you feel then.

Peter, these rules have changed (well, not even really but are checked more critically) to prevent companies being started with the only goal of owning land. Here we're talking about legit companies that own land/property, and that is no problem at all.

How can they tell the difference between the companies that have been started "with the only goal of owning land" and the "legit companies that own land/property?"

[NamKangMan]

Back to original topic: I found this info from propertywire.com and from the stats shown, property is indeed moving and not overinflated.

"It estimates that approximately 84% of units in completed of condominiums buildings have been sold and the average asking price of condominiums by developers was approximately THB 90,000 per square meter.

There was no new supply of villas in this quarter and the total stock of completed villas in was 2,787 units. There are a total of 133 villas that are expected to be completed in the fourth quarter of 2010, with 343 villas expected in 2011.

'Based on our new survey, the sales performance of total existing and future units was 77%. Out of 3,749 villas, 2,897 units have been sold and 852 units are still for sale. The sales rate of all existing and future luxury and high-end units was 74%. Out of 880 luxury and high end units, 653units were sold, leaving 227 units remained unsold,' the report adds."

Doesn't 51% of the condo's in the block have to be Thai owned? If so, these would probably be the developers family, just on paper. Where does that leave these stats?

[NamKangMan]

If a tenant fails to factor in key money in assessing the total rental that is entirely their own look out.

A sensible landlord anywhere in the world (invluding 'the west' wherever that is) will charge whatever the market will bear, in amongst other considerations.

Any rental market that has a number of outsiders will full pockets and muddled minds will likely have a sector charging far more than the local market would even consider.

I see other posters talk about the insignificance of the non-Thai market in Phuket - but is that based on property size or cost ratio?

I think it's the "outsiders with full pockets and muddled mind" that have kept the market on the boil for many years, however, I see this decreasing significantly over the next few years as the GFC has hit retirees hard and farang finally are realising all is not what it seems in Thailand.

[stevenl]

How can they tell the difference between the companies that have been started "with the only goal of owning land" and the "legit companies that own land/property?"

BY looking at activities, money coming in and going out, of the company.

[katabeachbum]

How can they tell the difference between the companies that have been started "with the only goal of owning land" and the "legit companies that own land/property?"

BY looking at activities, money coming in and going out, of the company.

It is simply a trading company. Nothing wrong for a grocery store co ltd to purchase property. Even to purchase property only to rent it is ok.

The companies established to purchase and hold property only, without sensible amount of trade, are greyish. Not very complicated to go white if/when desired. Open a bar in the garage

[katabeachbum]

Back to original topic: I found this info from propertywire.com and from the stats shown, property is indeed moving and not overinflated.

"It estimates that approximately 84% of units in completed of condominiums buildings have been sold and the average asking price of condominiums by developers was approximately THB 90,000 per square meter.

There was no new supply of villas in this quarter and the total stock of completed villas in was 2,787 units. There are a total of 133 villas that are expected to be completed in the fourth quarter of 2010, with 343 villas expected in 2011.

'Based on our new survey, the sales performance of total existing and future units was 77%. Out of 3,749 villas, 2,897 units have been sold and 852 units are still for sale. The sales rate of all existing and future luxury and high-end units was 74%. Out of 880 luxury and high end units, 653units were sold, leaving 227 units remained unsold,' the report adds."

Doesn't 51% of the condo's in the block have to be Thai owned? If so, these would probably be the developers family, just on paper. Where does that leave these stats?

51% of new condos sqm needs to be Thai owned. Do you think only foreigners buy/live in condos? Some condos are actually Thai dominated, IOW less than 49% sold to foreigners.

[thaiwanderer]

I think it's the "outsiders with full pockets and muddled mind" that have kept the market on the boil for many years, however, I see this decreasing significantly over the next few years as the GFC has hit retirees hard and farang finally are realising all is not what it seems in Thailand.

The queue of fuddled minded farangs wanting to drop their loads is as long as ever, but the GFC has reduced the size of their money bags.

[HDRIDER]

For 10 years i have been listening to “just wait and see price will go down now” but it don’t go down, only price going down is when people try to sell a house for 15 mill and they set the price down to 12, be course it was too expensive in the first place

[barka]

For 10 years i have been listening to "just wait and see price will go down now" but it don't go down, only price going down is when people try to sell a house for 15 mill and they set the price down to 12, be course it was too expensive in the first place

You are right..BUT...so is Peter Callen...you have only to get in your car and travel around the island and see what is happening..reality,,i did this last year and i have recently done the same trip..and not much change only more Thai developments...The foreign property development is mostly the same...empty and becoming ..derilict ghost projects..,apart from a few High end projects that have re started...STATS..dont really mean a lot..its how they are interputed and by who...usually its the.. REAL ESTATE SPECULATORS. who are doing this

[petercallen]

For 10 years i have been listening to "just wait and see price will go down now" but it don't go down, only price going down is when people try to sell a house for 15 mill and they set the price down to 12, be course it was too expensive in the first place

You could be right mate but one high end developer advertises the the PG

25% discount on property plus free transfer, company, and 1 years insurance

They have been doing this for awhile now so maybe they still have not sold.

[petercallen]

Just checked the PG, Villa advertised ( and it is a villa in my opinion not a house being called a villa )

25M reduced to 17.5M, further discounts available.

Do not believe me check for yourself

[steelepulse]

I think there are 3 types of buyers, and the house above fits into the category that will be hard to find a buyer.

1) Locals that want to buy something in the under 5 million range in a housing estate where they can get financing and make a payment of less than 30K/mo to the bank.

2) Foreigners looking for their primary home for a " good deal". House cited above falls into this category as a holiday home buyer will not look to buy back there in dreamland by Baan Bua. However a holiday home buyer would buy in Baan Bua even though it's more expensive.

3) Foreigners looking to buy a holiday home and these are usually in developements of like properties with security, infrastructure etc.

I'd venture to say most of the recent sales cited in that property article fall into category 3 as the world economic crisis will make it hard for the average foreigner to pull up stakes in their home country and move here and drop 15-20 million baht. There just aren't that many people that realistically have the time, money and ability to move them and their family here in the current economic situation.

Houses falling into category 2 above will languish on the market, while category 1 and 3 will still move. PC is a prime example of a category 2 buyer, unfortunately for the market, there just aren't too many PC's.

[petercallen]

Most people do not know what type of buyer i am, especially people who do not know me.

The average Thai buyer is not going to pay 30K a month in payments, more likely around 10K.

Thai people will not buy from a farang spec builder, the can buy much better elsewhere

most of the of the newbie farang buyers who listen to spec builders have gone,

There is a recession on and a lot of these buyers came from countries still in recession.

Different posters have stated on this forum the high end market is still going well.

I suggested people look up a advertisement in the Phuket Gazette and make up there own minds.

The advertisement is headed CHARMING POOL VILLA in the houses for sale section

I believe the seller really wants to sell the property and has priced it realisticly

Spec builders are not doing the same, and they cannot sell there properties unless they get a newbie mug.

[snamos]

15 to 20 million baht is a lot of money in anyones books

[petercallen]

15 to 20 million baht is a lot of money in anyones books

Yes i agree with you, but when you compare the property i mentioned against another property

i was offered at 15.8M it makes the true value of the 15.8 property 6 to 7M

[steelepulse]

>>Most people do not know what type of buyer i am, especially people who do not know me.

From your countless posts on the subject, I think most everyone has a pretty good idea.

[petercallen]

And by your posts it sounds like you make your living out of real estate

>>Most people do not know what type of buyer i am, especially people who do not know me.

From your countless posts on the subject, I think most everyone has a pretty good idea.

And from your posts it sounds like you make a living from real estate.

I apologize if i am wrong.

Have a nice day

[stevenl]

And by your posts it sounds like you make your living out of real estate

>>Most people do not know what type of buyer i am, especially people who do not know me.

From your countless posts on the subject, I think most everyone has a pretty good idea.

And from your posts it sounds like you make a living from real estate.

I apologize if i am wrong.

Have a nice day

Why apologise Peter, is working in real estate something to apologise for? Isn't that what you used to do yourself?

[petercallen]

Why apologise Peter, is working in real estate something to apologise for? Isn't that what you used to do yourself?

Apart from 6 months i have never worked in real estate i have invested in it but not here.

Correct me if i am wrong, dealing in land and retailing are occupations reserved for Thai nationals

Which i am not so i would not think about doing it here.

[steelepulse]

And by your posts it sounds like you make your living out of real estate

And from your posts it sounds like you make a living from real estate.

I apologize if i am wrong.

Have a nice day

Sorry,

I'm not in the real estate industry, although I do own a few rental properties in various places .