Demanding Expats Fuel Bangkok Housing Recovery

[george]

Demanding expatriates fuel Bangkok housing recovery

BANGKOK: -- A profusion of tropical foliage on the balcony dapples the light even before it reaches the wooden blinds and falls through them onto the silk throws indoors.

In the dim coolness of Jeremy Horner's marble-floored apartment are a modern kitchen, three bedrooms and bathrooms and three balconies, totaling 233 square meters, or 2,508 square feet, of space, with a shared pool upstairs and a spa downstairs.

It all adds up to the Bangkok lifestyle favored by growing numbers of foreigners.

"I've always felt that rent was money not doing anything," said Horner, a photographer. "And I thought whatever happened, whether I was here long term or not, that if I bought a place which was well built and well maintained in a good area, then I couldn't lose."

He looked at new developments across Bangkok, but then found this apartment on the Internet and chose it for the décor and the building's quality.

It is in a condominium block where there are several foreign owners and good management, in a location - Soi Yennakart, off Sathorn Road - that real estate agents describe as Grade A.

Horner had bought property in England, his homeland, so he had experience in real estate. He said the process in Thailand was manageable, but that having a reputable agent was vital.

His luxurious apartment, including the furnishings and decoration, was priced at 19 million baht, or $460,000, but he bought it for 15 million baht.

Horner is part of a growing segment in the Thai property market that James Pitchon, managing director of CB Richard Ellis in Bangkok, describes as the expatriate lifestyle buyer.

More foreigners are moving to Thailand, and more longtime expatriates are buying condominiums. The number of work permits for foreigners increased from 45,000 in July 2003 to 55,645 in March 2005, although this does not reflect the growing number of expatriate retirees here.

Bangkok is a heaving metropolis with far too many cars, but the city still offers much more space for the money than, say, Hong Kong or Singapore, and a luxurious tropical lifestyle.

The shape of the city also has been changing, with the advent of the Skytrain, an overhead monorail mass-transit system, and a new subway.

"The expat lifestyle buyer has decided he or she likes Asia and, whatever happens, wants to maintain some sort of home in Asia," Pitchon said. "The expectation is that, in the future, they will live here for part of the year.

"This is an important market and it's growing. It's new demand."

These buyers are demanding good design and a high quality of construction. Developers who once might have offered empty concrete shells now finish their buildings off with decor packages like "Grande Oriental" or "Modern Zen." And wealthy Thai buyers also are demanding lavish styling in their new homes.

A decade ago, property developers in Bangkok thought the profit ceiling was limitless. Then the Thai currency collapsed in 1997, plunging East Asia into crisis. The remains of that collapse are visible across Bangkok in the form of half-built towers and concrete piles, but new construction, like the Infinity, is attracting attention now.

The Infinity still is an empty building lot, but lavish marketing by Goldenland Property Development promises a "Venice in the East," complete with canals and gondolas, shopping malls, and an entrance "inspired by Rome's Spanish Steps."

The first of three towers to be built is almost sold out, even though construction is just beginning and completion is not expected until 2008. The only remaining apartments are the small ones - 85 to 104 square meters - on lower floors, at prices ranging from 10.2 million to 12.5 million baht.

Sales are also brisk at the Raffiné 31, where more than half of the 44 two-floor apartments have been sold.

Bangkok's less optimistic real estate analysts say buyers have returned to the market in recent years, but there is a new note of caution - making new projects more considered, more design-conscious and more expensive. In the top bracket, only the Met, a 66-floor condo block, has appeared on the market so far this year.

Kiat Sitheeamorn, a member of Parliament and an expert on the Thai economy, said that the high-end projects "are experiencing a slower rate of sales and, since last year's increase in pricing, we're starting to see some speculative buying."

Ian Soo, managing director of Hamptons Property in Bangkok, said there was significantly more foreign interest in buying in Bangkok. "But we've yet to see if there is a sufficient number of buyers to take up all this supply," he said.

As in many Asian countries, the condominium market was booming from the late 1980s to late 1990s, but much of that activity was speculative. In those times, people bought properties before they were built with the intention of reselling them at higher prices before the titles were issued.

The city had 27,000 condos in 1997, more than seven times as many as the 3,500 units counted in 1990.

Since the crash, banks have been busy dealing with nonperforming loans, developers have struggled with mountains of debt and stock has only gradually been cleared.

"Banks have become very cautious on project financing; they still have a strong memory of the problems which caused 1997," Pitchon said.

He estimated that about 70 percent of the units put under construction since 2002 had been sold, a positive sign that the market is in closer touch with demand than it had been in the past.

Nigel Cornick, chief executive officer of Raimon Land, a publicly traded property company based in Bangkok, agreed that the property market in the Thai capital was more realistic now.

He should know. He joined the company in 1996, the year before the economic crisis hit and Raimon Land's huge debts forced it into restructuring, a process from which it emerged in 2001.

In August 2003, Cornick won praise for his launching of the Lakes, which converted an incomplete office building into luxury condominiums.

It was a near-instant sellout, and heralded the reopening of property business after the crash. Prices opened at about 68,000 baht per square meter and now are about 94,000 baht per square meter.

Raimon Land went on to offer the Legend Saladaeng, in another prime location and with top-quality finishes.

The project has proved highly popular among foreigners, selling for about 85,000 baht per square meter. Two-bedroom units of 106 square meters sold for 9.5 million baht.

Cornick said that the cost of construction had risen 6 percent to 8 percent this year, largely because of rising fuel costs, while interest rates also are rising and economic growth is slipping.

All of these factors are producing a challenging environment for anyone seeking profit from property this year.

"Speculation is to some extent still happening, especially last year," he said. "But it is less now, because there is less opportunity to make a profit."

--International Herald Tribune 2005-09-16

[thaibebop]

So, an expat can buy a condo but not a house? What's the difference?

[sua yai]

There's one born every day.

I just can't see the financial benefit of selling a property in London that earns rent and appreciates in value a lot faster than in Thailand.

Plus my investment, legally, is far more secure

[marquess]

You also have to take into account currency depriciation. Five years ago it was 50 baht to one pound and now look at it.

[The Skipper]

There's one born every day.

I just can't see the financial benefit of selling a property in London that earns rent and appreciates in value a lot faster than in Thailand.

Plus my investment, legally, is far more secure

<{POST_SNAPBACK}>

So, property value has doubled in the last five years in London? It has in Bangkok.

Bangkok real estate is an excellent investment.

[plachon]

This looks to me, v. much like another Shawn Crispin story, who I seem to remember did a gung-ho story on Bangkok property in IHT about 9 months back. Anyone remember it? The point being that some journos are only too happy to write any old crap, for a nice wee incentive from the property industry.........

[brianbrain]

His luxurious apartment, including the furnishings and decoration, was priced at 19 million baht, or $460,000, but he bought it for 15 million baht.

<{POST_SNAPBACK}>

Hmm... my house in England is worth 30 million baht but you can buy it for only 15 million.

[brianbrain]

The shape of the city also has been changing, with the advent of the Skytrain, an overhead monorail mass-transit system, and a new subway.

Give it another 50 years and they may even install pavement along the roads outside. Unless you are the type of person who just wants the condo-car-shopping experience, this is not a great place to "invest" in a home. Government investment in basic infrastructure and services that affect basic quality of life is woefully lacking.

[Beer-diow, khao-neow, mai-an!]

This is obviously cheer-leading for a flagging property sector. But really, how negative ar some people on here as well?! If you were thinking not about appreciation per se (which frankly only mugs can expect anywhere over the next 3 years anywhere) but just about what you get in relative terms (space, luxury, etc.) then BKK does stand up well in many cases.

Funny how so many people whinge on here yet obviously have deep rooted connections to the country and/or city.

[Nepal4me]

This is obviously cheer-leading for a flagging property sector. But really, how negative ar some people on here as well?! If you were thinking not about appreciation per se (which frankly only mugs can expect anywhere over the next 3 years anywhere) but just about what you get in relative terms (space, luxury, etc.) then BKK does stand up well in many cases.

Funny how so many people whinge on here yet obviously have deep rooted connections to the country and/or city.

<{POST_SNAPBACK}>

I guess there are a lot of mugs here then. Dam, hate to be such a mug....

Obviously cheer-leading for a flagging property sector? Not necessarily. Notice the increase in the number of expats coming in, they have to stay somewhere and they are monied people relatively speaking. There is a lot less development now partially due to larger supply and also higher building costs. What happens when you get increasing ex-pats together with fewer new developments? Yup, prices go up. The take up rate of existing condos is increasing, there isn't a huge oversupply right now but I would agree there is a very large supply. With the incoming expats, the foreign investment and the fewer number of developments this year, that supply will likely get much smaller over the next year or 2. I wouldn't expect large appreciation in the short term but in good areas with good quality, the prices are going up and will continue to do so. Take The Met for example, from 120,000 to 139,000 baht per sq meter. Great location, high quality development, brisk sales. These higher prices have a tendency to drive prices up elsewhere, especially in similar high end developments.

Come all you naysayers, BKK is not that bad, if it was, you wouldn't be here. It's developing. Thailand is still a developing nation, BKK has put in very functional skytrain and subway systems, a new airport to follow next year, lot of improvement. Yeah the sidewalks are difficult to walk along sometimes because of people selling stuff but is it really worth complaining about that? That's part of the charm, it's part of the good and bad. Bangkok is a great place to live, visit whatever, it's going to continue to develop. Asia is in growth mode, China and India will continue to develop and pull neighbouring countries along.

Having said all that, it's just my opinion. I think we'll see more growth for many years to come. So many doomsayer on this board, just wanted to add my thoughts which in general are very positive about opportunities here.

[Beer-diow, khao-neow, mai-an!]

That was largely my point!

[loong]

There's one born every day.

I just can't see the financial benefit of selling a property in London that earns rent and appreciates in value a lot faster than in Thailand.

Plus my investment, legally, is far more secure

<{POST_SNAPBACK}>

So, property value has doubled in the last five years in London? It has in Bangkok.

Bangkok real estate is an excellent investment.

<{POST_SNAPBACK}>

Yes, property prices have doubled in Uk generally. My house in Wales has increased by 150%, My house in Kent increased by about 80%. Increases were higher, but have fallen back in the last year.

My Welsh house has stood for over 100 years, Kent house 60. Probably in 50 years time, both houses will still be in condition.

With the erratic build quality in Thailand, what will be the condition of these condos and houses be in 20 or 30 years time?

I have seen many concrete constructions in Thailand falling apart after 10 years!

I looked at a construction in progress recently. They had prepared to cast the horizontal concrete sections, most of the metal reinforcing was in the top half, where it is not needed. Concrete has strength under compression (top), but lacks strength under tension, so the important section for reinforcement is the lower part. Also some of the stone they were using in the mix was 75mm plus in diameter.

That building will look very nice when it is finished, but will soon start to fall apart.

I had some work done recently (stupid, I was not there to keep an eye on it)

They just put down concrete on top of vegetation and topsoil, didn't even attempt to dig out. I was able to take a stick and push it right underneath. I showed this to them and explained that it had to all be dug out. Their reason for such bad workmanship? "We have never done work for Farang before"!

[brianbrain]

Come all you naysayers, BKK is not that bad, if it was, you wouldn't be here.  It's developing.  Thailand is still a developing nation, BKK has put in very functional skytrain and subway systems, a new airport to follow next year, lot of improvement.  Yeah the sidewalks are difficult to walk along sometimes because of people selling stuff but is it really worth complaining about that?  That's part of the charm, it's part of the good and bad.  Bangkok is a great place to live, visit whatever, it's going to continue to develop.  Asia is in growth mode, China and India will continue to develop and pull neighbouring countries along. 

<{POST_SNAPBACK}>

The BTS and subway systems are great. I agree with you there. Regarding the airport, I'm not much bothered as I fly so infrequently (no more than one return journey a year) but I can see how developments must be helping many others. But for me, and I think a lot of other people, what would really be nice (I mean REALLY nice) would be if they fixed the bloody pavements!

I'm not talking about street sellers or US/UK whales blocking pedestrian traffic, I'm thinking of uneven surfaces, dangerous holes, trip hazards, or an absence of safe pavement to protect pedestrians from motor vehicles. If you are not aware of these things then I assume you rarely walk anywhere. Every day I walk up and down two sois in the Sukhumvit area and know I am risking my neck. And it's such a crying shame because in other respects Bangkok is such a safe place to live (one of the great reasons for staying in this city). All they need do is spend a little money on the pavements and the city would be such a nicer place.

So, yes I do think it is worth complaining about.

[The_Moog]

With the erratic build quality in Thailand, what will be the condition of these condos and houses be in 20 or 30 years time?

I have seen many concrete constructions in Thailand falling apart after 10 years!

We're going to find out because all those eggbox houses will still be there in 20 years. Not worth re-developing.

I agree with last poster's comments on sidewalks. Some progress maybe in 2007, when there are plans to put cables underground in a handful of streets. Allowing motorbikers to ride on the pavements (apparently its legal) remains sheer insanity.

[Nepal4me]

[The BTS and subway systems are great. I agree with you there. Regarding the airport, I'm not much bothered as I fly so infrequently (no more than one return journey a year) but I can see how developments must be helping many others. But for me, and I think a lot of other people, what would really be nice (I mean REALLY nice) would be if they fixed the bloody pavements!

I'm not talking about street sellers or US/UK whales blocking pedestrian traffic, I'm thinking of uneven surfaces, dangerous holes, trip hazards, or an absence of safe pavement to protect pedestrians from motor vehicles. If you are not aware of these things then I assume you rarely walk anywhere. Every day I walk up and down two sois in the Sukhumvit area and know I am risking my neck. And it's such a crying shame because in other respects Bangkok is such a safe place to live (one of the great reasons for staying in this city). All they need do is spend a little money on the pavements and the city would be such a nicer place.

So, yes I do think it is worth complaining about.

<{POST_SNAPBACK}>

I totally agree with you on the sidewalk issue, it's a mess. Even on high rent streets like Silom or Lang Suan, you're risking a twisted ankle to say the least any time you walk down there. Other places are even worse, so yeah, you're right, that is indeed worth complaining about. However crap the sidewalks are, do believe they'll be improved. A big part of the problem with the sidewalks has been corruption. The companies bribe officials to let them build the sidewalks, they build those stupid square tiles directly over sand so as soon as it rains they shift and they are called back to re-tile the sidewalk again in a crappy manner. Hopefully that will be addressed, with the shopping strip from MBK to Ploenchit, the gov't is trying to create competitive options for tourist shopping instead of going to HK and Singapore. They realize they need to address this issue, thus the new above ground walkway from Siam BTS to Chitlom BTS, soon to enter WTC upon its Zen expansion. The sidewalks are so crap, you have to believe that this issue is being raised to the highest gov't levels. It's not just you and I, everybody in BKK is aware of how crap they are, at least those that have been to other countries.

I still have to say, despite the serious need to adress the sidewalk situation, it is not that big an issue when it comes to the price of condos in BKK. Things like business investment, the new airport (although not important for you), the increasing number of expats living here, improved infrastucture are much more critical issues driving condo pricing here.

[WhiteShiva]

There's one born every day.

I just can't see the financial benefit of selling a property in London that earns rent and appreciates in value a lot faster than in Thailand.

Plus my investment, legally, is far more secure

<{POST_SNAPBACK}>

So, property value has doubled in the last five years in London? It has in Bangkok.

Bangkok real estate is an excellent investment.

<{POST_SNAPBACK}>

It certainly was - not convinced it still is, though.