Delight Posted April 14, 2011 Share Posted April 14, 2011 (edited) What causes property prices to Boom/Bust /Stabilize? I shall start the discussion with my opinion. Others are free to query / offer alternative views In my view there are only 2 factors which affects the prices of property(given that population rise and property supply is standard against Historical norms) The 2 factors are: 1 Sentiment 2 Money supply in a particular location. Scenario A Both factors 1 and 2 are in the negative In this case property prices will be depressed Scenario B Only one of the factors is positive . It does not matter which is up and which is down. In this case property prices will rise in line with historical norms for that particular location. Scenario C Both factors are positive. This will cause house price inflation . Prices will rise higher than historical norms in a particular location. This inflation will feed itself until the activity can described as a boom. Can you go from C to B -short answer –NO The only option after C is to go to A and then from A to B then overtime to C What causes a change in sentiment? I can only refer to UK and to USA In the UK it was the election of Tony Blair as P.M back in 1997. He inspired the nation with his cry 'Things can only get better' --Most people believed it. In USA it was Bush asking Allan Greenspan (then chairman of the Fed) to 'find a way to make low earners into home owners'. Greenspan should have said No-For certain it was not his job. He said Yes The rest is history Therefore in my view the Boom /Bust cycle (in terms of its cause ) has nothing to do with Greedy bankers -Greedy estate agents -greedy house sellers etc. etc. The basic Human condition did not change Edited April 14, 2011 by Delight Link to comment Share on other sites More sharing options...
pkrv Posted April 14, 2011 Share Posted April 14, 2011 (edited) You forgot FX when factoring in Thailand as a Farang. Edited April 14, 2011 by pkrv Link to comment Share on other sites More sharing options...
Jebhead Posted April 14, 2011 Share Posted April 14, 2011 Supply and demand... JH Link to comment Share on other sites More sharing options...
Delight Posted April 14, 2011 Author Share Posted April 14, 2011 (edited) You forgot FX when factoring in Thailand as a Farang. Perhaps you could define FX Regret I can not work it out Edited April 14, 2011 by Delight Link to comment Share on other sites More sharing options...
Delight Posted April 14, 2011 Author Share Posted April 14, 2011 Supply and demand... JH Supply and demand of what. Sentiment or Money? In UK and USA there is a plentiful of supply of housing stock and there is plenty of demand i.e. The public interest to own a house has not diminished. And yet transactions are below historical norms. Your statement does not explain anything Link to comment Share on other sites More sharing options...
thaiwanderer Posted April 14, 2011 Share Posted April 14, 2011 Empty pocketed demand is no real demand. Link to comment Share on other sites More sharing options...
trogers Posted April 14, 2011 Share Posted April 14, 2011 In UK and USA there is a plentiful of supply of housing stock and there is plenty of demand i.e. The public interest to own a house has not diminished. And yet transactions are below historical norms. Simple - many in the US and UK survive day to day on credit. What savings do they have for investing in home ownership? Contrast this situation with people in East/Southeast Asia. Link to comment Share on other sites More sharing options...
thunder30101 Posted April 15, 2011 Share Posted April 15, 2011 I think the main reason thais buy property/land is because it is the only game in town to provide some return on your savings, banks pay nothing in interest for savings. They will buy/build a house-land-apt building and let it rot to the ground, but alot of face to be had by owning land. Im just waiting for another baht bust like 97 with the massive amounts of foreign capitol coming in and being loaned out with no chance of it being repaid by the borrowers. Nobody I know has got any big pay increases lately and red plates and buildings going up like mushrooms everywhere. Link to comment Share on other sites More sharing options...
Delight Posted April 15, 2011 Author Share Posted April 15, 2011 (edited) In UK and USA there is a plentiful of supply of housing stock and there is plenty of demand i.e. The public interest to own a house has not diminished. And yet transactions are below historical norms. Simple - many in the US and UK survive day to day on credit. What savings do they have for investing in home ownership? Contrast this situation with people in East/Southeast Asia. Simple - many in the US and UK survive day to day on credit. What savings do they have for investing in home ownership? This USA circumstance is in the 'A' category as per my initial post.Not everywhere . Some locations could be 'B' or 'C' . But in broad terms the 'A' category fits. Contrast this situation with people in East/Southeast Asia. East/Southeast Asia in general terms terms is 'B' As I stated you really have to analyze on a location by location basis .I would not refer to the whole of East/Southeast Asia as one homogeneous location with respect to property prices Edited April 15, 2011 by Delight Link to comment Share on other sites More sharing options...
Delight Posted April 15, 2011 Author Share Posted April 15, 2011 Empty pocketed demand is no real demand. There is demand for property. If we were talking 'pet rocks '-then I would agree. Populations have not just got fed up with the notion of owning a property . What you are referring to is I think 1 Sentiment -low 2 Money supply in a particular location.-low Category 'A' Link to comment Share on other sites More sharing options...
Delight Posted April 15, 2011 Author Share Posted April 15, 2011 (edited) I think the main reason thais buy property/land is because it is the only game in town to provide some return on your savings, banks pay nothing in interest for savings. They will buy/build a house-land-apt building and let it rot to the ground, but alot of face to be had by owning land. Im just waiting for another baht bust like 97 with the massive amounts of foreign capitol coming in and being loaned out with no chance of it being repaid by the borrowers. Nobody I know has got any big pay increases lately and red plates and buildings going up like mushrooms everywhere. Must confess I am not familiar with the term 'red plates'in the context of this post. However buy property/land is because it is the only game in town to provide some return on your savings, banks pay nothing in interest for savings. I assume that this refers to locations where farang choose to live. Currently those areas are more towards Category 'A' as per my post. The investors are hoping for a category 'C' ie a Boom . In my view it will go 'A' to 'B' . My guess that there is only a 20% chance that it will go to a 'C' any time soon . However 'A' to 'B' is better than 0% in a bank. Im just waiting for another baht bust like 97 with the massive amounts of foreign capitol coming in and being loaned out with no chance of it being repaid by the borrowers I think that you will have long wait. Thailand was bailed out by the IMF back in '97. The cause(but not the root cause) was the decision by Thai monetary authorities to float the Baht. This decision was also supported by high interest rates (.In truth they probably had no choice). The property market became a classic category 'C . 'But it soon went to an 'A' as the confidence of foreign investors slipped and they escaped on the 'High' History does have a habit of repeating itself. If they screw up maybe the IMF will be less willing to sort them out.. As you state losing face is difficult for Kon Thai. For that reason alone I do not see them repeating the same mistakes. Of course Thailand in general has been in Category 'B' for the entire Boom /Bust cycle that many Countries in the West have witnessed. Edited April 15, 2011 by Delight Link to comment Share on other sites More sharing options...
thunder30101 Posted April 15, 2011 Share Posted April 15, 2011 If you dont know what a red plate is you havent a clue about the thai system or economy. I am not talking about foolish farangs paying 2 or 3 times the market rates for properties so throw that red herring out the window. Thais make the same mistakes over and over and over, again I think you know nothing about thais or the shenanigans that go on in the banking system here. The gov is pumping billions of baht into the economy (villages) for votes right now which is only making matters worse. Link to comment Share on other sites More sharing options...
PattayaParent Posted April 15, 2011 Share Posted April 15, 2011 For those that have just arrived in Thailand Red Plates = New Cars Link to comment Share on other sites More sharing options...
trogers Posted April 15, 2011 Share Posted April 15, 2011 Empty pocketed demand is no real demand. There is demand for property. If we were talking 'pet rocks '-then I would agree. Populations have not just got fed up with the notion of owning a property . What you are referring to is I think 1 Sentiment -low 2 Money supply in a particular location.-low Category 'A' Economists use the term 'Effective Demand' to contrast general demand and demand that are backed up by purchasing abilities and realised. Link to comment Share on other sites More sharing options...
Darrel Posted April 15, 2011 Share Posted April 15, 2011 Im just waiting for another baht bust like 97 with the massive amounts of foreign capitol coming in and being loaned out with no chance of it being repaid by the borrowers. You may not have long to wait. I was horrified to read the other day that Thailand only very recently capped mortgage loans for condos at 90% value. Since the last crash you would be lucky to get 75% on residential property in the UK, and rightly so. I was even more horrified to read that Kbank has one of the biggest exposures to domestic residential loans. Kbank is my bank and I'm seriously thinking about changing. Link to comment Share on other sites More sharing options...
Darrel Posted April 15, 2011 Share Posted April 15, 2011 Supply and demand... Those two, and labour costs/inflation. Link to comment Share on other sites More sharing options...
Delight Posted April 15, 2011 Author Share Posted April 15, 2011 (edited) If you dont know what a red plate is you havent a clue about the thai system or economy. I am not talking about foolish farangs paying 2 or 3 times the market rates for properties so throw that red herring out the window. Thais make the same mistakes over and over and over, again I think you know nothing about thais or the shenanigans that go on in the banking system here. The gov is pumping billions of baht into the economy (villages) for votes right now which is only making matters worse. With due respect my original post was not Thailand specific. If fact I quoted UK and US examples of a spike in the rise of Sentiment. The gov is pumping billions of baht into the economy (villages) for votes right now which is only making matters worse . What matters are getting worse? Lets say your statement is correct .Say 10 Billion baht is thrown at a population of 25 million (Isaan) gives an average of 400 baht per beneficiary. That will not have a impact on local pricing. It could only have long effect if the 10 Billion was thrown at a few ad- infinitum Red Plate Given that I have purchased 3 new vehicles since I arrived in Thailand -In that context no explanation is necessary I cannot connect 'Red Plate' with the property market. Possibly you are referring to new arrivals that buy property almost day 1 in Thailand. A colloquialism that is new for me. If it no more than that then I thank you for expanding my vocabulary. Thais make the same mistakes over and over and over, again Strange that, inspite of all these mistakes on a continuous basis Thailand (in general terms) avoided the Boom/Bust that USA and UK and others managed to create for themselves Edited April 15, 2011 by Delight Link to comment Share on other sites More sharing options...
Delight Posted April 15, 2011 Author Share Posted April 15, 2011 (edited) Supply and demand... Those two, and labour costs/inflation. Must confess that I do not fully understand your post. However Do you see evidence of spiraling Inflation in your location ,in terms of the property? Simple supply and demand economic thinking does not apply to those economies where a domestic property is seen as a future investment. Because they cannot be defined as a standard consumer item nor are they only purchased in the main for the single purpose of selling for profit.-such as gold as an investment.for example.The belief that they are always a store of wealth is not proven The graph I attach shows that house prices does not run consistently parallel with any of the other regular variables. They probably run in relation to Sentiment and Money supply in a particular location. Difficult to measure Sentiment. The chart refers to the American market. House prices in America peaked in 1894 . It took until 1998 to regain there 1894 value in real terms. After which they fell again until 1997. Edited April 15, 2011 by Delight Link to comment Share on other sites More sharing options...
trogers Posted April 15, 2011 Share Posted April 15, 2011 Contrast this situation with people in East/Southeast Asia. East/Southeast Asia in general terms terms is 'B' As I stated you really have to analyze on a location by location basis .I would not refer to the whole of East/Southeast Asia as one homogeneous location with respect to property prices The culture of the Chinese, Japanese and Koreans places home ownership as a major sign of financial stability, ahead of car ownership. Link to comment Share on other sites More sharing options...
Delight Posted April 15, 2011 Author Share Posted April 15, 2011 Empty pocketed demand is no real demand. There is demand for property. If we were talking 'pet rocks '-then I would agree. Populations have not just got fed up with the notion of owning a property . What you are referring to is I think 1 Sentiment -low 2 Money supply in a particular location.-low Category 'A' Economists use the term 'Effective Demand' to contrast general demand and demand that are backed up by purchasing abilities and realised. Thanks for the input I took the view that I would keep the terminology simple..Every man speak Thanks again Link to comment Share on other sites More sharing options...
pkrv Posted April 15, 2011 Share Posted April 15, 2011 You forgot FX when factoring in Thailand as a Farang. Perhaps you could define FX Regret I can not work it out No problem - I am UK based so really only track sterling (GBP) vs. Thai Baht (THB) The market instrument is GBPTHB= We bought when sterling was 75 GBP to THB Today it is 49 (ish) GBP to THB. So in UK terms our Thai assets have increased 50% in FX (foreign exchange) movement alone - obviously my UK assets have also fallen 50% in Thai THB terms In sterling terms - I would not buy today in Thailand today it would be like having a stone throwing contest from the bottom of a gravity well If you are Thai the above is not really relevant - except I would be considering buying property in the US or UK at this time - if you can make use of it of course.... Link to comment Share on other sites More sharing options...
Delight Posted April 15, 2011 Author Share Posted April 15, 2011 (edited) You forgot FX when factoring in Thailand as a Farang. Perhaps you could define FX Regret I can not work it out No problem - I am UK based so really only track sterling (GBP) vs. Thai Baht (THB) The market instrument is GBPTHB= We bought when sterling was 75 GBP to THB Today it is 49 (ish) GBP to THB. So in UK terms our Thai assets have increased 50% in FX (foreign exchange) movement alone - obviously my UK assets have also fallen 50% in Thai THB terms In sterling terms - I would not buy today in Thailand today it would be like having a stone throwing contest from the bottom of a gravity well If you are Thai the above is not really relevant - except I would be considering buying property in the US or UK at this time - if you can make use of it of course.... Thanks I have used the term Sentiment in my original post If the Thai Baht is 49 when in very recent times it was say 70 -then that must have had a negative impact on Sentiment for buyers new to the market. I am advised that it used to be 90 Adjusting from 90 to 70 must have, at the time, also have a negative impact on Sentiment But Sentiment recovered at 70 Do you think that this could,given time, re -occur at say 48? ie 48 is an acceptable norm. Edited April 15, 2011 by Delight Link to comment Share on other sites More sharing options...
Delight Posted April 15, 2011 Author Share Posted April 15, 2011 (edited) You forgot FX when factoring in Thailand as a Farang. Now that I understand your FX reference I will answer. The post was not Thailand Specific. However FX will impact both Supply of money and Sentiment. The only 2 variables in the post Thus it does not require to be a stated 3rd variable Of course it could have no impact for a farang if he is simply buying and selling in the same market and specifically not going up -market Edited April 15, 2011 by Delight Link to comment Share on other sites More sharing options...
pkrv Posted April 15, 2011 Share Posted April 15, 2011 You forgot FX when factoring in Thailand as a Farang. Perhaps you could define FX Regret I can not work it out No problem - I am UK based so really only track sterling (GBP) vs. Thai Baht (THB) The market instrument is GBPTHB= We bought when sterling was 75 GBP to THB Today it is 49 (ish) GBP to THB. So in UK terms our Thai assets have increased 50% in FX (foreign exchange) movement alone - obviously my UK assets have also fallen 50% in Thai THB terms In sterling terms - I would not buy today in Thailand today it would be like having a stone throwing contest from the bottom of a gravity well If you are Thai the above is not really relevant - except I would be considering buying property in the US or UK at this time - if you can make use of it of course.... Thanks I have used the term Sentiment in my original post If the Thai Baht is 49 when in very recent times it was say 70 -then that must have had a negative impact on Sentiment for buyers new to the market. I am advised that it used to be 90 Adjusting from 90 to 70 must have, at the time, also have a negative impact on Sentiment But Sentiment recovered at 70 Do you think that this could,given time, re -occur at say 48? ie 48 is an acceptable norm. Don't forget this is just one of the factors - there is lifestyle, ability to buy, desire to buy, plus a host of other issues. 75 was an opportunity that came at the right time for us. Link to comment Share on other sites More sharing options...
pkrv Posted April 15, 2011 Share Posted April 15, 2011 You forgot FX when factoring in Thailand as a Farang. Now that I understand your FX reference I will answer. The post was not Thailand Specific. However FX will impact both Supply of money and Sentiment. The only 2 variables in the post Thus it does not require to be a stated 3rd variable Of course it could have no impact for a farang if he is simply buying and selling in the same market and specifically not going up -market Property (condominiums in Thailand) is now a global issue - Thais are now buying in the UK - FX is a massive factor. Link to comment Share on other sites More sharing options...
Delight Posted April 15, 2011 Author Share Posted April 15, 2011 (edited) You forgot FX when factoring in Thailand as a Farang. Now that I understand your FX reference I will answer. The post was not Thailand Specific. However FX will impact both Supply of money and Sentiment. The only 2 variables in the post Thus it does not require to be a stated 3rd variable Of course it could have no impact for a farang if he is simply buying and selling in the same market and specifically not going up -market Property (condominiums in Thailand) is now a global issue - Thais are now buying in the UK - FX is a massive factor. I fail to understand your position -or maybe I have not explained the variables Money supply. This is no more than what is says-Access to funds Sentiment is the process that factors in all the financial ,emotional and practical issues that will give a' YES 'or a 'NO' to Q 1 Shall I/we buy and then potentially Q2 Where/What shall I /we buy I think FX issues are represented(if appropriate) somewhere in this process Edited April 15, 2011 by Delight Link to comment Share on other sites More sharing options...
PattayaParent Posted April 15, 2011 Share Posted April 15, 2011 Contrast this situation with people in East/Southeast Asia. East/Southeast Asia in general terms terms is 'B' As I stated you really have to analyze on a location by location basis .I would not refer to the whole of East/Southeast Asia as one homogeneous location with respect to property prices The culture of the Chinese, Japanese and Koreans places home ownership as a major sign of financial stability, ahead of car ownership. Whereas the culture of Thailand places more importance on car ownership than home ownership. Link to comment Share on other sites More sharing options...
PattayaParent Posted April 15, 2011 Share Posted April 15, 2011 You forgot FX when factoring in Thailand as a Farang. Perhaps you could define FX Regret I can not work it out No problem - I am UK based so really only track sterling (GBP) vs. Thai Baht (THB) The market instrument is GBPTHB= We bought when sterling was 75 GBP to THB Today it is 49 (ish) GBP to THB. So in UK terms our Thai assets have increased 50% in FX (foreign exchange) movement alone - obviously my UK assets have also fallen 50% in Thai THB terms In sterling terms - I would not buy today in Thailand today it would be like having a stone throwing contest from the bottom of a gravity well If you are Thai the above is not really relevant - except I would be considering buying property in the US or UK at this time - if you can make use of it of course.... Thanks I have used the term Sentiment in my original post If the Thai Baht is 49 when in very recent times it was say 70 -then that must have had a negative impact on Sentiment for buyers new to the market. I am advised that it used to be 90 Adjusting from 90 to 70 must have, at the time, also have a negative impact on Sentiment But Sentiment recovered at 70 Do you think that this could,given time, re -occur at say 48? ie 48 is an acceptable norm. Depends when you arrived. I came at 40 to the Quid, 25 to the $$. that's my acceptable norm for comparison purposes. Link to comment Share on other sites More sharing options...
Darrel Posted April 15, 2011 Share Posted April 15, 2011 I came at 40 to the Quid When was it 40 Baht to 1 GBP? Link to comment Share on other sites More sharing options...
rgs2001uk Posted April 15, 2011 Share Posted April 15, 2011 I came at 40 to the Quid When was it 40 Baht to 1 GBP? Pre 1997 crash, see the following links, http://www.x-rates.com/d/THB/GBP/hist1995.html http://www.x-rates.com/d/THB/GBP/hist1996.html http://www.x-rates.com/d/THB/GBP/hist1997.html Like PP I regard anything over 40 as a bonus, and can remember seeing it as low as 36 in the early 90's. Link to comment Share on other sites More sharing options...
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