Construction Boom On Sukhumvit Road

[bombis]

The evergreen answer to your complaint/question is as follows: when people stop buying condos, developers will stop building them.

It wouldn't be the first time though that a bubble is created and then it would more be like "When there are too many condos and nobody buys them anymore and the first developers start crashing, then they stop building condos."

[rotary]

The evergreen answer to your complaint/question is as follows: when people stop buying condos, developers will stop building them.

I'm sure the developers know what they are doing, but there seem to be loads of empty units.

I am not so sure these developers know what they are doing, Ah yes I remember 1997 well when I bought my Condo, at a 52% discount from the initial asking price even after the exchange rate had went from +/-25 baht to the dollar to more than 50. Its not just in Thailand now, these property guys get out of hand in many countries and greed takes over from common sense and reasonable profits.

Edited June 28, 2011 by rotary

[exbelg]

lets imagine you have 10 millions baht to play with ...

leave on the bank...... the bank goes bancrupt, you lose everything...

invest in a condo ... does the condo disappear if the bank goes bancrupt ??? I think not ...

[ippyevie]

I don't know how cash rich they are - most Asian countries have a few holding the majority of the money. China has an average income of $5000USd per capita per annum. Not exactly cash rich. More likely, a few wealthy groups lending money on very long loans (you know, the less you pay on a deposit means a higher accumulation of interest of the period of the loan), which was also part of the reason of the collapse in the US housing market.

No, the collapse of the housing market in the US owes to the fact that the bank lends money to low earners with multiple credit cards on a 100% LTV and there's no way they will be able to meet their debt. They can probably pay interest rate that initially, which was at teaser rate of 1% and then after a few years, it went sky-rockketed, they started to default on payments. Pools of junk graded debts were in default and that collaps on the immediate better grade debts in domino effect fashion. The market was betting for the housing price will go up forever so the loan term make sense economically but it didn't. So this has nothing to do with loans being long at all. There's plenty of good quality long loans in the market.

The Shanghai, Beijing and Hong Kong markets are now on the same way, with most of the original owners now sold out (I have friends that sold all their property in China).

The new government rules in China to halt price inflation on housing sales is something that Thailand should consider, but won't because it is a source of positive income flow into the Kingdom - they will then complain in 5 years when even their top tier managers cannot afford to get even a mortgage on any of these apartments on Sukhumvit.. or they will just have a crack down on Foreigners owning and renting properties in Thailand, putting pressure towards a bear market in the condo sector.

Most Thai people driving their brand new Suzuki Swifts etc, did not pay cash for them - they have them on 20-30 year loans. Just creative accounting, in a society which is from what I have seen just as over-leveraged as Hong Kong or Shanghai.

There's a huge segment of rich Thai that are truly cash rich. You can't look at average income per capita to make sense out of property prices in Thailand. Look at land prices as an example. One rai in Pranburi costs as much as the ones in Cannes. It's a rich people's game. They don't need cash, they only will sell at the price they have in mind. But they don't need to sell... hence the price level being sustained despite the lack of transaction flow.

[KeyserSoze01]

Would that be the same Trendy Condo where Ambassador Plaza used to be which has been empty since it was finished?

...along with the desolate development further down the soi, not to mention the new hotel where Clinton Plaza was which is still empty...

Whoever wrote this article certainly didn't actually go and have a look...

Lets not forget the plethora of half-finished, empty shells of buildings dotting the skyline in big smoke.

By the time these projects go tits-up, the graft has already taken place and those who are skimming off the top have already made their $$$. Who cares if the properties are ever actually finished and occupied.

[wlcart]

Too many are thinking like westerners here, but, TiT.

Our family owns a condo in a very nice building with maybe 50% occupancy. We have owned the condo a few years and if I looked at the low demand, using my western logic, i would expect prices to fall, but rather, they have risen.

How fast can we sell it, well that is another questions, but the prices have gone up.

Think about the car market here. Cars hold the value like crazy in Thailand, nothing like the west.

I have learned that Thai's do not sale for a loss.

Many Thais with lots of money buy up everything and keep it. They do not need cash, so they just wait on their investment until they get the price they want.

Once a person sales a condo of X amount of baht, no one else in that building will sell for less.

This is not a market of middle class average Joes buying and selling as according to their life needs. Most everything is owned by a few, and the majority of the people are excluded out of the real estate market anyway because they cannot not afford to participate. You could say, the fix is in.

The real estate bust in the west happened with the crooks in the bank played repo man on the citizens, and then flooded the market with properties. That will never happen here.

Not saying I know what will happen, just know I like many things in Thailand, leave your western thinking back in your homeland.

[ToffeEFCpower]

Would that be the same Trendy Condo where Ambassador Plaza used to be which has been empty since it was finished?

...along with the desolate development further down the soi, not to mention the new hotel where Clinton Plaza was which is still empty...

Whoever wrote this article certainly didn't actually go and have a look...

[ToffeEFCpower]

No mate the Trendy Condo is opposite the ambassador plaza and is fully operational for over 2 years now. The half constructed project your thinking of is the Regent hotel and residences. The developers ran out of money.

[ToffeEFCpower]

Not sure how widespread your global trend is, in the UK, which also has a low interest rate, property prices are being reduced

I see this happening in Thailand, HK, China, Malaysia, Australia and Canada. In some other markets like the UK and the US banks went crazy over the lats few years lending 100% or more of property value and lending money to anyone who asked so in those markets the property bubble grew much more quickly and is now deflating. In other markets, especially Asia, banks were more cautious and the property bubbles have grown more slowly and are still inflating.

why Thai investors prefer to leave properties empty rather than accept a realistic rent, surely some income would add value to their investment

I think its a combination of things; buying property and leaving it as a bare shell saves on the fitting out cost and makes more sense if you plan to flip the unit. The future buyer may not like your interior design. For every $ spent fitting out an apartment you probably only get 50cents back when you sell. You may be able to buy 4 units as bare shell compared to 3 units fully decorated. Also leasing out property is a hassle, finding the tenants, collecting the rent, doing maintenance, etc. Then when it comes time to sell an empty unit may be easier to sell. It depends on the buyer of course, an investor looking for yield will be happy with a tenant, but someone who plans to live there will prefer an empty place they can decorate the way they like.

[ToffeEFCpower]

Your spot on mate. Most Thai's like to buy new and empty and leave them that way if planning to sell off at a later date.

I bought one in Trendy off the plan nearly 3 years ago and it's still empty. I'll get round to selling it one day lol

[notime]

Are these condos really sell for 100,000 THB a sqm ? For the property "hanging in the air" with no or little land component? And people believe they are going to make money out of it?

To me buying a part of the building is just consumption, not an investment because the value of that building decreases every year. Maybe slower than a car but it does. What is ever increasing is the value of land. The investment in land is even better than in gold. They keep making more and more gold but nobody makes more land.

But has the world gone mad or is it me? Because if the above is true why do I have a problem selling two duplex houses (4 beautiful semi-detached), with large swimming pool and on their own piece of freehold land, near the best beach in Samui for as little as 50,000 THB per sqm?

Edited June 28, 2011 by notime

[arthurwait]

Are these condos really sell for 100,000 THB a sqm ? For the property "hanging in the air" with no or little land component? And people believe they are going to make money out of it?

To me buying a part of the building is just consumption, not an investment because the value of that building decreases every year. Maybe slower than a car but it does. What is ever increasing is the value of land. The investment in land is even better than in gold. They keep making more and more gold but nobody makes more land.

But has the world gone mad or is it me? Because if the above is true why do I have a problem selling two duplex houses (4 beautiful semi-detached), with large swimming pool and on their own piece of freehold land, near the best beach in Samui for as little as 50,000 THB per sqm?

Because they are in Farang land who obviously aren't spending money now and are the only people with money whoever wanted to live there pushing the prices up. Rich Thais want to live close to their businesses.

Monied Thais don't want houses on islands even for holiday homes due to monied Thais not doing the beach/sun who when they do stay in hotels, not spending money on somewhere they will hardly go.

Younger Thais with money : parents money or inherited only want to live in Bangkok. That's it. The parents who made the money usually made most by investing in land in places people will need to buy, close to Bangkok, the airport, on main roads, future main roads. Unfortunately for you not somewhere only Farangs will buy during economic booms.

[arthurwait]

Too many are thinking like westerners here, but, TiT.

Our family owns a condo in a very nice building with maybe 50% occupancy. We have owned the condo a few years and if I looked at the low demand, using my western logic, i would expect prices to fall, but rather, they have risen.

How fast can we sell it, well that is another questions, but the prices have gone up.

Think about the car market here. Cars hold the value like crazy in Thailand, nothing like the west.

I have learned that Thai's do not sale for a loss.

Many Thais with lots of money buy up everything and keep it. They do not need cash, so they just wait on their investment until they get the price they want.

Once a person sales a condo of X amount of baht, no one else in that building will sell for less.

This is not a market of middle class average Joes buying and selling as according to their life needs. Most everything is owned by a few, and the majority of the people are excluded out of the real estate market anyway because they cannot not afford to participate. You could say, the fix is in.

The real estate bust in the west happened with the crooks in the bank played repo man on the citizens, and then flooded the market with properties. That will never happen here.

Not saying I know what will happen, just know I like many things in Thailand, leave your western thinking back in your homeland.

^^^ This.

[EnhancePlus]

If the ownership has to be 49% or 51% Thai (correct me if I'm wrong on these figures) how are so many Thai's that cash rich?? At THB 3m that's a lot of dosh for even the high end upper middle class.

[HeavyDrinker]

EnhancePlus, they are just making it all up!

TV is the cyber equivalent of a barstool but inhabited by "non drinkers"

[EnhancePlus]

EnhancePlus, they are just making it all up!

TV is the cyber equivalent of a barstool but inhabited by "non drinkers"

The barflies of the keyboard pub

[bangon04]

In neighborhoods just off Sukhumvit one can already see hand-written "for sale" signs as people try to flip units in nearby buildings which aren't yet completed.

and although the article is talking about lower Sukhumvit mainly, there is also a condo-building frenzy going on in Suk 77 On Nut.

Surely as soon as the next tower block goes up outside your window with the previously good view, it must devalue your "investment" considerably... where there was once space there is now a forest of cranes...

[cdnvic]

Post with name calling removed. Next one loses posting rights.

[MaiChai]

Personally i think the property market is way too risky here. Better keeping your money and renting. With little or no city planning Bangkok will become an unbearable place to live, and if you are renting its easy to up and move somewhere else.

[Thighlander]

In late 2009, I bought a 67 square meter, 2 level, loft style townhouse for 680,000 THB. It is rented out for 18,000 per month. Right here in Phoenix, Arizona. Look what kind of return you would get on a 680,000 property in LOS; 4000 thb, 5000 thb......that's why the Chinese, Canadians, and Brazilians are here buying up properties in the distressed areas. The new tattoo here says "RENTER", as in all the people that lost those distressed homes couldn't get a new mortgage for probably five more years. I owned a house in a moobaan in CHiangMai with an attorney--a Thai couple actually did take a loss selling it to me--they had been transferred to Lopburi, and they had been through a few sets of bad renters. People will say the houses are impossible to sell--the thais won't buy a farang house, etc...but that is why you have to lowball. I despise the unreasonable limits on farang investors, and I think we will be the ones to get the last laugh. There are still some unfinished buildings from the 97 crisis. Low leverage has made them somewhat immune, but I agree with others that the market is softening. You can buy condos herein the States all day for 10000 thb/psm--even in these bad times, people are much more able to afford higher rents.........I used to love Sukhumvit, and like a lot of places--it didn't get any better as prices spiraled upward. First sign I ever saw in LOS regarding urinating in public was on soi 13 down from the Miami, last Fall. I would look for new frontiers....Had a seller down to 415,000 for a 35 sm studio in Chiang Rai.

[rametindallas]

Not sure how widespread your global trend is, in the UK, which also has a low interest rate, property prices are being reduced

I see this happening in Thailand, HK, China, Malaysia, Australia and Canada. In some other markets like the UK and the US banks went crazy over the lats few years lending 100% or more of property value and lending money to anyone who asked so in those markets the property bubble grew much more quickly and is now deflating. In other markets, especially Asia, banks were more cautious and the property bubbles have grown more slowly and are still inflating.

why Thai investors prefer to leave properties empty rather than accept a realistic rent, surely some income would add value to their investment

I think its a combination of things; buying property and leaving it as a bare shell saves on the fitting out cost and makes more sense if you plan to flip the unit. The future buyer may not like your interior design. For every $ spent fitting out an apartment you probably only get 50cents back when you sell. You may be able to buy 4 units as bare shell compared to 3 units fully decorated. Also leasing out property is a hassle, finding the tenants, collecting the rent, doing maintenance, etc. Then when it comes time to sell an empty unit may be easier to sell. It depends on the buyer of course, an investor looking for yield will be happy with a tenant, but someone who plans to live there will prefer an empty place they can decorate the way they like.

My observation is: Thais will not buy a used condo and live among who know's ghost(s). Just like investment grade coins, uncirculated condos are much easier to value and price. There are many very wealthy business investors in Thailand (plus polititions, police, army, civil service, 'soapy' operators and operators of gambling dens etc.) Where else are they to park their money? The stock market is manipulated repeatedly, bonds have no yields, Whether it's a bubble or not, condos are selling along the Sukumvit line and people are coming of age to buy condos every year. Thailand's economy, compared to the rest of the free world is amazingly strong especially when one takes into account all the turmoil of the last few years. Fortunately, I'm not plagued by wealth and the problems of what to do with it.

[arthurwait]

If the ownership has to be 49% or 51% Thai (correct me if I'm wrong on these figures) how are so many Thai's that cash rich?? At THB 3m that's a lot of dosh for even the high end upper middle class.

It's nothing for the parents/ grand-parents, mainly Chinese Thai, who reinvested everything they made in land over the last 50 years obviously in that time land values spiralled and have either set up more businesses on the land, sold it and reinvested the money, rented it out, borrowed against it at it's increased value. The parents mainly buy the kids condos/houses or finance it outright or at least service the mortgage between jobs or subsidise the mortgage if pay is too low.

As said most parents made money from investing in land and property so see it as just another investment. It's easy to compare land and property prices to the current situation in the western world, but property/land prices in Thailand have just been rising for 50/ whatever years and will continue to do so especially in Bangkok as more and more people get an income that can finance it as Thailand modernises. Not on high end overpriced condos/houses, they will mainly fall in the short term, but condos that those with a decent wage can afford to rent and land for business will rise. High end condos may rise in price over a decade or so, but most young people with money all their life don't care about it as an investment just want a flash place to live - impress the opposite sex etc.

People have said just look at the classified to see how many empty houses and condos there are for sale, very true, but there are mainly in Pattaya and other farang places where Thais dont want to live. As said they are not close to their businesses or work or in Bangkok the only place young modern westernised Thais want to live.

Their children 25-40 years old or the grand children upto in their 20 twenties may find it hard to find the money if doing a job if the parent won't finance them wanting them to stay in their home town running their family business or the kids actually want to stay in their home town making much more money for much better working hours in their family business. Most though want to head off to Bangkok. Those that have started their own succesful businesses will find it no problem either.

Oh there are a lot of bad investments, property building, buying by thick rich kids who believe they so clever because they are rich. Failing to see making the money had nothing to do with them.

Edited June 29, 2011 by arthurwait

[midas]

Most new condos are empty.

I see many condos which are built in the last years, occupied at most at 20%.

There are lots of Thais with money who invest like crazy. They are told by agents condo prizes go up every year 10-15% and you can also rent out for 8% per year.

As the rich are not much better educated than a rice farmer, they believe this crap and let the bubble grow.

Crazy prices for crappy apartments. And after 5 years, they will look like slums. Recently saw a new luxury condo at prime location where the pool was unusable due to negligence for already 6 months.

Never buy a condo here - you will lose big $$.

I don't know if these latest developments offer the condominiums on a pre-fitted out basis but many developments prior to the 1997 crisis were offered as a very bare shell with no fitout whatsoever so not ready for occupation. It's one thing for Thai ‘s to buy a condo as an investment but how many of them will spend the extra money to fit them out?