Must...Resist....Buying..........Condo....

[Grawburg]

My contract is coming to a close in 3 months and off to the next adventure...Africa this time. I want to make BKK a home base and would like to get a downtown condo in the US$300,000 range to possibly rent while I'm away, but live in for vacations and - in the future - permanently.

My concern is the cost of condos relative to the worldwide economy. Condo prices in the higher end places cannot possibly continue in this trend of non-stop growth...or maybe they can. That's my problem.....bubble or no bubble?

I got absolutely hammered in the US buying a nice house only to sell it at 3/4 of the purchase price 1 year later. i cannot afford another financial beating like that.....particularly if I can't rent it.

Can someone look into their crystal ball and tell me when 1997 will repeat itself here?

[ccterry]

Hi Grawburg,

Having been involved in risk management at various points in my life and dabbling in the property market I have the following rule.

I value real estate in cities with a 10 year rent metric. If the viable rent on the property is 60k baht a month then roughly speaking I

would assign it a 7.5m baht value. My observations of the bangkok property market currently is that at times the prices are as much as twice

this rough metric. Thats all well and good if one can foresee exceptional growth however we have been thru a period of exceptional growth

in the bangkok condo market. I read last year at one point 100+ new towers came to the market last year!!!! Thats alot of real estate.

Alot of these new towers are empty. Check the lights at night. Wealthy thais have been feeding the bubble. For me personally I will continue to rent.

I pay 33k baht a month whilst the condo is valued at close to 8.6 million baht. In my opinion this is frankly madness. If I could short condos in bangkok at the moment I would. Just my 2 cents

cheers

cc

[Mysticyeti]

Hey Grawburg,

just sharing a thought. Having lived here for the past 7 years and still not purchased a condo already points in the direction i'm going to be shooting at. That's becuase i think the property market in bangkok is overrated, and although i'm not great in creating valuation system, i do have to agree with what CCterry has mentioned. Firstly, this is thailand and just being a foreigner itself is a drawback as we cannot fully comprehend the thai laws here. Your real estate agents might come up with some explanation as to why you should buy but, not knowing the language the law will really be challenging. Secondly, the growing economics in the region and the changes that you see around should alret you that, thailand is not the next big thing in the region anymore. Post flood, the no. of foreign companies that have shifted production out of thailand is increasing as their trust in the government to overcome such mishpas is perishing. At the same time, focus in this region is shifting to burma. Thirdly, this country is spectaluar in terms of culture and people and definitely would be a great home but, in terms of economics, most of the systems are volatile. I might be wrong but based on few readings, it shows that thai people who have an average salaray of 15k are eligible for a credit card with credit limit of 50k. This is almost similar to the bubble where people are receiving loans without the ability to pay back increasing your credits and making the economy unstable. This is just the tip of the iceberg but anyways, i'm just sharing random thoughts in hopes to atleast shed some lights on your question. I hope it makes sense

[dddave]

Ever since I began coming to Bangkok ten years ago when the skyline was defined by unfinished "Ghost Buildings" the mantra has been: "Don't buy a condo here! The market is oversupplied, the construction is shoddy, the Thai economy will tank, blah...blah...blah!"

Well, those who ignored the eternal negativity and bought quality condos over those years have seen their investments appreciate significantly, especially when taking into account the weakening western currencies.

Granted; the future is never guaranteed by the past but Asia as a whole and Thailand as a part of that is growing and the economy of Bangkok and the parallel increase in housing demand will almost certainly grow with it.

[ccterry]

With respect to ddave. One of two things have to happen either the rental value of condos has to go up or the price of condos has to go down.

In the end it is a matter of supply and demand. Condos are built to be lived in. Thai planning laws are questionable. With money and political will it is not hard to force thru a developement. We have an ever increasing number of hi value condos needing hi value rents to befit their purchase price. If you do a very quick survey you will note there is an awful lot of spare real estate around. I have a number of thais friends who I have known for many years. Recently some have become real estate developers. I also note (and this is not a recent thing) that thais like to flip condos. Flipping is buying off plan in the hope they can re-sell later once said developement is finished. With respect to ddave gravity is a physical law . When everyone is making money from something and you can rarely hear a negative vibe for me its often a sure sign to get off the bandwagon.

[givenall]

Don’t buy any condo in Thailand for investment; buy only if you are absolutely sure that will move here in future of use it often to make it worthwhile. You can get nice hotel to stay for your vacation, if you want to use this condo only for vacation

In Thailand buying is very easy and selling is very very very difficult

[ccterry]

In Thailand buying is very easy and selling is very very very difficult

In the end this is all you need to know. If you do buy contrary to what many will tell you buy an old/used condo. It will be cheap and you will have a chance to sell it back at a similar level. The new condo market is run by the developers. Sure the old condos were badly built. Probably as badly built as the new ones . You would be better off renting in thailand and buying property in you own country (usd i guess). US property market is shot to hell perfect time to invest. You can probably get something with good potential growth and a ceiling rent that will mostly match its current value.

[WhiteCadillac]

Valid points in this thread. Wouldnt buy in this market.

OT: It is funny how Thaivisa links as "news". Feels like they dont have any content development, but feels like they can just use these threads as "news" and get more ad $.

[strollling]

You have doubts.

Listen to them.

When you have holidays, come over here and rent. You'll be happier.

[ronz28]

Price to rent ratios sure to vary by location and timing (job market). Some examples:

http://www.numbeo.com/property-investment/gmaps_rankings.jsp?indexToShow=getPriceToRentRatioCityCentre&year=2011&OK=OK

http://info.trulia.com/index.php?s=32055&item=125286

[stickyrice2000]

I would not buy a condo in Thailand if I were you. The future is unknown. Don't settle and do something until you are ready to move in tomorrow.

[USNret]

Great thread. It validates what I felt at a gut level that BKK is just inherently overpriced. But I don't have the tools to prove this with valuation. I like the metric that ccterry provided. If someone had bought 7-10 years ago, yes you would have ridden this bubble to a nice profit (esp if you are now prepared to sell). But it's way late to jump on this bandwagon.

I waiting for that happy confluence of events: The BKK bubble to burst, and recovery of the U.S. dollar. Then we can snatch up these condos at bargain prices.

[AZBill]

I continue to rent a very nice condo in BK for when my wife and I are here and would NEVER consider buying anything in Thailand - period! Too much supply in the condo market and too much uncertainty in the government. Also condos are just plain tough to resell. Take advantage of the over-supply and cut a great long term rental deal.

[ExpatJ]

I would recommend buying a 1-2 br condo to live in for those newly arrived expats who plan to stay here for a 3 year plus assignment- then using your 'rent' money to instead pay into a condo that you own is a nice investment.

Buying a condo now will pay off in the medium/long term (10 years ++) but may drop alot in price inbetween (the market is over supplied right now as others have mentioned). But in 10-20 years, i see central bangkok becoming more like singapore i.e. a high concentration of wealthy locals and expats with good rental returns and increased property prices.

[bushwacker]

Let me think about this:

1. Red shirts, yellow shirts, multi-colored shirts and no shirts

2. With a retirement visa, the immigration department reserves the right to re-asses my permission to stay each and every year

3. Surplus of condo units yet overpriced

4. Poor construction

5. Bombs going off in the south

6. Restrictive ownership laws

7. Global warming threatening to have Bangkok under water in the future

8. Last years floods showing government inability to govern

9. Thai people's unwillingness to be lead by government .... i.e. destroying dikes

10. Corruption at every level of society ... for example the Police have license to print money

11. Traffic and pollution in the city is only going to get worse

12. Very very poor resale market or infrastructure to list and sell properties. MLS listings are unheard of here.

13. Very cheap rentals available

14. Ability to rent great places and run whenever a major problem arises like sinking foundation

15. I am going to stop here because my coffee is getting cold. But you get the idea .... Buying is a really bad idea !!!!!

[NewlyMintedThai]

Let me think about this:

1. Red shirts, yellow shirts, multi-colored shirts and no shirts

2. With a retirement visa, the immigration department reserves the right to re-asses my permission to stay each and every year

3. Surplus of condo units yet overpriced

4. Poor construction

5. Bombs going off in the south

6. Restrictive ownership laws

7. Global warming threatening to have Bangkok under water in the future

8. Last years floods showing government inability to govern

9. Thai people's unwillingness to be lead by government .... i.e. destroying dikes

10. Corruption at every level of society ... for example the Police have license to print money

11. Traffic and pollution in the city is only going to get worse

12. Very very poor resale market or infrastructure to list and sell properties. MLS listings are unheard of here.

13. Very cheap rentals available

14. Ability to rent great places and run whenever a major problem arises like sinking foundation

15. I am going to stop here because my coffee is getting cold. But you get the idea .... Buying is a really bad idea !!!!!

Glad I didn't listen to people like this when I bought!

[phutoie2]

Bushwacker raises some good issues, though I am sure he meant dykes! perhaps he see's it all through a pair of clear ones.

[WhizBang]

I bought my condo 10 years ago (42 baht/$ at that time), and the condo is in a prime location and well maintained. Over the years I have seen high rise after high rise go up. Most are still mainly vacent.

Even in my prime location, I doubt I could break even, even at today's exchange rate. There are just too many new condos available. The market is severely overbuilt. I was also once told, that Thai's will only buy new condos, not used ones.

Bottom line, I would not buy (or invest) anything in Thailand (unless you are prepared to lose it). Besides, Thailand is nowhere close to being politically stable. And, I suspect things will get significantly worse in the years to come. In fact, a civil war would not surprise me.

Fortunately, I live in my condo, so I don't care about reselling, and after I go, it will become my son's property.

[NewlyMintedThai]

As mentioned in another thread, I bought a condo in 2004 and just sold it for double what I paid, before factoring in THB appreciation. I am happy I didn't listen to naysayers.

[DP25]

There is some major political chaos coming, might want to wait, maybe you can even take advantage of it

[NewlyMintedThai]

There is some major political chaos coming, might want to wait, maybe you can even take advantage of it

Perhaps, but even with blood running in the streets in 1992 real estate prices were unaffected.

[djayz]

Let me think about this:

1. Red shirts, yellow shirts, multi-colored shirts and no shirts

2. With a retirement visa, the immigration department reserves the right to re-asses my permission to stay each and every year

3. Surplus of condo units yet overpriced

4. Poor construction

5. Bombs going off in the south

6. Restrictive ownership laws

7. Global warming threatening to have Bangkok under water in the future

8. Last years floods showing government inability to govern

9. Thai people's unwillingness to be lead by government .... i.e. destroying dikes

10. Corruption at every level of society ... for example the Police have license to print money

11. Traffic and pollution in the city is only going to get worse

12. Very very poor resale market or infrastructure to list and sell properties. MLS listings are unheard of here.

13. Very cheap rentals available

14. Ability to rent great places and run whenever a major problem arises like sinking foundation

15. I am going to stop here because my coffee is getting cold. But you get the idea .... Buying is a really bad idea !!!!!

Glad I didn't listen to people like this when I bought!

Me too...

[djayz]

As mentioned in another thread, I bought a condo in 2004 and just sold it for double what I paid, before factoring in THB appreciation. I am happy I didn't listen to naysayers.

Me too...

People who have nothing to invest are usually the ones who "know it all"

[TommoPhysicist]

It would be interesting to hear from foreigners who bought a condo in Thailand and sold it.

Purchase year and price in Baht, Sale year and price in Baht.

Anyone who has been trying to sell and failing for more than a year could also join in.

Those who THINK or ESTIMATE a profit would not be welcome, just the facts please.

I suspect for every profit there will be 100 losses or failures to sell (or gf/wife taking the condo).

Perhaps NewlyMinted could start us off?

Edited April 1, 2012 by TommoPhysicist

[NewlyMintedThai]

Sure.

Bought 2004 for 14.5 million.

Sold 2012 for 30 million.

[ccterry]

As mentioned in another thread, I bought a condo in 2004 and just sold it for double what I paid, before factoring in THB appreciation. I am happy I didn't listen to naysayers.

So whos the clever one? The buyer or the seller. Or is it, as you are suggesting you are both clever. You bought some years ago and sold recently, are you clever? Or is the person you sold to clever for buying your condo at the price he paid? Is thai property a special asset that has extra-ordinary returns forever? What exactly are you saying?

[NewlyMintedThai]

As mentioned in another thread, I bought a condo in 2004 and just sold it for double what I paid, before factoring in THB appreciation. I am happy I didn't listen to naysayers.

So whos the clever one? The buyer or the seller. Or is it, as you are suggesting you are both clever. You bought some years ago and sold recently, are you clever? Or is the person you sold to clever for buying your condo at the price he paid? Is thai property a special asset that has extra-ordinary returns forever? What exactly are you saying?

I'm saying I'm happy with the investment I made and am glad I didn't listen to those who called me foolish.

Perhaps the new owner will make even more if he sells it after a few years, who knows?

[w11guy]

Whether buying is good or bad depends on where you buy and the price you buy for. Buying isn't always bad. If you found a great condo at an absolute bargain price then you'd want to take that opportunity. There are plenty of bargains around and some very steep discounts. For me the discounts still aren't enough because renting is so cheap that it would cost me more to pay back a mortgage than to pay the rent. In the last condo building I lived there were quite a few condos for sale. I know of one that's been on sale for 2 years. Also loads of empty apartments that can't be rented. The market is overpriced for sure. No market that is fairly priced has this many empty properties. In my current building there are about 200 condos. I doubt very much that more than 25% are lived in. The one I rented had been empty for over 6 months and i got a great deal on the rent. Walk into any condo building and they'll show you plenty of condos for sale or rent. Do that in a city like London and it will be very difficult to find somewhere.

With so many great condos and cheap rents I can't see any reason whatsoever to buy. It won't take much for property prices to crash.

But over the longer term (20 years) I suppose they could go up in price. But it all depends on how overpriced they are now. If there was a crash and they dropped in price 50% then they could still be available at current prices in 10-20 years. Also, as has already been pointed out there are too many things here that could go wrong. More political strife and another flood and the foreigner condo market will collapse.

It's all very well some people saying they did well by buying 10 years ago, but that doesn't mean property will do well for the next 10 years. But did these people actually sell their property and make a profit. Or are they assuming that they could sell at a certain price? And if they did sell, how much better off (if at all) are they than if they rented. Renting means no lawyer fees, property taxes, condo fees, selling fees and all the other hassles. Renting here is extremely cheap and simple. Fed up of the area? Then just move. Can't do that if you bought and can't sell.

But it the market was fully opened up to foreigners then I'd buy a townhouse in Bangkok.

[NewlyMintedThai]

My first condo:

Bought in 1996 for 5.5 million. Sold in 2004 for 8.5 million. I lost in dollar terms due to the flotation of the THB. But I didn't bring in money to make the purchase, so that's not entirely relevent.

[w11guy]

As mentioned in another thread, I bought a condo in 2004 and just sold it for double what I paid, before factoring in THB appreciation. I am happy I didn't listen to naysayers.

So whos the clever one? The buyer or the seller. Or is it, as you are suggesting you are both clever. You bought some years ago and sold recently, are you clever? Or is the person you sold to clever for buying your condo at the price he paid? Is thai property a special asset that has extra-ordinary returns forever? What exactly are you saying?

I'm saying I'm happy with the investment I made and am glad I didn't listen to those who called me foolish.

Perhaps the new owner will make even more if he sells it after a few years, who knows?

Yes, it often makes sense to ignore others. But just because you double your money in the last 10 years doesn't mean that prices in general will double in the next 10 years. Also, yours could have been a special case due to location or some other reason. I'm not knocking you at all, as you did well. but that's no reason for everyone else to buy in the current overpriced market.