Thailand Sees Property Boom Despite Global Crisis

[webfact]

PROPERTY

Boom could bust in condo markets

Wichit Chaitrong

Sucheera Pinijparakarn

The Nation

BANGKOK: -- A property bubble is forming in Bangkok and other Thai cities, as well as in Vietnam and Myanmar, partly because of euphoria over the forthcoming Asean Economic Community, an economist has warned, while a senior banking executive played down such fears, saying no bubble had been detected.

Given the debt crisis in Europe and the collapse of the property sector in Spain, there are signs of a property bubble in Bangkok, especially in the market for high-rise condominiums along Sukhumvit Road, Sompop Manarungsan, president of the Panyapiwat Institute of Technology, said yesterday.

He pointed to the heavy advertising for condos in all media, particularly pamphlets and new media channels such as short message service (SMS, or text messaging).

The heavy advertising suggests that condominium developers are finding it hard to get buyers, he said, belying the conventional view that the market is not in a bubble.

"I live on Sukhumvit Road. Over the past 10 years I have witnessed many condos spring up. Those who have older condos are moving to new condos, leaving the old ones empty," Sompop said.

He said he was not sure whether there are new buyers, and suggested there might only be small groups of people buying condos for speculative purposes, hoping to rent to foreigners or certain groups of Thais.

Japanese and other foreigners are currently enjoying low rents, Sompop said.

Land developers may be overly optimistic that large numbers of people will move to condos along mass-transit routes, he warned.

"We should be aware that a burst of the property bubble would drag down banks that have lent to land developers and home-buyers," he said.

The bursting of the property bubble in Spain has created huge trouble for both banks and the overall economy, while the sub-prime-mortgage crisis in the United States sparked the global financial crisis in 2008, Sompop said.

He said authorities such as the Bank of Thailand had to put in place preventive measures before this small bubble grew out of control.

Land and property prices are booming now in key provinces such as Khon Kaen, Udon Thani and |other provinces as businesses and individuals believe that Thailand will benefit greatly from the Asean single market.

Land prices in Yangon, the commercial centre of Myanmar, are soaring at a faster pace than economic fundamentals, warned Sompop. People in Myanmar believe that political reform will bring economic prosperity, causing them to speculate on land, he said.

Land and property prices in Vietnam have been increasing for a long time, leading to rising inflation and higher business costs.

Trouble in other Asean countries such as Vietnam or Indonesia would adversely affect the Thai economy, he said.

He also warned of the threat of political conflict between the red and yellow shirts, which could result in an economic-policy vacuum at a time of high global economic volatility.

The expense of populist policies will also strain the government's ability to make productive investments, he said.

Praphan Anupongongarch, executive vice president at Thanachart Bank, however, said his bank did not yet see clear signs of a condominium-market bubble.

"If demand is dropping because consumers are worried about the European crisis, there is little chance of a condominium bubble occurring," Praphan said.

Some projects may not be attractive because of their poor locations, he said.

In a related development, the state-owned Secondary Mortgage Corporation (SMC) signed a memorandum of understanding to buy mortgages worth Bt1.85 billion from Kasikornbank.

The agreement aims to provide liquidity to banks and offer opportunities to home-buyers and investors in SMC bonds, its executives said.

-- The Nation 2012-06-27

[Moruya]

Property has almost always been the root cause of financial collapse since the late '80s

[MrJohnson]

Property has almost always been the root cause of financial collapse since the late '80s

Agreed. Property speculation is seen is a guaranteed fast buck but is essentially a wasted investment in the broader sense. Aside from the actual construction and materials it is a non-productive investment. From where I sit in mid Sukhumvit the surge in condominium construction over the last 4-5 years is extraordinary. What is even more extraordinary is how many of them, once completed, sit nearly 100% vacant!A Short Aside - I had to laugh the other day walking past the new Hyde Residence on the corner of Soi 13. If you have walked past there you will know that it is the domain of the street hawker mafia flogging fake watches (oops sorry Culture Minister), sun glasses, sex toys and viagra - the troupe I like to call the 3 P's - Pimps, Prostitutes and Pornographers. The folks at this high end of condo project have spent a lot of money landscaping and beautifying the front of their show condo only to have it defiled by the street hawkers. It looks like a slum at the front. I have it on good authority that they (the street vendors) were recently each paid B70,000 to quietly move on. When I walked past the other day at around 6pm a car load of uniformed Tessakij chaps had arrived to try and get them to leave. What do you think happened? Yes, you are right. The street vendor mafia shouted, harassed and threatened them until they fled in fear. Good luck trying to sell those condos at B180,000 sq/m.

[clockman]

Evrywhere you look building. it reminds me of 1997! just the same

[rkidlad]

Japanese and other foreigners are currently enjoying low rents, Sompop said.

Really? Maybe in Sukhumvit. If you look to rent a new apartment, it's expensive. Even in low key areas people are asking for 15,000-20,000 for a 42sqm apartment. Just because it's new.

You often see the same apartments pop up time and time again. The prices stay the same.

[hansgruber]

Of course a banking executive will say there is no bubble. It's their bread and butter. Crooks

[Pseudolus]

I see over supply and not much demand due to the daft rentals the property speculators are looking for. They rather keep it empty for a year than lose 3k a month on what they think it is worth.

[jonclark]

I think the litmus test for all of these new developments is the % of these new condos that have lights on at night. Passing many of these condos on the way home each night the lights are off in the individual rooms. Next time you drive down Suk at night just see how many condo rooms have lights on. My bet is you can count the number on one hand. Which means many are unsold and if they are not sold the money to build them remains unpaid.

A friend of mine related a similar story about the condos in Beijing except that the Chinese authorities actually employed someone to go and turn the lights on at night, to give the impression of occupancy.

Edited June 27, 2012 by jonclark

[SOEYCHANLOY]

As I am Spanish, now living in Thailand since a decade but keeping strong ties with my Country I can predict almost the scenario of what will happen here, when the speculative bubble will collapse.

It is happening exactly the same it happened in Spain 8 years ago.

People getting credits from any entity, and at any rate full gas!

No one looks what are the prognostics of global economy for the next 10 years (they should...if they engage themselves in 20 years long credits).

People here are so blinded by greed that they dont give a shit about the issues...And when talking with soma Thai friends about the concern of the Spanish crisis and when telling them that for sure the same disaster is on way to Thailand; They simply dont want to hear! Even some think I talk because i am jealous of them.....

5555

Poor devils.

Sent from my GT-S5830T using Thaivisa Connect App

[Moruya]

Evrywhere you look building. it reminds me of 1997! just the same

The crane index

[davejonesbkk]

I think these topics have been done to death over the last few years in the real estate forum and there's always people saying that its all fine etc, I personally know nothing of real estate markets nor am I going to claim I do but after living in Bangkok for around 7 years now Im personally baffled by the amount of huge condos I have seen and Im still seeing go up all along sukumwit especially the upper end. I live in a unit right by Udom Suk bts, every direction I look there are huge condos either finihsed, about to be finihshed or new ones being started. Some of the prices are insane, there's a fancy hi-so one called Ideo and apparently its something like 10k+ a month for a tiny 25sqm box studio!! <deleted> this is sukumwit 103 people!!

There's a plot of land opposite my building that had some derelict foundationsthat look like they were part of a condo building from the late 90s, a new sales office was quickly thrown up there a few months much to my amazement but then nothing happened since and no sign of life there now. Within a radious of something like 500m fromwhere I live there are at least 6 huge condos, most of them completed over a year now, I dont think a single one shows more than 50% of lights on at night...if that.

On nut is even more insane, I go to the beer gareden down there sometimes and look at that huge monstrosity 'The Verve' Id say barely 20% of the lights on there at night and its been finished a year now, plus there is another huge one under construction right next to it plus 2 other huge ones near by and tons of smaller ones that have been done a couple of years ago behind tescos etc that still dont have many people in....then you have all the older buildings....

I know 'lights on at night' is hardly any official benchmark but its all I can go on right now. Im curious to know where all the people are going to come from to fill these buildings, esp. when the majority of the rent prices seem to be out of reach of the vast majority of Thais....

[Asiantravel]

The parlous state of the world banking system is starting to look increasingly shakier every day and this

will surely affect Thailand eventually?

There is np need for me to say anything about the banks in Europe but even the Gov of the Bank of England is sounding gloomy ( http://www.bbc.co.uk...siness-18587254 ) and there are some very sinister theories regarding the National Westminster bank computer glitch in UK which some are saying now will go on for many weeks more.( some are saying they are short of cash )

We all know also about the banking downgrades even in USA so where is all this money to buy more property coming from ?

Edited June 27, 2012 by Asiantravel

[how241]

Evrywhere you look building. it reminds me of 1997! just the same

In Pattaya, they never stop building. Why ?

[Postmaster]

What is the Ploenchit area like for value, safety at night, entertainmentand general living ?

Anybody, thanks

[julemanden]

Property has almost always been the root cause of financial collapse since the late '80s

Agreed. Property speculation is seen is a guaranteed fast buck but is essentially a wasted investment in the broader sense. Aside from the actual construction and materials it is a non-productive investment. From where I sit in mid Sukhumvit the surge in condominium construction over the last 4-5 years is extraordinary. What is even more extraordinary is how many of them, once completed, sit nearly 100% vacant!A Short Aside - I had to laugh the other day walking past the new Hyde Residence on the corner of Soi 13. If you have walked past there you will know that it is the domain of the street hawker mafia flogging fake watches (oops sorry Culture Minister), sun glasses, sex toys and viagra - the troupe I like to call the 3 P's - Pimps, Prostitutes and Pornographers. The folks at this high end of condo project have spent a lot of money landscaping and beautifying the front of their show condo only to have it defiled by the street hawkers. It looks like a slum at the front. I have it on good authority that they (the street vendors) were recently each paid B70,000 to quietly move on. When I walked past the other day at around 6pm a car load of uniformed Tessakij chaps had arrived to try and get them to leave. What do you think happened? Yes, you are right. The street vendor mafia shouted, harassed and threatened them until they fled in fear. Good luck trying to sell those condos at B180,000 sq/m.

Pay the right people and all the bad things goes away )))

[steven100]

" Thailand Sees Property Boom Despite Global Crisis "

how come there are empty appartments everywhere ?

[ginjag]

Property boom, is this just BKK, go to jomptien not to the estate agents, look at a condo notice board, nice 32 Sq M hotel style room hot shower, air con,Good balcony, swim pool, reception security well maintained 6,000 bht per year Main/fee. lift, 300 meters from beach 750,000 cannot sell, my friend is selling.... so where is the boom. another example 5,000 a month condo, another 590,000 bht -small but nice. big boom alright----you have to believe 25% of what you see and hear.

[VeraLynn]

Property boom, is this just BKK, go to jomptien not to the estate agents, look at a condo notice board, nice 32 Sq M hotel style room hot shower, air con,Good balcony, swim pool, reception security well maintained 6,000 bht per year Main/fee. lift, 300 meters from beach 750,000 cannot sell, my friend is selling.... so where is the boom. another example 5,000 a month condo, another 590,000 bht -small but nice. big boom alright----you have to believe 25% of what you see and hear.

The boom is in the new builds, the decent ones are selling like hot cakes. However I agree with SOEYCHANLOY that it could become another Spain. Too many doors not enough people, borrowed money and retirement dreams left shattered.

[Equalizer]

Property has almost always been the root cause of financial collapse since the late '80s

It really is quite amusing. Thailand with its lack of genuine Bureaucracy and corrupt placement of institutional influence will always feed the mouths of the intelligent. Unfortunately the intelligent are not from Thailand per say. It is a vicious circle of calamitous policy and corrupt ideology that ultimately feeds foreign banks and investors. It is at this point they realize how stupid they have been and then amend the laws of business over the next number of years while unknowingly starting the ball rolling all over again. Here you can be the best man for the job but never be allowed to do it. So obvious it makes me laugh.

[clinique]

Actually the Nation articles headline is "Boom could bust.." and the article doesnt really say there IS a boom. So IMO the OP has incorrectly headed the Post bysaying "Thailand Sees Property Boom ..."

[belg]

haha no bubble seen by senior banker, maybe time for new glasses...; none of the so called overpaid experts saw 2008 comming with the big bubble in the US of worthless mortages

in my moo bahn many houses put the sign: for rent or for sale

you always have the old somchai with too much money that buys here and there in the hope it will get sold for a good profit

[ginjag]

We'll meet again, Understand it's for new, but normally because of demand it overflows onto other properties, in this case it isn't, sounds more a BKK hit than all over, in the north property is still ridiculously low priced.

[PattayaPhom]

Evrywhere you look building. it reminds me of 1997! just the same

In Pattaya, they never stop building. Why ?

Because people are buying

[PattayaPhom]

Property boom, is this just BKK, go to jomptien not to the estate agents, look at a condo notice board, nice 32 Sq M hotel style room hot shower, air con,Good balcony, swim pool, reception security well maintained 6,000 bht per year Main/fee. lift, 300 meters from beach 750,000 cannot sell, my friend is selling.... so where is the boom. another example 5,000 a month condo, another 590,000 bht -small but nice. big boom alright----you have to believe 25% of what you see and hear.

Possibly because these are in Majestic, Rimhad or Condochain.....and probably in Thai name!

[SgtPepper]

It's not just condos. Everywhere I go, I see a bran new terrace of town-houses being built alongside or opposite an unoccupied terrace of town-houses.

[rotary]

Since the property bust of 1997 I never knew that the market ever recovered..........it has picked up some at times but nothing has really come anywhere close to recovery. Prices are still depressed in most areas except when folks start buying stuff after they have been smoking something.......ha ha

[lifeincnx]

Bookmark this article and come back to it in about one year. That will be just about the right time for the financial chickens to come home to roost. The building frenzy here in Thailand, when combined with the new banking push for credit card debt at all levels of society, is an unnatural disaster waiting to happen.

[mpetersen]

Foreigners cannot generally finance property purchases in Thailand. This is not the same situation Spain.

[palm]

There is no property "boom" in Bangkok. Condo prices in particular are trickling up, barely in line with inflation. Land costs are the main factor for increasing prices, not greed by developers.

[ginjag]

PattayaPhom Foreigners name --and not bad position next to 7-11-super Thai maket and Tesco lotus