Bangkok Prime Property Prices Growing Fastest Globally

[andy1308]

http://www.ddproperty.com/en/property-news/2012/7/1504/bangkok-prime-property-prices-growing-fastest-glob

Prime property prices in Bangkok are grew faster than any other city in the world during the 12 months ending June 2012. Prime property is defined as the top 5 percent of the mainstream housing market.

[trogers]

Is this good news or bad?

As prices go up, rental yield fall. And we most likely be approaching the formation of another bubble when yields fall below 5% pa.

[bkkjames]

andy is a sponsor of TV ?

[Pib]

Whether true or not, real estate folks always paint a rosy picture, find the silver lining in every dark cloud, etc. I do know that I live in western Bangkok and it's growing/expanding fast with plenty of SME, single family/condo, and low-rise construction underway...typical for large cities where the central/high-rise part of the city gets packed like sardines in a can and very expensive...then the outskirts turn into the real growth areas. I guess you call that growth/expansion of a city.

[andy1308]

For clarification and transparency, Andy1308 (me) is Regional Group Editor for PropertyGuru Group, Asia's leading property portal - and in Thailand we have DDProperty.com which is Thailand's number one property website ranked by Alexa and Google Hitwise, as well as in terms of the number of listings. Every month we're publishing more than 700 property stories across the region, of which more than 100 are on DDProperty in both English and Thai.

The stories I share here are ones that I feel are of genuine interest to ThaiVisa readers. I hope that's okay and that I'm not infringing any rules.

[trogers]

Whether true or not, real estate folks always paint a rosy picture, find the silver lining in every dark cloud, etc.

Agree!

The fact is that property in the Thai capital represents a very compelling investment opportunity for local and overseas buyers alike.

Seems this property consultant based the compelling invesment opportunity only on the basis of fast rising prices with no mention on rental yields.

It is like telling people to come to buy today because prices will be higher tomorrow (26% within a year)' date=' like telling them to speculate on fast increase in prices to make their investment gain - gathering the greater fools...[img']http://www.thaivisa.com/forum//public/style_emoticons/default/cheesy.gif[/img]

[p_brownstone]

Whether true or not, real estate folks always paint a rosy picture, find the silver lining in every dark cloud, etc.

Agree!

The fact is that property in the Thai capital represents a very compelling investment opportunity for local and overseas buyers alike.

Seems this property consultant based the compelling invesment opportunity only on the basis of fast rising prices with no mention on rental yields.

It is like telling people to come to buy today because prices will be higher tomorrow (26% within a year)' date=' like telling them to speculate on fast increase in prices to make their investment gain - gathering the greater fools...[img']http://www.thaivisa.com/forum//public/style_emoticons/default/cheesy.gif[/img]

I quite agree.

What are these claimed increases based on - particularly for the Condominium Sector which is obviously the largest in Bangkok - "asking price" per square metre or actual (NOT "projected") Rental Yields for example?

Anyone driving around Sukhumvit / Petchburi Road areas in Bangkok will see huge finished / almost finished Condominiums and equally huge sites where more are planned (at least 3 enormous sites at the junction of Asoke and Petchburi for example). I simply cannot believe there is a demand for Condos in Bangkok sufficient to find buyers for all these Units.

A Bubble in the making without doubt.

Patrick

[PattayaPhom]

For clarification and transparency, Andy1308 (me) is Regional Group Editor for PropertyGuru Group, Asia's leading property portal - and in Thailand we have DDProperty.com which is Thailand's number one property website ranked by Alexa and Google Hitwise, as well as in terms of the number of listings. Every month we're publishing more than 700 property stories across the region, of which more than 100 are on DDProperty in both English and Thai.

The stories I share here are ones that I feel are of genuine interest to ThaiVisa readers. I hope that's okay and that I'm not infringing any rules.

Keep em coming Andy, always good to read.

[BirdsandBooze]

Sounds like an 80's Tenerife timeshare tout.

[london]

"Prime property prices in Bangkok are grew faster than any other city in the world during the 12 months ending June 2012"

Interesting...and I'd probably have to agree that the top end, "Prime" have done just that.

I have seen that there have definitely been price rises with increasing rentals in BKK. I know that my rentals have gone up in the last year.

But more generally, on a country by country basis in this region, from experience, I would have to say that Malaysia and Indonesia have left Thailand way behind in the price rise area.

My BKK properties have probably increased around 20% over the last 2 years, but my Malaysian holdings have outpaced that increase and those in Indonesia have left both in the shade.

That said, I wish I had Prime London real estate now.....that has increased by a huge amount over the last 12 months....but who's to say what may happen next ?

[PattayaParent]

Is this good news or bad?

As prices go up, rental yield fall. And we most likely be approaching the formation of another bubble when yields fall below 5% pa.

As property prices go up rents increase to match so yields stay the same.

[trogers]

Is this good news or bad?

As prices go up, rental yield fall. And we most likely be approaching the formation of another bubble when yields fall below 5% pa.

As property prices go up rents increase to match so yields stay the same.

Rent is subjected to the interaction of demand and supply of rental space, and has no or minimal dependency to property prices.

But property prices do rely on rental yield as a fundamental determinant, just like price to earning ratios used in stocks.

[aussiebebe]

Is this good news or bad?

As prices go up, rental yield fall. And we most likely be approaching the formation of another bubble when yields fall below 5% pa.

Yes, it's interesting to note that the 28.8% increase in high-end Bangkok property (taken from the Knight Frank Prime Global Cities Index) is almost exactly the same increase as high-end London properties experienced during 2006 (28.6% also according to Knight Frank). This astonishing increase preceded a crash, as history shows, but who knows what lays in store for Bangkok - price forecasts are a mug's game.

[london]

"price forecasts are a mug's game."

How very true !

[davejones]

Can you tell us which condos have gone up in price 28%. I find this very hard to believe. I see stagnant prices all around. Would be interesting to know some actual properties that have risen in price.

[trogers]

"A pin lies in wait for every bubble, and when the two eventually meet, a new wave of investors learn some very old lessons." - Warren Buffet

Here is an old lesson. Property prices in Japan rose four folds from 1980 to 1990. The bubble burst and prices fell back to 1980 levels only in 2004, before gradually climbing back up. Prices are now less than double of those in 1980. A generation of speculators were caught with their pants down for more than two decades.

Edited August 23, 2012 by trogers

[trogers]

Deleted - double post

Edited August 23, 2012 by trogers

[bbradsby]

I believe the emphasis in the OP is the word "Prime."

Without piling on the OP, caveat emptor - one must always consider the source of received information, and their possible vested interests. There was a reasonably detailed CBRE Bangkok Post article/adticle/advertorial/infomercial published yesterday which addressed the Bangkok condo markets - plural.

So, Andy, with the combined facts: that the primary market for Prime, downtown condos is Thai nationals, and that Thais don't like to buy used property, cars, etc, and that these Thais are buying two-bedroom units and above, the best BKK condo investment would be a recently-built but pre-owned prime downtown unit of two bedrooms or above?

Edited August 25, 2012 by bbradsby

[mr3cho]

A question for the more experienced in this market... What will happen when the bubble bursts here?

A few years ago in Los Angeles, I bought a property, with the intentions of selling in 3 yrs, as the last recent bubble was inflating and sold just before the explosion. Went with my gut feeling of when to buy and sell and moreover, I was very fortunate. People caught with a variable rate ARM, increased rates, second mortgage, etc couldn't make payment or sell and lost their homes. Foreclosures. Prices dropped to about 1998-2001 prices in most areas (i'm just estimating).

I am about to buy a condo in BKK to live in without regards to selling it in the next 5-10 years. I feel(gut) that prices are inflated about 25%

The problem with the condo market here is the way these projects are bought and sold before the project is complete. With deposits of 10k baht, monthly payments before ownership and project complete of about 7-10k/month. Its cheap for people with no intentions of living there to buy during presale with little cash and sell closer to project completion for good profit...thereby artificially inflating the prices with artificial demand. I'd say most condominiums aren't anywhere near 100% occupied. Many 'prime' properties aren't even 50% occupied.

So what happens when the bubble bursts here?

Edited August 25, 2012 by mr3cho

[Khun Jean]

When prices go up but values stay the same or go down it is called inflation.

You read many times things like 'Consumer sales rose 1%'.

It actually means inflation went up 5% and people bought 4% less.

Inflation is very sneaky and it is the greatest factor in any published number.

Unfortunately most people ignore inflation, but that was the goal after all.

Edited August 25, 2012 by Khun Jean

[davejones]

Just look around Bangkok and you will see evidence of what happened the last time the bubble burst (1997). The same will most likely happen again and the city will be littered with half-finished condo buildings that will be left to rot. If you bought a condo in one of those buildings then you will have lost your money. For already completed building I imagine prices will crash. I am already seeing 25%+ discounts to sell some condos. And I know plenty that have been on sale for over 2 years and still haven't sold. And these are in pretty good locations. There is massive over-supply in the condo market and new buildings going up all over the place. Many condos will remain empty for decades. There just isn't enough demand to fill all the condos. In my opinion, because they are overpriced. If they were priced properly then they would be full. But there just aren't enough people who can afford to rent or buy all of them. It's a disaster waiting to happen, and something that could really derail the Thai economy. Could be soon, or could take years before it comes to a head.

[trogers]

I am about to buy a condo in BKK to live in without regards to selling it in the next 5-10 years. I feel(gut) that prices are inflated about 25%

The problem with the condo market here is the way these projects are bought and sold before the project is complete. With deposits of 10k baht, monthly payments before ownership and project complete of about 7-10k/month. Its cheap for people with no intentions of living there to buy during presale with little cash and sell closer to project completion for good profit...thereby artificially inflating the prices with artificial demand. I'd say most condominiums aren't anywhere near 100% occupied. Many 'prime' properties aren't even 50% occupied.

I suggest you look at mature developments for your home. They will reflect prices closer to market values due to lack of speculation. Also, you can see the state of maintenance of the project and the class of occupiers.

[trogers]

When prices go up but values stay the same or go down it is called inflation.

You read many times things like 'Consumer sales rose 1%'.

It actually means inflation went up 5% and people bought 4% less.

Inflation is very sneaky and it is the greatest factor in any published number.

Unfortunately most people ignore inflation, but that was the goal after all.

When asset inflation is driven primarily by speculation a bubble forms. This can be seen when property prices increase annually much higher than the consumer price inflation.

And asset deflation occurs when the bubble burst. You can see prices of property falling even when the consumer price index is still increasing at 3-5% pa.

[cheeryble]

I don't see Andy being misleading and he refers the report to Knight Frank which everyone knows is an Estate Agent.

I think as long as he maintains full disclosure and balance in the stories I'm happy to get the info.

[Khun Jean]

To elaberate on my post and my personal thinking.

Andy is not misleading, he is misled. Big difference.

It is very difficult when a lot of people feed you information without the underlying structure to measure prices.

Whole generations are grown up around a monetary system, so it is difficult to escape it.

Our measurement of value is increasingly difficult to measure. Central banks have to much control, they can just pump more digital money and cause inflation or take money out of circulation (one of the causes of the great depression) and cause deflation.

One decision during a weekend and by monday the instrument used for pricing is changed. The ones who are at the frontend, banks and parties that receive money from central banks are the first to know, us peasants will now it some time later.

When the Dow Jones goes up 10%, what does it mean?

Companies make 10% more profit? Paper money lost 10%?

Very difficult to measure and make a good valuation.

So in what do you measure 'value'? In US$, Euro's, Yuan? Or Food, Oil, Gold, Energy?

The above mentioned misleading is very subtle and is everywhere. News, stock markets, house prices, experts opinions?

One thing is in common, they all studied the same form of economics, could they all be wrong? I hope not.

One thing is for sure and that is that paper money is becoming a bad instrument to measure value with.

I don't have the solution, i personally value things in Euro, Thai baht and gold (this causes also an fx to the US$ thus the US$ is also included).

Just to get some more datapoints to prevent wrong conclusions.

Unfortunately it is not getting any easier.

[cheeryble]

Some agreement with you there Kh Jean (though I have no idea about Andy's case)

I think one of the most important things we can do is learn to evaluate evidence. This particularly includes knowing about the fallacies and biases....all of them. If we can have some knowledge of these and examples of others mishits we can see where we ourselves are likely to come a cropper.

Of particular relevance to investment matters I would recommend people know about survivorship bias

http://www.wisegeek.com/in-finance-what-is-survivorship-bias.htm

Not particularly in it's strict meaning above but just having the realization that just because something is there doesn't NECESSARILY mean it's an example to invest in or emulate.....far from it.....it may have survived through chance alone.

Example for would be currency traders: you will sometimes hear from those who have tried trading for a year and it's worked. You may even see "success" figures from brokers, or advertise EAs (progams that trade for you).

Some of those survivors will make enough to be confident and move to CM and set up their little trading desk.

They no doubt think they have something special going. It ain't necessarily so. Some are bound to survive, though less at each stage. They don't seem to be asking the question why they should have an edge over the countless thousands with far greater resources who are essentially betting against them (though occasionally just being small can be an edge.....this is just an example).

The survivors are the only ones you're likely to hear about success from, those who lost their account have moved back home to work and save another stake.

The brokers make commission regardless.

The same applies to all manner of investment.

Cheeryble

Edited September 2, 2012 by cheeryble

[trogers]

The brokers make commission regardless.

The same applies to all manner of investment.

A similar advice about brokers was given by Warren Buffet - "Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway".

Meaning - "If the advice from the brokers are so great, why aren't they all rich? Maybe it's because they don't get rich off their advice but off charging you commissions?".

Edited September 2, 2012 by trogers

[Touhukasta]

I agree there's lots of condos that are mismanaged, not well-kept, become damaged by mold within a few years after the building is finished and both the rents and

property values start to fall over time even while in general prices in bangkok are going up.

Also I've seen a couple of these condo projects being built and their foundations look old and in bad shape.

So basically by the time the building is finished, it's already old and busted on the inside.

Although paint etc. will make it look fine for a while on the outside. The climate is here is very harsh to buildings.

In Finland there's lots of buildings that are in great shape that were built in 1950's etc. Not very common here.

So I guess I better go for an old, well-managed condo.. If I find one in a good location where I want to live.

[bangkokburning]

Whenever I am on a flyover or bts I am struck by how much vacant land is still available all over BKK. I see no shortage of the overpriced and horribly decorated 3m 30sqm box for the balance of my lifetime.

[trogers]

Whenever I am on a flyover or bts I am struck by how much vacant land is still available all over BKK. I see no shortage of the overpriced and horribly decorated 3m 30sqm box for the balance of my lifetime.

Actually, there were already lots of these 3m wide 30 sqm boxes when I first work here in the 80s. Just that they are now calling them condos.