How Difficult Was It To Sell Your Condo?

[isawasnake]

To get a good price for a condo though, i'd be looking at anywhere from 1 to 2 years myself. If you need to sell quick, that just doesn't work. If you sell quick you probably sold too low, or got lucky.

If you wait 1-2 years you have to factor in the interest you will lose on not having the money, also the expenses to keep the condo e.g. annual fee, repairs, etc. If you are planning to buy somewhere where prices are rising it could be better to selling quickly for less. All depends what plans you have for the money. You also run the risk of prices dropping or even crashing. If it's your home and you need to sell before buying somewhere else, then why drag it out for 1-2 years. Sell it and move on.

I definitely agree with the point you made about bank interest. Yet, I personally believe that nobody knows where condos are going. Some think they do, some have theories.... all great, but nobody knows. Point being i think waiting to sell your condo, it could make it go up or down in that time, so it is a wash -- or slightly favor the positive side since real estate has an obvious overall trend upwards.

My overall opinion on Thai condos is that it is pretty darn safe to put money in one and expect to get about that much out after X amount of years after taxes etc, probably a little more. But yes, your post opened my eyes as effective benefits of waiting to sell. I think buying a condo here makes a lot of sense in instances where a person living here may not be so savvy with investing, yet wants to purposefully tie his money up somehow (if you get my drift). Low cost living with the ability to sell and pull the money back out is very appealing to some, including me. Kinda like golilox, not too hard to get the money, not too easy either, condos seem just right for many an expat here. Anyway, I am just rambling on.

Edited October 15, 2012 by isawasnake

[cheeryble]

8-9 million baht condos are not intrinsically a worse deal then 1-2million baht ones, there is always a buyer who absolutely wants the more expensive option and nothing less, it's just that they are less liquid......but hey you get more bang when it happens....

As for the general market, it's alright being timid and holding cash until inflation comes along. The very low rates of recent times have been easy on everyone, but it won't last forever, and when inflation goes up you want to be holding solid assets.

Last factor I'd mention is the Chinese.

Up here in CM this year Chinese tourists are everywhere. They are yakking behind me in a quiet little university coffee shop away from all normal areas. They're not wearing Chairman Mao uniforms and they're not all on bus tours, they're rather unnoticeable and like normal westerners, quite stylish, having fun and riding motorbikes and eating out and even was asked directions by two cars (one a BMW) with Chinese plates. IPad maps were at the ready. They're coming in couples and threes and fours and all sorts. My friend's (boutique) hotel has a load of them.

This is the first year. Word I'd getting out. How many next year, 4x as many? 8x? What about 2014......20x? And that would make 0.0000 of the population!

Thailand could easily become to China what Spain became to Britain......it's a similar distance and can even be driven. Only difference is there are a BILLION Chinese. What happens when they start buying condos and property I can't imagine, but the Chinese sure like owning things. Vietnam's very expensive to buy property, Laos is third world, and the Chinese would hate India. So Thailand's the first place for the ever richer Chinese to escape their abysmal weather, it's as plain as the nose on you face. Not at all sure I like it, but mark my words it will happen.

This is not factored in, and it will affect us all.

ps: anyone know about legal situation for Chinese buying abroad?

Edited October 15, 2012 by cheeryble

[davejones]

8-9 million baht condos are not intrinsically a worse deal then 1-2million baht ones, there is always a buyer who absolutely wants the more expensive option and nothing less, it's just that they are less liquid......but hey you get more bang when it happens....

As for the general market, it's alright being timid and holding cash until inflation comes along. The very low rates of recent times have been easy on everyone, but it won't last forever, and when inflation goes up you want to be holding solid assets.

Last factor I'd mention is the Chinese.

Up here in CM this year Chinese tourists are everywhere. They are yakking behind me in a quiet little university coffee shop away from all normal areas. They're not wearing Chairman Mao uniforms and they're not all on bus tours, they're rather unnoticeable and like normal westerners, quite stylish, having fun and riding motorbikes and eating out and even was asked directions by two cars (one a BMW) with Chinese plates. IPad maps were at the ready. They're coming in couples and threes and fours and all sorts. My friend's (boutique) hotel has a load of them.

This is the first year. Word I'd getting out. How many next year, 4x as many? 8x? What about 2014......20x? And that would make 0.0000 of the population!

Thailand could easily become to China what Spain became to Britain......it's a similar distance and can even be driven. Only difference is there are a BILLION Chinese. What happens when they start buying condos and property I can't imagine, but the Chinese sure like owning things. Vietnam's very expensive to buy property, Laos is third world, and the Chinese would hate India. So Thailand's the first place for the ever richer Chinese to escape their abysmal weather, it's as plain as the nose on you face. Not at all sure I like it, but mark my words it will happen.

This is not factored in, and it will affect us all.

ps: anyone know about legal situation for Chinese buying abroad?

Good post. The Chinese coming isn't something I had thought about. I think it's pretty difficult for them to take money out of the country at the moment, but I think that is already starting to change. There are lots of Chinese already living here, and they have been coming for generations, so they obviously fit in quite well. Only time will tell I suppose.

I read an interesting article a couple of months ago about the property situation in Pattaya in Bangkok. The article reckoned that at the current rate of sales it would take around 4-5 months to sell all outstanding condo stock. For Bangkok the figure was around 20 months. So the Bangkok market is very over-supplied. And they are still building lots of condos in both locations. I am astounded by how many empty apartments there are in Bangkok, even in condos that have been around for years. Many still haven't sold out. Markets like that are usually heading for a crash. But if the building owner has no debts then they have no real reason to discount unless they really want to sell quickly. In Pattaya some projects sell out quickly, so it is a better merket at the moment. But the amount of condos being built in Jontiem over the next 3 years is so huge that it is bound to constrain prices.

My personal view is that the Thai market in general is very overpriced, but that doesn't mean that prices won't continue to rise. But it's no easy for Thais to get mortgages, so I can't see prices growing quickly at all. Many condos I keep an eye on are still on the market for the same prices as 2 years ago and they still haven't sold.

It's a very difficult market to judge, and I haven't seen anything like it in any other country.

[cheeryble]

Good post.

Thankyou

The Chinese coming isn't something I had thought about. I think it's pretty difficult for them to take money out of the country at the moment, but I think that is already starting to change. There are lots of Chinese already living here, and they have been coming for generations, so they obviously fit in quite well. Only time will tell I suppose.

Even if money export isn't officially sanctioned there's a lot of Chinese money being remitted for exports which could easily be manoeuvred into the old unofficial money transfer network (what's the name of that?)

I read an interesting article a couple of months ago about the property situation in Pattaya in Bangkok. The article reckoned that at the current rate of sales it would take around 4-5 months to sell all outstanding condo stock. For Bangkok the figure was around 20 months. So the Bangkok market is very over-supplied. And they are still building lots of condos in both locations. I am astounded by how many empty apartments there are in Bangkok, even in condos that have been around for years. Many still haven't sold out. Markets like that are usually heading for a crash. But if the building owner has no debts then they have no real reason to discount unless they really want to sell quickly. In Pattaya some projects sell out quickly, so it is a better merket at the moment. But the amount of condos being built in Jontiem over the next 3 years is so huge that it is bound to constrain prices.

My personal view is that the Thai market in general is very overpriced, but that doesn't mean that prices won't continue to rise. But it's no easy for Thais to get mortgages, so I can't see prices growing quickly at all. Many condos I keep an eye on are still on the market for the same prices as 2 years ago and they still haven't sold.

Is a sell-out time of 5 months or 20 months that long? I think 5 months sounds short and 20 months doesn't sound bad at all for BKK considering flooding. But what do I know?

As for CM I worked out roughly what it cost to build a new condo per sqm. and I think there's room for reduction if the market slowed. But that is certainly not happening as of now and the base new price remains 40,000psm. As I have previously said I personally have two friends bought places being built and now another looking to buy (relevant to our previous poster about upmarket being bad his range is 6 to 10 million which is quite high in CM.)

That's just from my little group of farang friends. But in fact the big market is Thais, I'd say 75% plus, and an awful lot can be seen up here from BKK looking at land so I guess the same's true of condos. They often buy for just occasional visits, seem to prefer it to putting money in the bank. There is no doubt a proportion of moneyed Thais with funds they don't quite know what to do with, and there's no doubt they like really the idea of regularly visiting, or retiring to, CM. It's ubiquitous already and undoubtedly growing.

Edited October 15, 2012 by cheeryble

[ExpatOilWorker]

Find your condo or area here (http://www.prakard.com) this will give you a good idea of what similar units are selling for.

As already mentioned, at the right price your unit will also sell withing 3-6 months.

[ballbreaker]

Its a matter of listing at right price and having lots of people view unit for sale.

I know of someone who listed his condo for 18M baht the middle of last year and just recently reduced price again from 15M to 14M baht. Hopefully he will hit the magic price as he continues to reduce price if no takers at 14M.

[trogers]

Its a matter of listing at right price and having lots of people view unit for sale.

I know of someone who listed his condo for 18M baht the middle of last year and just recently reduced price again from 15M to 14M baht. Hopefully he will hit the magic price as he continues to reduce price if no takers at 14M.

I have said - the correct price can be calculated from a rental yield of 8%. If similar units in the building are renting out at Bt80k a month, the price should be Bt12m. And if rent is at Bt100k a month, the price should be Bt15m.

[TommoPhysicist]

That's just from my little group of farang friends. But in fact the big market is Thais, I'd say 75% plus, and an awful lot can be seen up here from BKK looking at land so I guess the same's true of condos. They often buy for just occasional visits, seem to prefer it to putting money in the bank. There is no doubt a proportion of moneyed Thais with funds they don't quite know what to do with, and there's no doubt they like really the idea of regularly visiting, or retiring to, CM. It's ubiquitous already and undoubtedly growing.

Thais don't buy condos for investment in CM.

They buy them to put a girl in.

They buy land and houses for investment.

Rental yields in CM are 3-5%.

You can occasionally get a foolish foreigner to pay more, but not often.

Edited October 18, 2012 by TommoPhysicist

[Baloney pony]

Its a matter of listing at right price and having lots of people view unit for sale.

I know of someone who listed his condo for 18M baht the middle of last year and just recently reduced price again from 15M to 14M baht. Hopefully he will hit the magic price as he continues to reduce price if no takers at 14M.

I have said - the correct price can be calculated from a rental yield of 8%. If similar units in the building are renting out at Bt80k a month, the price should be Bt12m. And if rent is at Bt100k a month, the price should be Bt15m.

I haven't seen many if any condos bringing in 8% rental yield. Usually the rent yield is a consistent 6% or lower of condo sell price.

[isawasnake]

^but he's simply saying the correct figure to use to get the selling price is at 8%.

[trogers]

Its a matter of listing at right price and having lots of people view unit for sale.

I know of someone who listed his condo for 18M baht the middle of last year and just recently reduced price again from 15M to 14M baht. Hopefully he will hit the magic price as he continues to reduce price if no takers at 14M.

I have said - the correct price can be calculated from a rental yield of 8%. If similar units in the building are renting out at Bt80k a month, the price should be Bt12m. And if rent is at Bt100k a month, the price should be Bt15m.

I haven't seen many if any condos bringing in 8% rental yield. Usually the rent yield is a consistent 6% or lower of condo sell price.

The further up the property cycle, the lower the rental yield due to speculation, and not rising values, jacking prices up.

If you had bought during 2007-2009, you would have gotten rental yields close to 10%.

[cheeryble]

The further up the property cycle, the lower the rental yield due to speculation, and not rising values, jacking prices up.

If you had bought during 2007-2009, you would have gotten rental yields close to 10%.

Quite right.

The question of buying well also comes into it of course.

I know someone who took his cajones in his hands and bought four houses on or near the river in CM after the big SEAsian crash and has seen a rental yield over 25% on his initial outlay. I know of others who bought established condos in the years a bit after but still aftermath prices who have seen nearer 15 than 10%

Agree with you TRogers that condos bought well over the last years would have brought near 10%, but upward price pressure has pushed this down for all but very well bought units.

As you say the property cycle is now advancing and new condo prices in CM of 40k/sqm would mean considerably lower gross yields maybe 5%+/-.

Of course a person would re-value a unit based on sellable rental yields but the above would all be on initial investment.

Thais don't buy condos for investment in CM.

They buy them to put a girl in.

They buy land and houses for investment.

Rental yields in CM are 3-5%.

You can occasionally get a foolish foreigner to pay more, but not often.

1. Thais DO buy condos to just stay in occasionally, between once a year and once a month. It seems to be very common indeed. Have a look at the doors with bills waiting pushed under the door for weeks on end.

2. They may of course occasionally put a Mia in.....everyone deserves a home....but more seem empty most of the time.

3. Rental yields....se above.

Edited October 18, 2012 by cheeryble

[cheeryble]

I like to see which way things are going....

Rental yields as the obviously on-the-ball TRogers says have been expected to be perhaps 8% in Thailand.

But as we can see in CM they now seem to be nearer 5% based on retail price new condo units.

The condo units are priced at 40,000/sqm.

Land cost in CM I'm guessing averages 8-20m/rai for a condo location so what does that cost per sqm of unit. Gotta be 2000 or so hasn't it?

The Thai Appraisal Foundation puts BKK newbuild 6-15 storey residential buildings at a build cost for 2011 of 16,300.

Inflation may be up a bit but BKK costs dearer, so shall we say CM 15,000?

But for a sqm of building we don't get a sqm of condo, as there are receptions, carparks, public rooms, storerooms, corridors etc. My guess is we get maybe 60% of a sqm. (maybe less...anyone?), meaning x1.66 to the 15,000, or 25,000/sqm of private unit space to build. But that is presumably without a pool and so on.

Then we must know that the thing is a business enterprise which must have money paid out sometimes years ahead for the land, for getting permissions, for all the extras. It is all somewhat at risk until the building gets started and when it's finished it needs marketing effectively adding another lump and loans have to be repaid add the land and looks to me we may well be over 30,000/sqm.

All this effort and risk deserves a pretty fair profit and a bit of safety, so from this angle 40,000 seems pretty fair.

So shall we say the price is not unreasonable?

Assuming we must look at any possible way of reducing prices:

A lowered land price can only make a very modest difference to the sqm price.

The materials are out of local control and we must assume will remain roughly in line with inflation (steel already came down).

You know where this is going don't you?

To get a reasonable yield to base a purchase price on we must either:

1. Lower our expected yield

2. Raise our rents.

As for 1, well yields are indeed lower in other countries. Perhaps landlords deserve a bit more in LOS as it's more of a push to get management done right......but this will get better. But perhaps yield expectations could drop a bit.

Looks like the alternative, 2, also needs to take place.

The fact is in the West roughly 30% or a third of income is paid for accomodation.

My guess is here it's way less for the average condo-rent-paying farang, so a rise is not only possible, it may be overdue.

As for Thais, so far they just seem to fill up the buildings....I have no idea about rentals there.

I set this against a backdrop mentioned in a previous post of the Chinese suddenly swarming in CM this year.

At lunchtime I ran into my Thai friend who partially runs a boutique hotel, which he had told me for the first time was "mostly Chinese" recently. They are generally well heeled which fits with the Chinese BMW plus iPad asking me directions.

I mentioned I thought this could grow exponentially like Spain to Britain 30 or 40 years ago and he said he had already booked to learn Chinese on a formal basis as a priority.

I asked if he knew if the Chinese could buy abroad.

He amazed me by saying he had been asked by several Chinese guests about the details of property ownership here....they didn't seem at all up to speed but seemed very interested.

Bedways is bestways

Edited October 18, 2012 by cheeryble

[trogers]

Prudent investors will look at rental yields when deciding on investing. Speculators look only at expectation of price increases in the near future when deciding.

And now we have identify the players in the market and the timing along the property cycle they will be active. Speculators will create the bubble and those still holding the property when the bubble burst will suffer. Prudent investors will then swarm in to acquire choice located property in distress.

[JeffreyMcCollum]

It is all in pricing, as well as getting lucky a few times.

I have had about a dozen condos around Thailand. Never sold at a loss. Did break even a time or two, but it was time for something new.

When it is time to move on I sell it at a fair price and it moves quickly. A friend at one building I sold a unit a few years back at twice my money, his is still on the market. Hardly any lookers even. He want this amount (5 times the price he paid) because he did this and that to the unit. Well I don't care what you did, good for you. First thing I would do would be gut the place and start over.

Selling is business and keep personal emotions out of it

[cheeryble]

Further to the Chinese coming, it seems they are now the biggest tourist visitors and others than me have noticed them swarming and having plenty of money. Their numbers visiting Thailand grew nearly 30% this first half year, but I can tell you they were inordinately higher than that in Chiangmai, where they undoubtedly increased hundreds of percent, especially after August,when those figures finished, in the latest Chinese holiday season.

http://www.gokunming.com/en/blog/item/2764/chiang_mais_chinese_invasion

Edited October 19, 2012 by cheeryble

[TommoPhysicist]

I can buy a new condo in CM, 10km out of town .... 150k for 34m2 = 5km2

Someone I know just bought three next to each other, knocking them together, 100m2 for 450k = 4.5km2

As for Chinese, they are tourists, not looking to buy a condo IMHO.

Edited October 19, 2012 by TommoPhysicist

[KRS1]

for 350,000 you can buy a one brm condo in HAWAII...and Jomtiem is not Hawaii....

..and also get approximately $2000 USD in rental income from a well managed company if you buy in a hotel.

[davejones]

for 350,000 you can buy a one brm condo in HAWAII...and Jomtiem is not Hawaii....

..and also get approximately $2000 USD in rental income from a well managed company if you buy in a hotel.

But what happens when you have to fork out mega bucks when the hotel and your room needs renovating? That could easily eat up most of the profits. Seems like the hotel company wants you to take all the risk rather than them buying the hotel themselves. If the hotel doesn't succeed they can just walk away. What will you do then?

Also, you don't have the option of living there if it's a hotel room, whereas you can live in a condo if you want to.

Many of here aren't from the USA so have no interest in investing there. They would rather invest where they live. Returns might not be as good, but it's easier to manage the property. It's always better to be around when problems appear. And with property they will always appear at some point.

I for one would never invest in Hawaii because I don't know anything about the place and therefore don't understand the property market there. Understanding your market is a critical part of buying the right property. It's not as simple as you make out. Headline figures are rarely achieved in practice.

[PattayaPhom]

for 350,000 you can buy a one brm condo in HAWAII...and Jomtiem is not Hawaii....

But that's no use if you can't get a long-term USA visa, which most people can't. Also no use if you want to live in Thailand. Also no use if you don't like Hawaii. But your geography is excellent; Jomtien is indeed not Hawaii. Go to the top of the class.

What he was implying is that Jomtien is in every way vastly inferior to Hawaii. You'd be an idiot to pay anything like the same price. There are any number of brand-new condos available in Pattaya for 900,000 baht and up. Last time I checked, that was less than $30,000. Honestly, what kind of idiot would pay over $300,000 for a condo in a Third World country with Third World infrastructure, facilities, safety, disease risks, unhealthy climate and crime/corruption like Thailand? $50,000 max. is what a pad for a foreigner is worth in a marginal country like Thailand, $100,000 perhaps if it's a really really swanky and large place with several bedrooms, its own swimming pool, et cetera. Invest any more than that in property in Thailand (or similar Third World southeast Asian countries) and you're the living proof of the wisdom behind the saying "A fool and his money are easily parted."

Its absurd and misleading to cite Thailand as a Third world country with poor infrastructure etc. This puts in in the same boat as (say) India or Pakistan. Thailand is a developing country. There is good infrastructure in the Chonburi region as there is in most of the country (its a million miles closer to wester standards than, say, Indian standards). Town planning may lack a lot but its not a case of poor infrastructure.

You cite: Third World infrastructure, facilities, safety, disease risks, unhealthy climate and crime/corruption like Thailand. I agree with the poor safety and crime/corruption aspects, but the rest are incorrect & as they are erroneous it makes your argument look poor.

However your overall point is still valid and I agree with it in general. But your point would be better made by removing the errors and exaggerations.

Water shortage, expected power cuts within 24 months, hospitol waiting lists with elderly being put on 'dyeing lists' to save money, government debt, high unemployment, major road traffic with no investment whaotsoever, alarming rates of TB and other infectious diseases. malnourished children etc etc etc, sounds very much like a third world country to me...question where is it ?...answer UK...so lets just see how that compares to Thailand, and am sure know where I am better off

[mania]

I can buy a new condo in CM, 10km out of town .... 150k for 34m2 = 5km2

Someone I know just bought three next to each other, knocking them together, 100m2 for 450k = 4.5km2

As for Chinese, they are tourists, not looking to buy a condo IMHO.

Can you say what the name is of this condo?

Thanks

[samtam]

Does this mean that a THB50m condo at The Sukhothai Residences renting at THB200,000 per month should really be priced at around THB30m?

[IamNotaNumber]

Both the rental and sale price are probably way over what the thing is really worth, but of course everything to do with property is also to do with supply and demand.

The notion that the "right" price for a condo is 12.5 times it's rental value (or that the "right" rent is 8% of a property's worth) is equally daft. There is no "right" price, just a price that someone is prepared to pay. The ratio of rental price to purchase price will also vary according to the general economic climate, even outside of the supply and demand issue.

Of course the matter is even more confusing in Thailand were the final price actually paid (for rent or for purchase) often bears no relation to the fantasy price that was being asked for by the owner. Some clear examples already given in this thread, and there are plenty more.

You can get a realistic price for rent by seeing what many people are prepared to pay for a unit, and you know this when it is never empty between tenants. Any empty rental unit is overpriced.

You can get a realistic price for buying when a place sells within a few weeks (not months) of being put on the market, having generated plenty of viewings and offers.

[MahaYellow]

for 350,000 you can buy a one brm condo in HAWAII...and Jomtiem is not Hawaii....

But that's no use if you can't get a long-term USA visa, which most people can't. Also no use if you want to live in Thailand. Also no use if you don't like Hawaii. But your geography is excellent; Jomtien is indeed not Hawaii. Go to the top of the class.

What he was implying is that Jomtien is in every way vastly inferior to Hawaii. You'd be an idiot to pay anything like the same price. There are any number of brand-new condos available in Pattaya for 900,000 baht and up. Last time I checked, that was less than $30,000. Honestly, what kind of idiot would pay over $300,000 for a condo in a Third World country with Third World infrastructure, facilities, safety, disease risks, unhealthy climate and crime/corruption like Thailand? $50,000 max. is what a pad for a foreigner is worth in a marginal country like Thailand, $100,000 perhaps if it's a really really swanky and large place with several bedrooms, its own swimming pool, et cetera. Invest any more than that in property in Thailand (or similar Third World southeast Asian countries) and you're the living proof of the wisdom behind the saying "A fool and his money are easily parted."

And I wonder what kind of imbecile would like to live in a "Third World country with Third World

infrastructure, facilities, safety, disease risks, unhealthy climate and crime/corruption

like Thailand ?"

Better stay put in your own country of birth and keep away from Thailand !

[trogers]

Both the rental and sale price are probably way over what the thing is really worth, but of course everything to do with property is also to do with supply and demand.

The notion that the "right" price for a condo is 12.5 times it's rental value (or that the "right" rent is 8% of a property's worth) is equally daft. There is no "right" price, just a price that someone is prepared to pay. The ratio of rental price to purchase price will also vary according to the general economic climate, even outside of the supply and demand issue.

You can get a realistic price for rent by seeing what many people are prepared to pay for a unit, and you know this when it is never empty between tenants. Any empty rental unit is overpriced.

You can get a realistic price for buying when a place sells within a few weeks (not months) of being put on the market, having generated plenty of viewings and offers.

I wonder how we can tell if prices in the stock market is normal, overpriced, or underpriced? Following the general economic climate is no help as it is subjected to euphoria and depression that cause bubbles and recessions. Investors in stock use P/E ratios as a benchmark. Investors in real estate can use the same for properties.

For stocks, a P/E ratio of 15 is usually considered the mean, and values far above and below it signify the state of euphoria and depressiveness of the market. Prudent investors will act when the general market climate is depressed, and wait out when even teachers and housewives want a piece of the action in a bubble.

For properties, I hold the P/E ratio of 12.5 as the mean.

[davejones]

Both the rental and sale price are probably way over what the thing is really worth, but of course everything to do with property is also to do with supply and demand.

The notion that the "right" price for a condo is 12.5 times it's rental value (or that the "right" rent is 8% of a property's worth) is equally daft. There is no "right" price, just a price that someone is prepared to pay. The ratio of rental price to purchase price will also vary according to the general economic climate, even outside of the supply and demand issue.

You can get a realistic price for rent by seeing what many people are prepared to pay for a unit, and you know this when it is never empty between tenants. Any empty rental unit is overpriced.

You can get a realistic price for buying when a place sells within a few weeks (not months) of being put on the market, having generated plenty of viewings and offers.

I wonder how we can tell if prices in the stock market is normal, overpriced, or underpriced? Following the general economic climate is no help as it is subjected to euphoria and depression that cause bubbles and recessions. Investors in stock use P/E ratios as a benchmark. Investors in real estate can use the same for properties.

For stocks, a P/E ratio of 15 is usually considered the mean, and values far above and below it signify the state of euphoria and depressiveness of the market. Prudent investors will act when the general market climate is depressed, and wait out when even teachers and housewives want a piece of the action in a bubble.

For properties, I hold the P/E ratio of 12.5 as the mean.

Different stocks have different P/E ratios and it's the same with houses. In some markets you could live to be 100 and you will never get to buy anything near your mean level. Also, things sometimes change over time. P/E ratio for houses gets much higher in affluent areas in safe countries. Take prime central London for example; that isn't going to have a P/E of 12.5 in your lifetime. There is so much variation in both stocks and property that the P/E is a little meaningless most of the time. Other factors are just as important.

[trogers]

Both the rental and sale price are probably way over what the thing is really worth, but of course everything to do with property is also to do with supply and demand.

The notion that the "right" price for a condo is 12.5 times it's rental value (or that the "right" rent is 8% of a property's worth) is equally daft. There is no "right" price, just a price that someone is prepared to pay. The ratio of rental price to purchase price will also vary according to the general economic climate, even outside of the supply and demand issue.

You can get a realistic price for rent by seeing what many people are prepared to pay for a unit, and you know this when it is never empty between tenants. Any empty rental unit is overpriced.

You can get a realistic price for buying when a place sells within a few weeks (not months) of being put on the market, having generated plenty of viewings and offers.

I wonder how we can tell if prices in the stock market is normal, overpriced, or underpriced? Following the general economic climate is no help as it is subjected to euphoria and depression that cause bubbles and recessions. Investors in stock use P/E ratios as a benchmark. Investors in real estate can use the same for properties.

For stocks, a P/E ratio of 15 is usually considered the mean, and values far above and below it signify the state of euphoria and depressiveness of the market. Prudent investors will act when the general market climate is depressed, and wait out when even teachers and housewives want a piece of the action in a bubble.

For properties, I hold the P/E ratio of 12.5 as the mean.

Different stocks have different P/E ratios and it's the same with houses. In some markets you could live to be 100 and you will never get to buy anything near your mean level. Also, things sometimes change over time. P/E ratio for houses gets much higher in affluent areas in safe countries. Take prime central London for example; that isn't going to have a P/E of 12.5 in your lifetime. There is so much variation in both stocks and property that the P/E is a little meaningless most of the time. Other factors are just as important.

Sorry to differ. All my 5 condos bought in 2007-8 were giving me P/E at 11 or less (eg. Bought a 1-bed for Baht1.55m + refurbishing cost at Baht150k and renting out at 15k a month till now). It is just a matter of when you buy them. You will hear similar stories from investors who only come into the market after the bubble burst.

[Topprofile]

Trogers - you have been spewing your negative views on the Bangkok property market for the last 5 years. Both here on thaivisa and on prakard. So far you have been wrong, but keep going and you may eventually be right...

Actually rental prices have not followed upwards at the same pace where appreciating of property prices has risen with almost 100%

Your 1.55m condos are located in the low quality Klong Toey housing projects for the less fortunate...

[trogers]

Trogers - you have been spewing your negative views on the Bangkok property market for the last 5 years. Both here on thaivisa and on prakard. So far you have been wrong, but keep going and you may eventually be right...

Actually rental prices have not followed upwards at the same pace where appreciating of property prices has risen with almost 100%

Your 1.55m condos are located in the low quality Klong Toey housing projects for the less fortunate...

I doubt many less fortunate can afford Bt15k a month for rent. Probably Bt3k a month is closer to their budget. This example is the best P/E ratio I acquired because the previous owner, a Taiwanese, got into trouble when the stock market took a dip, and he was looking for fast cash.

The other distress property that I acquired was in an auction of repossessed properties, a 163sqm 3-bed unit in Sukhumvit Soi 24 at less than Bt48k/sqm..

[IamNotaNumber]

I wonder how we can tell if prices in the stock market is normal, overpriced, or underpriced? Following the general economic climate is no help as it is subjected to euphoria and depression that cause bubbles and recessions. Investors in stock use P/E ratios as a benchmark. Investors in real estate can use the same for properties.

For stocks, a P/E ratio of 15 is usually considered the mean, and values far above and below it signify the state of euphoria and depressiveness of the market.

This is true as far as it goes, but it is still only describing trends and averages over a period. These may or may not have any bearing on reality on any one day.

For stocks there is also the question of future earnings and assets. I have several holdings in companies with a high P/E today that I suspect will significantly increase their earnings over the next few years. I also have holdings in companies with a high P/E and a stonking great pile of cash that they intend to redistribute to shareholders. Both groups are worth holding as far as I'm concerned but both are way outside any P/E average.

Similar exceptions could be suggested in the property market, and so I really dont think that an 8% yardstick of averages is either accurate or especially helpful. And it certainly isnt written in stone.

Edited November 3, 2012 by IamNotaNumber