Thai Household Debt

[nietzche]

Was recently in the local branch of K-bank, and literally everyone who worked there had an iPhone or Samsung Galaxy. I do not know for sure, but I imagine that a bank teller salary pay's maybe around 10 - 15k baht or so per month.

A new iPhone costs around 20,000 baht. That's 2 months salary to these people. If you take the average salary for a working professional in a big city like NY (around $70,000/year) then buying an iPhone on a Thai office workers salary is equivalent to a westerner walking around with a $7,000 phone?

Another example. I have met many young Thai people who work in offices, yet they all have cars? Their salaries tend to be in the 15k range also.

I guess the point I'm trying to make is that the math just doesn't add up?

It seems like the criteria for receiving credit in Thailand is very low at this point. It would be very interesting to see an honest study analyzing exactly how much the average middle class Thai person spends every month paying off loans used to buy all of these shiny new things.

I'd also imagine that the typical Thai household is up to their eyeballs in debt.

Do any TV members with Thai in-laws/family have any insight/insider knowledge on this subject?

[up-country_sinclair]

There's a credit bubble in Thailand that is eventually going to pop, and I'd guess sooner rather than later. Either way, it's going to be mess when the bill comes due.

[McMagus]

I have always wondered about this too and it's not as though the cars are old either. In Oz there are heaps of older cars on the roads. I read somewhere a few years ago that Thai household debt was climbing at an alarming rate. I notice that many poorer farmers are being offered credit cards. Gotta go pop one day.

[transam]

The Thai folk who guarantor-ed are in for a big shock somewhere down the line.

[kotsak]

Once you pop.. you can't stop :>

[NeverSure]

I have been wondering too if LOS is on a bubble. It really reminds me of the US just before the real estate collapse and banking/Wall Street crisis just a few years ago.

In the US, credit was easy, and the mindset was that real estate always goes up so better hurry and buy now. When things reached a point where even the average middle class citizen couldn't afford a home, and their credit cards were maxed out, it all came crashing down. In some places in the US, a home is worth about 50% of what it was 6 years ago, but they seem to be starting to sell again here and there. Obviously defaults and foreclosures were rampant, and many people who can make payments still owe a lot more on their homes than they are worth.

I see that same mindset now, not only in LOS but in diverse places such as Vancouver Canada.

I think the average Joe tends to base his investing on at most what he's seen in his lifetime, and maybe only the past 20 years. He'd do better to look at cycles over the past at least 100 years where there have been crashes. There was a great world wide depression in the 1930's that sure took the US down for at least ten years, and then it slowly crawled back.

I have Canada, UK, Germany, and SE Asia on my radar right now, and wouldn't buy a dimn thing there now. I might in the US only because there's a 1/2 price sale right now with few takers, but even then I'm nervous.

[loong]

Do any TV members with Thai in-laws/family have any insight/insider knowledge on this subject?

I live in a village, so worlds apart from those in the city.

Still, I really don't understand how so many people have brand new motorbikes and fairly expensive phones when they seem to spend most of their time sleeping/drinking/gambling apart from the 4 or 5 months that they are off cutting sugar cane.

I am aware of people on basically subsistence wages that are in debt equivalent to the earnings of 2 people for a year. But as they spend more every month than they earn, they have no hope of servicing their debt. As far as I know they keep on borrowing from other places, some to spend, some to service the debt and they are getting into deeper and deeper <deleted>.

I no longer lend money to my sister-in-law. The last time she borrowed money from me was over a year ago and she has not repaid 1 baht. Before that she did use to pay back ok, so I trusted her. I have since found out that she paid me back by borrowing elsewhere. She has no job at the moment and apparently is now in debt equivalent to what her husband earns in 2 years.

[StreetCowboy]

An acquaintance of mine disappeared leaving debts of several hundred thousand baht. Last I heard, five or six years ago, she was in Bahrain...

SC

[Farma]

I asked a few months ago where all the money was coming from in a village I frequent after seeing new cars and motorbikes appearing everywhere. I'm told every family has someone deeply in debt. I'm expecting a lot of repossessions in the near future. It won't be long before the local money lenders with their exhorbitant interest rates will be major landowners.

On another front I know business owners who overextended themselves. Rather than go the loan shark route they've opted to order stock from wholesalers offering 2 or 3 month interest free credit. Once credit runs out in one wholesaler they find another one and so forth. When the wholesaler chases them up on the outstanding money the shopowner stalls and claims they haven't recieved the bill. The shop owners can only play this game for so long before the house of cards falls.

[NeverSure]

I had decided to keep my home in the US when I come to LOS to live next year, but I've changed my mind. I was going to wall off 1/2 of my 1200 sq ft 4 car garage, lock it up and use it for storage and keep some things like Harleys and Schwinn bike collection and my guns. I was going to put my pickup up on jack stands and hook a float charger to the battery. That way, if in 2 or 3 years I changed my mind about LOS, I could go back. I was going to have a property management company lease it and watch it.

Now I've decided to sell everything (ebay will make the bikes go away really fast and for good money, and gunbroker.com will make the guns go away fast at auction and for good prices.) I can sell the pickup to a dealer just as I leave. If I price the house right it will go away too. It's a great home in a great location.

I simply still don't trust the global economy, and would rather sit on the sidelines with liquidity including PM's and see what happens. If LOS crashes, I might buy. I don't know.

It's spooky times out there and I have no control over what will happen.

[theblether]

There seems to be a terrible naivete among many Thais as to the effect of debt, but then again there are plenty of feckless people in Western countries.

I was involved in finance in Germany, dealing with US forces, from memory we allowed a debt to income ratio of 35%, figuring that was affordable to most people. We would also look at the nett amount left to see if there was enough there for basic sustenance needs such as housing and food. Some of the credit checks I saw back then were breathtakingly bad, so the debt problem is far from being solely a Thai problem.

A recent purchase I am aware of was a Thai lady of the type described by the OP, who purchased a second hand car at a monthly repayment rate of 8,000 baht, on a salary of 12,000 baht. Ludicrous. I know the Thai guy that guaranteed the loan, and as Transam pointed out, there may be trouble ahead.

The regulated debt system seems to have some serious consequences in Thailand compared to the West, but I'm no expert in that. However I do know of someone who borrowed 5,000 baht from the ubiquitous money lenders, and had to repay 6,000 30 days later. 20% interest on a 30 day loan, 30 days later the money was repaid and the 5,000 had to be re-borrowed to survive that month.

I have no experience of dealing with illegal money lenders in Thailand however I understand non payment is not an option. Another family member had to step in a few months later and pay the bill.

I recently paid a 6,000 debt repayment bill in connection with a mother being left high and dry with the daughter of a farang. It's a long story, it's been discussed elsewhere on the forum, it was my choice, my decision and that's it.

I agree with the OP, Thailand seems to be heading down a personal debt cul-de-sac, when the invoice arrives, there will be serious consequences.

[Bangkokhatter]

Firstly i'd suggest the wages are not as low as you may think in some areas( Bangkok ). I'll give a couple of examples of people where i work.

MNC manufacturing company, but they only pay the going rate for the job. One of the Sales admin girls recently bought a new Ford Escort and i asked how she could afford it. She saved over a year for the deposit ( no 100 % loans ) and took out a loan for the rest over 6 years. Her salary is around 15,000 a month, but she will get a couple of bonuses a year, which for the last couple have averaged 2.5 times her salary, plus the extra salary at xmas ( normal for most companies here ). She does live with her family, so living costs are small also.

One of our Technicians has just took out a mortgage on a 3.2 million house in a moohban on the outskirts of BKK. His salary is about 17,500 a month, plus O/T and also includes the bonuses mentioned above, his wife also works and the GP's look after their twin children. The mortgage term was for 35 years !!

Just 2 examples of how they can do it, but would also add the people with the latest phones at our place generally admit to them being copies from China, which are a lot cheaper.

I can't afford none of the above

[Banzai99]

An acquaintance of mine disappeared leaving debts of several hundred thousand baht. Last I heard, five or six years ago, she was in Bahrain...

SC

More than one acquaintance of mine from the UK disappeared leaving debts of several hundred thousand pounds.

Last I heard, five or six years later, they are still in Thailand...

[mogandave]

I can afford none of the above.

[trainman34014]

In the villages around me there are plenty of new cars and motorcycles parked outside of dilapidated wooden or tin shack style houses, so one is bound to be surprised that the people who live in such homes can afford them. However; although it may look like the arse is hanging out of their trousers a lot of them own substantial chunks of Land/Paddy's etc and the banks loan them the money for all their worldly desires on the strength of said land. Even the tin shack is sitting on ,quite often, a fairly large area and although they appear to have no wish to build a new house of buy a tin of paint they still want all the gadgetry they see the Hi so's using in the Soaps. One can only guess what the bill comes to for credit in any one village but we are talking huge amounts.

In one recent case I know of a couple of Thai's bought a 3.5 million home in a Moobahn with a Bank Mortgage. Not satisfied with the original design out front they got some further builders in right away to build very ornate structures right across the front of their patch using Stainless Steel and good quality Hardwood etc etc and it must have cost a packet. Next thing a new Honda appeared followed by a giant Merit party with a live band and enough booze to sink the Titanic all over again. Three weeks later a big 'For Sale' sign appeared quoting phone numbers for Thai and English speakers, so I asked the neighbour what was going on. She replied ''Huh; big house, big car, big party, big face, BIG DEBT '' ! I was told in the nine months that they had 'owned' the house not one Satang had been paid off of any of the debt and the Bank had now told them they had better sell the house or it would be taken off them. The Honda has already vanished.

[payak]

I have thai friends who have very long outstanding debts, they do not care.

when the debt collectors call they simply hang up, change there number and relocate, they say the companies dont really care and only call once or twice a year, so most times they dont even bother changing the number.

[TommoPhysicist]

Most of the bank tellers are cute girls.

I can't see many cute girls buying their own phones ........ can you?

Edited October 17, 2012 by TommoPhysicist

[uptheos]

But as they spend more every month than they earn, they have no hope of servicing their debt. As far as I know they keep on borrowing from other places, some to spend, some to service the debt and they are getting into deeper and deeper <deleted>.

You are talking about the USA I presume?

[trainman34014]

I have thai friends who have very long outstanding debts, they do not care.

when the debt collectors call they simply hang up, change there number and relocate, they say the companies dont really care and only call once or twice a year, so most times they dont even bother changing the number.

Sounds like life on the run !

[Banzai99]

I have thai friends who have very long outstanding debts, they do not care.

when the debt collectors call they simply hang up, change there number and relocate, they say the companies dont really care and only call once or twice a year, so most times they dont even bother changing the number.

Sounds like life on the run !

Sounds like the UK.

[DrTuner]

Criteria seems to be to be able to produce tax receipts or equivalent, no matter if falsified or real. I vaguely remember that 6% here actually pay taxes, makes one wonder how many "submortgage" loans are out there. Some sort of bubble is brewing, of that I'm sure.

[theblether]

An acquaintance of mine disappeared leaving debts of several hundred thousand baht. Last I heard, five or six years ago, she was in Bahrain...

SC

More than one acquaintance of mine from the UK disappeared leaving debts of several hundred thousand pounds.

Last I heard, five or six years later, they are still in Thailand...

Have you read any news stories about Thai females in Bahrain recently?

[BabyJebus]

The only ones that dont get in debt and run away seem to be the governement workers as they pretty much get unlimited loans. Seen so many runners. I mean lol 17000 salary up there for a 3.2mb house? That's the price of my house and right now with 0% interest its 20 000 per month in mortgage

[Chittychangchang]

I am personaly looking forward for the day when the bubble burst's and then the pound will be strong say 100bht to the £ like the mid 90's! That is when i will make my long term retirement investment's, talking about this to the wife the other day!

Save up falangs for the time is soon!

If it does not happen then theres always Greece!

[NeverSure]

Well, the US crashed and no one died. A lot of big spenders went broke though. Real Estate is selling for 50-60% of what it was if you can sell it although that's starting to improve. Some imports have increased in price due to the value of the dollar. China, Japan and S. Korea at least have manipulated the value of their currencies so that their exports don't rise in price and shut their industries down.

It will all settle down, but in the meantime you can actually live cheaper here IMHO if you're just starting and needing housing.

[Time Traveller]

Who cares? The samsung and apple shareholders are happy, that's what is important

[payak]

I have thai friends who have very long outstanding debts, they do not care.

when the debt collectors call they simply hang up, change there number and relocate, they say the companies dont really care and only call once or twice a year, so most times they dont even bother changing the number.

Sounds like life on the run !

yes, 2 phone calls a year, they hang up anyway.

I believe one has moved twice in about 6 years, really are living out of their suitcase.

they have been at the current address 2 years, soon they can unpack

[tuky]

My ex-wife traded in a fully paid for Toyota Wish, took the house chanote to the local loan shark and bought a new shiny Toyota Camry.

She couldn't pay the loan shark back and lost the house to him.

Where is the logic? the sense in that?

Last I heard the two remaining houses which were paying 70k per month in rental income have been lost to the loan shark as well.

Apparently it is all my fault too.

[arthurwait]

Bank tellers will make about 15-20K and most people here are likely live at home until married or even after. They will obviously live with a family that has put educating them to a standard to get that job ahead of whiskey and gambling. I guess they will need a degree of some sort to get the job so the family has put them through university which means they are most likely not on the breadline. So the girls have little expense.

I'm yet to see a bank girl leave in a car, the managers yes, bank tellers no. All on motorbikes.

They can get the phones or anything on credit easily. Large shops offer it on most things,maybe over 1 or 2 years at around a 1000 B a month.

The older ones with kids, do they have flash phones ? I'm yet to see one. Just younger ones with no kids and very little expense.

[chiangmaikelly]

First I converted my US dollars in to Swiss Francs and then to Aussie dollars and then Thai baht.

Of course I made a bunch of money. I have a Thai Visa system.

I have identified a certain type of poster on Thai Visa and do exactly the opposite of what they are feeling at the moment.

If you look up Thai Visa a few years ago you will find the same kind of doom and gloom posters when the US dollar was at 40. They said it was going to 60 because the Thai economy sucked. So I changed my dollars into baht at 40.

It's the gray market that confuses people. That and of course the system for borrowing money.

Start at Sattahip and drive North to Pattaya and count the new hotel rooms. Of course no one will do this because your doom and gloom head would explode.

Then go to Maptaphut and drive South to Rayong and count the new factories. Boom there goes your head again.

50% of the economy is off the books and 50% of the loans are low or no interest loans also off the books.

Go to a bank and borrow the money to buy a house. The teller gives you 3 million baht cash. Yup right there in the bank she hands over 3 million in cash. Then you turn around and give that money to the person who owns the house. Cash. Is that how one buys a house in the West? No. Why do think?