Thai Household Debt

[chiangmaikelly]

I am Irish so I know all about dept and property bubbles. I am just back from South Thailand where we own a Durian farm. I could not get over the amount of new pick ups I mean nearly every second one was band new! But in saying that there is big money being made in farming oil palm ,rubber and Durian that is if you own your own land. But where I see the bubble is in land and property it is just going up up up. My wife bought a rai 4 years ago for 100k this land is now worth 600k and this land has no chanoute. The cash rich people from Samui are driving the prices up and they have the cash to do it but it will coming crashing down like it did here.

No offense but when? A hundred years? 50? I suggest your information is of little value or consequence unless you can tell us when. There is a leading economist living in Chiang Mai who predicted the 1987 crash and he thinks land is a good investment in Thailand. He says, "Now I happen to believe if you have money on deposit in Thai banks, it's much safer than if you have deposits with Citigroup, UBS, Royal Bank of Scotland and so on, because Thai banks don't have huge derivative portfolios. JPMorgan, they have trillions of dollars in derivatives. Nobody knows how to value this 'garbage."

He also says, " Thai property was still reasonably priced when compared with real estate in other parts of the world."

Now maybe you have a PhD in Econ and advise people on billions of dollars of investments, I don't know. Maybe the fact that you are Irish levels the economic playing field but check out Marc Faber.

[jaysg]

I was in Bangkok since Tuesday and back in Singapore today and my last visit was in 2008.

I too realised almost every office worker carry a cool smartphone like iphone, samsung s3 etc. and wonder whether phones are cheaper in Thailand or their salaries and purchasing power increased.

While reading the Bangkok Post on Thursday, there was an article from Grant Thornton Thailand which raised the issue of public indebtness which risen to a record high level. Oh goosh, once the bubble bursts, it might be an ugly scence.

Do hope things get rectified soon

[NeverSure]

When any kind of income property, whether it be utility stocks or farm land or apartments or commercial income property gets to a price so high that it doesn't make economic sense to own it, people will eventually realize that the emperor has no clothes and it will crash. Who will be the last buyer at the highest price who is left holding the bag?

When people believe that the price of something will go up because it has been going up, and therefore believe they must buy now before it goes up more, that's a speculative bubble which must burst.

The true value of an income producing property is based on its income. Period. Anything above that is blue sky.

How many crashes does history have to show us before we get it? It's been only 15 years since LOS crashed. How soon people forget.

[MrRealDeal]

The part of the equation often forgotten about is that most Thai people or at least a lot of them live in a house with 2 or 3 generations and pay no property tax, so the cost of rent spread around can be much less than young people in the west who tend to want to live outside their parents home as soon as possible. So i'm not suprised that they have what might look like toys they can't afford because their culture and way of living together makes that possible without as much debt as people seem to assume. They are more secure in their housing that won't be stolen by the government even if they went broke through yearly taxes, and family helps family here so they can afford to take a little more debt risk than a typical western young person could or should.

As far as cars go the goveernment just had some first time car buying incentives that some number of young first time car buyers took advantage of that would help explain that.

The true value of anything is what the highest offer to buy it is not the income it produces , an income property may be making next to nothing but if the new mall want's your land to build a mall on it the equation changes pretty fast. If your property is producing nothing and they find oil under the neighbors yard the equation changes pretty fast ..... etc.

Edited November 24, 2012 by MrRealDeal

[chiangmaikelly]

When any kind of income property, whether it be utility stocks or farm land or apartments or commercial income property gets to a price so high that it doesn't make economic sense to own it, people will eventually realize that the emperor has no clothes and it will crash. Who will be the last buyer at the highest price who is left holding the bag?

When people believe that the price of something will go up because it has been going up, and therefore believe they must buy now before it goes up more, that's a speculative bubble which must burst.

The true value of an income producing property is based on its income. Period. Anything above that is blue sky.

How many crashes does history have to show us before we get it? It's been only 15 years since LOS crashed. How soon people forget.

No one forgot that's why the banking system here is in such good shape unlike the West.

[NeverSure]

No one forgot that's why the banking system here is in such good shape unlike the West.

Who audits the banks in LOS? What are their capital requirements? If a loan is past due, are they required to write it off as a loss to expense, and then if they collect enter it again as income? Or can they do what they want? Western banks are recovering, and their books are transparent. Their regulations are stiff. Banks have been closed down or taken over by bigger, better capitalized banks in the West. The situation is far better than it was 5 years ago.

I'm not saying I trust the economies in the West, but that's the governments I don't trust, not the banks. The governments are the ones who are in trouble from over spending.

Why is no one talking about all of the rice the Thai government bought last year that is rotting in warehouses? They thought they could corner the market, give the farmers a better price, and then by storing the rice create an artificial shortage which would drive the price up. It backfired and the price is down and the rice is rotting. How will the Thai government pay for this? It drove up the price of farm land because farmers were getting a lot more for rice, but now there will be another crop and where does it go? The real price globally is very low.

How does Thailand pay for this? Thailand is still renting every big warehouse it can find to store rotting rice.

The lack of transparency in Thailand banking and government should worry anyone. They can smile and say everything is peachy, but it isn't.

Edited November 25, 2012 by NeverSure

[LivinginKata]

even more inflammatory posts removed

[soundman]

I have removed even more bickering posts. Stop it, or I will give the participants some time to cool their heels in the sin bin.

Everyone else, back on topic please, or the mods will close it.

[Bbt]

This thread is in my interest and i would like to share my comments which base on my own experience. I admit that it could not be applied to all of us, Thai people, but hopefully it can reflects some of our attitude.

Social Value

Car is one of the things used to be the symbol of sucess. I used to explain to our young-just graduated staff from surin that how his net worth could turn negative once he bought a car but that was not good enough to stop or delay him to buy 6xx,xxx b toyota. Few months ago i explained to another 25 year old staff how he could invest and make his left money has growth if he bought cheaper car. Again, it was not good enough to stop him from buying 9xx,xxx toyota in cash.

One of my friends bought iphone for his daughter, grade 11, by paying the deposits for her and gave me the reason of "its teenager's trend". Its hard for me to believe that he asked himslef whether he is teaching his daughter to live beyond her means. My colleague with 15000 baht salary has just bought iphone few months ago. Another with 20000 baht even asked for loan from company to buy one. Both of them like using social network apps.

Life style and retirement

I noticed that there are a lot of elderly everywhere (travelling places, shopping mall, public park) in Europe or Japan. Therfore I understand that people in developed countries clearly understand that how some amount of money play the roles in their quality of life after retirement.

It's common for our elderly to stay home and spend time on taking care of our grandchildren and spend less. In Thailand, goverment's social security fund was set up in 1999. Some of us even dont understand that what we will receive from government when we retire and dont have questions whether that amount of money is sufficient for our standard of living.

If Thai people were 22 years old in 1999, they would receive approximately 8,xxx bath a month when they retire, which I dont think that its sufficient for high quality of life. I've suggested my young colleagues to establish their own retirement fund, in addtion to compulsory social security fund, by contributing a part of his salary into long term investment. To be honest, I think I have had some success and this give me a hope that the situation could be improved if the people get the appropriate education. Anyway if finally-turn-elderly Thai chose to have traditional retirement life, money would not spent on other important things during still-working period.

Household Debt

Some of us feel nothing about having debt. Some of us expect that if we were in the financial trouble, our family would help us. And if our members of family were in troble, we would help them (if we have some savings, unfortunatly we usually have no money left.). But I dont think that most of us feel free about having debt.

Sense of mathematics

Its a shame to accept that some of us lack the sense of math. Some of us cannot imagine that how high cost of cars ownership eat our asset value. Some of us cannot imagine that how and how quick cars can depreciate and how the house can hold the value and how these affect our net worth. Some of us cannot imagine that whats the ratio of car price per our income. Some of us cannot understand what our debt per networth/income mean.

Education and public transportation.

I admit that I graduated without systematic knowledge about finance and extremely lack of understanding in the importance of retirement fund. I've realized these later. I am not sure that whether nowadays we have better education in these issues. I've lived and worked in urban area which i dont think we have good enough public transportation. We need a much better in both of qualities and quantities.

Summary

With the above reasons, some of us dont spend the money on other unnecessary things in their own opinions. With some social value in their mind, lacking of understanding in math related knowledge and money left in hands, some of us spend a lot of money on expensive cars, mobile phones or other expensive stuffs. And these could make some of us prabably have to pay the price. With better and wider spread education, hopefully the people who pay the price could be less and less.

Remarks

1. I actually prefer "most of us" to "some of us", but to avoid necessity to prove that "most of us" is more proper, "some of us" is used.

2. Sorry for my English, I already tried my best. Please feel free to suggest.

[simple1]

No one forgot that's why the banking system here is in such good shape unlike the West.

Who audits the banks in LOS? What are their capital requirements? If a loan is past due, are they required to write it off as a loss to expense, and then if they collect enter it again as income? Or can they do what they want? Western banks are recovering, and their books are transparent. Their regulations are stiff. Banks have been closed down or taken over by bigger, better capitalized banks in the West. The situation is far better than it was 5 years ago.

I'm not saying I trust the economies in the West, but that's the governments I don't trust, not the banks. The governments are the ones who are in trouble from over spending.

Why is no one talking about all of the rice the Thai government bought last year that is rotting in warehouses? They thought they could corner the market, give the farmers a better price, and then by storing the rice create an artificial shortage which would drive the price up. It backfired and the price is down and the rice is rotting. How will the Thai government pay for this? It drove up the price of farm land because farmers were getting a lot more for rice, but now there will be another crop and where does it go? The real price globally is very low.

How does Thailand pay for this? Thailand is still renting every big warehouse it can find to store rotting rice.

The lack of transparency in Thailand banking and government should worry anyone. They can smile and say everything is peachy, but it isn't.

Aside from internal & external regulatory audit, Thai banks will have implemented Basel 1 & 11 for managing financial and operational risks and are in the process of reviewing Basel 111 implementation. For implications of Basel 111 go to:

http://www.nationmul...s-30190955.html

For background on Basel 11 & 111 go to:

http://en.wikipedia.org/wiki/Basel_II

http://en.wikipedia.org/wiki/Basel_III

Edited November 25, 2012 by simple1

[jaysg]

No one forgot that's why the banking system here is in such good shape unlike the West.

Who audits the banks in LOS? What are their capital requirements? If a loan is past due, are they required to write it off as a loss to expense, and then if they collect enter it again as income? Or can they do what they want? Western banks are recovering, and their books are transparent. Their regulations are stiff. Banks have been closed down or taken over by bigger, better capitalized banks in the West. The situation is far better than it was 5 years ago.

I'm not saying I trust the economies in the West, but that's the governments I don't trust, not the banks. The governments are the ones who are in trouble from over spending.

Why is no one talking about all of the rice the Thai government bought last year that is rotting in warehouses? They thought they could corner the market, give the farmers a better price, and then by storing the rice create an artificial shortage which would drive the price up. It backfired and the price is down and the rice is rotting. How will the Thai government pay for this? It drove up the price of farm land because farmers were getting a lot more for rice, but now there will be another crop and where does it go? The real price globally is very low.

How does Thailand pay for this? Thailand is still renting every big warehouse it can find to store rotting rice.

The lack of transparency in Thailand banking and government should worry anyone. They can smile and say everything is peachy, but it isn't.

Only the Big Fours audit the banks. Western banks audited by Big Fours also go broke in recent years. How good are the audits?

[n0mad]

When any kind of income property, whether it be utility stocks or farm land or apartments or commercial income property gets to a price so high that it doesn't make economic sense to own it, people will eventually realize that the emperor has no clothes and it will crash. Who will be the last buyer at the highest price who is left holding the bag?

When people believe that the price of something will go up because it has been going up, and therefore believe they must buy now before it goes up more, that's a speculative bubble which must burst.

The true value of an income producing property is based on its income. Period. Anything above that is blue sky.

How many crashes does history have to show us before we get it? It's been only 15 years since LOS crashed. How soon people forget.

No one forgot that's why the banking system here is in such good shape unlike the West.

very keen to hear your thoughts on the below article, you are so adamant there is no problem with the levels of thai debt will you still maintain your stance?

http://www.thaivisa.com/forum/topic/600925-thai-people-spending-beyond-their-means-report/

[chiangmaikelly]

When any kind of income property, whether it be utility stocks or farm land or apartments or commercial income property gets to a price so high that it doesn't make economic sense to own it, people will eventually realize that the emperor has no clothes and it will crash. Who will be the last buyer at the highest price who is left holding the bag?

When people believe that the price of something will go up because it has been going up, and therefore believe they must buy now before it goes up more, that's a speculative bubble which must burst.

The true value of an income producing property is based on its income. Period. Anything above that is blue sky.

How many crashes does history have to show us before we get it? It's been only 15 years since LOS crashed. How soon people forget.

No one forgot that's why the banking system here is in such good shape unlike the West.

very keen to hear your thoughts on the below article, you are so adamant there is no problem with the levels of thai debt will you still maintain your stance?

http://www.thaivisa....r-means-report/

I read the article. It says, " Non-performing personal loans stood at Bt56.5 billion, which accounts for 21.4 per cent of outstanding non-performing loans of all financial institutions." It quoted the percent of outstanding non-performing loans. So roughly 80% of non performing loans are not personal loans. So of the loans not being paid 20% are personal and 80% are business or government or something else.

So is that good or bad in comparison to other countries? I don't know.

Maybe you can help. What is the percent of non performing personal loans in Thailand and is that number good or bad when compared with other countries in like circumstances?

What the article did not quote was the total of personal loans in Thailand and what percent of those loans are not being paid. It said 56 billion were not being paid but not what the percent of the total loans are. See what I am saying? It may be good or bad but we don't know until we compare the amount of loans not being paid with other countries. And we can't do that unless we have a total personal loan amount.

Edited November 28, 2012 by chiangmaikelly

[n0mad]

When any kind of income property, whether it be utility stocks or farm land or apartments or commercial income property gets to a price so high that it doesn't make economic sense to own it, people will eventually realize that the emperor has no clothes and it will crash. Who will be the last buyer at the highest price who is left holding the bag?

When people believe that the price of something will go up because it has been going up, and therefore believe they must buy now before it goes up more, that's a speculative bubble which must burst.

The true value of an income producing property is based on its income. Period. Anything above that is blue sky.

How many crashes does history have to show us before we get it? It's been only 15 years since LOS crashed. How soon people forget.

No one forgot that's why the banking system here is in such good shape unlike the West.

very keen to hear your thoughts on the below article, you are so adamant there is no problem with the levels of thai debt will you still maintain your stance?

http://www.thaivisa....r-means-report/

I read the article. It says, " Non-performing personal loans stood at Bt56.5 billion, which accounts for 21.4 per cent of outstanding non-performing loans of all financial institutions." It quoted the percent of outstanding non-performing loans. So roughly 80% of non performing loans are not personal loans. So of the loans not being paid 20% are personal and 80% are business or government or something else.

So is that good or bad in comparison to other countries? I don't know.

Maybe you can help. What is the percent of non performing personal loans in Thailand and is that number good or bad when compared with other countries in like circumstances?

while the article does not tell you the percentage of non-performing personal loans to personal loans it would be very arrogant to ignore the value in baht of non performing loans just because of this. Also, comparing the levels of Thai personal debt with similar countries would be very difficult considering the quality of data that gets released from developing nations.

this article is from a national body, who disagrees with your premise doesn't really matter what i think , the NESDB through deputy secretary-general Suwannee Khamman says "A number of people have been spending beyond their means," this is in contrast to what you have been saying.

so again, does this article alter your stance in anyway and if not could you please share your reasons.

[chiangmaikelly]

No one forgot that's why the banking system here is in such good shape unlike the West.

very keen to hear your thoughts on the below article, you are so adamant there is no problem with the levels of thai debt will you still maintain your stance?

http://www.thaivisa....r-means-report/

I read the article. It says, " Non-performing personal loans stood at Bt56.5 billion, which accounts for 21.4 per cent of outstanding non-performing loans of all financial institutions." It quoted the percent of outstanding non-performing loans. So roughly 80% of non performing loans are not personal loans. So of the loans not being paid 20% are personal and 80% are business or government or something else.

So is that good or bad in comparison to other countries? I don't know.

Maybe you can help. What is the percent of non performing personal loans in Thailand and is that number good or bad when compared with other countries in like circumstances?

while the article does not tell you the percentage of non-performing personal loans to personal loans it would be very arrogant to ignore the value in baht of non performing loans just because of this. Also, comparing the levels of Thai personal debt with similar countries would be very difficult considering the quality of data that gets released from developing nations.

this article is from a national body, who disagrees with your premise doesn't really matter what i think , the NESDB through deputy secretary-general Suwannee Khamman says "A number of people have been spending beyond their means," this is in contrast to what you have been saying.

so again, does this article alter your stance in anyway and if not could you please share your reasons.

Frankly I don't care who wrote the article. The information in the article does not support the conclusions.

If you want to discuss personal debt and non performing loans we must know the total of personal debt and the total of non performing personal loans both for the country under discussion and other countries in similar circumstances.

You opinion to the contrary does not change those facts.

The conclusions of the article may be correct; they may not be correct. Not enough information was presented to make that determination.

What do I personally think? I told the wife to wait till next year to buy a car and pick up one only a few months old from a person who was going to default on a loan. Why? Because I don't think anyone really knows how this 100,000 baht rebate thing works.

[n0mad]

Frankly I don't care who wrote the article. The information in the article does not support the conclusions.

If you want to discuss personal debt and non performing loans we must know the total of personal debt and the total of non performing personal loans both for the country under discussion and other countries in similar circumstances.

You opinion to the contrary does not change those facts.

The conclusions of the article may be correct; they may not be correct. Not enough information was presented to make that determination.

What do I personally think? I told the wife to wait till next year to buy a car and pick up one only a few months old from a person who was going to default on a loan. Why? Because I don't think anyone really knows how this 100,000 baht rebate thing works.

i find your response interesting it's in stark contrast to posts you have made in previous threads where the information was good enough if it supported your premise. I have no issue though questioning the detail of the data given though, obviously it should be done uniformly and not only when it opposes your view. You can be very stubborn with your views, i suggest trying to be a little more objective. Anyway i hope you are right as a lot of pain will be avoided for the Thai people.

Edited November 28, 2012 by n0mad

[NeverSure]

No one forgot that's why the banking system here is in such good shape unlike the West.

Who audits the banks in LOS? What are their capital requirements? If a loan is past due, are they required to write it off as a loss to expense, and then if they collect enter it again as income? Or can they do what they want? Western banks are recovering, and their books are transparent. Their regulations are stiff. Banks have been closed down or taken over by bigger, better capitalized banks in the West. The situation is far better than it was 5 years ago.

I'm not saying I trust the economies in the West, but that's the governments I don't trust, not the banks. The governments are the ones who are in trouble from over spending.

Why is no one talking about all of the rice the Thai government bought last year that is rotting in warehouses? They thought they could corner the market, give the farmers a better price, and then by storing the rice create an artificial shortage which would drive the price up. It backfired and the price is down and the rice is rotting. How will the Thai government pay for this? It drove up the price of farm land because farmers were getting a lot more for rice, but now there will be another crop and where does it go? The real price globally is very low.

How does Thailand pay for this? Thailand is still renting every big warehouse it can find to store rotting rice.

The lack of transparency in Thailand banking and government should worry anyone. They can smile and say everything is peachy, but it isn't.

Only the Big Fours audit the banks. Western banks audited by Big Fours also go broke in recent years. How good are the audits?

Define "go broke." If you mean that some got caught with stupid loans, and were merged into bigger banks which could afford to take them on, then yes.

If you mean a single depositor lost a dime, then never.

Losses went to investors who were stupid enough to buy things like derivatives, but those we losses all over Europe even. I don't answer for others' stupid "investments."

[chiangmaikelly]

Frankly I don't care who wrote the article. The information in the article does not support the conclusions.

If you want to discuss personal debt and non performing loans we must know the total of personal debt and the total of non performing personal loans both for the country under discussion and other countries in similar circumstances.

You opinion to the contrary does not change those facts.

The conclusions of the article may be correct; they may not be correct. Not enough information was presented to make that determination.

What do I personally think? I told the wife to wait till next year to buy a car and pick up one only a few months old from a person who was going to default on a loan. Why? Because I don't think anyone really knows how this 100,000 baht rebate thing works.

i find your response interesting it's in stark contrast to posts you have made in previous threads where the information was good enough if it supported your premise. I have no issue though questioning the detail of the data given though, obviously it should be done uniformly and not only when it opposes your view. You can be very stubborn with your views, i suggest trying to be a little more objective. Anyway i hope you are right as a lot of pain will be avoided for the Thai people.

I don't care one way or the other. I just want the information I get to be accurate as it effects how I handle my money. Getting information on Thai Visa ls like pulling teeth. So much BS that one has to be stubborn to actually get at the facts. You can ask a simple question and get 40 posts before someone actually answers it.

The news sources here are slanted at best and all with an agenda. So one has to dig. Then there are the posters with an agenda. Some dislike Thailand and some love it and that effects what they post. I don't know why the people in this thread are harping on a bubble. It is just not backed up by international economists. It is also odd how some think experience with 10 people in a village makes up the majority of Thais.

[linno2]

It seems the the one certain thing is 'uncertainty'! There are so many variables and competing opinons - even amongst the academics and economists and strategists. I have been pursing a simple approach with my family - don't get involved in any loans - pay any existing loans off as quickly as you can - think about growing something in addition to rice to spread the risk in case the 'rice mountain' comes 'tumbling down' - work on being moreself sufficient.

[maturebrit]

i was giving my ex 200k THB a month and all she did was borrow a million to raise her families status with cars house mocys and living the life... instead of budgeting the 200k a month the family blew it and when I left. ... yes that was ALL my fault...Thai people have little or none knowledge of managing finances. ... the whole country is living in debt to the most part

Sent from my GT-N7000 using Thaivisa Connect App

[thaibeachlovers]

i was giving my ex 200k THB a month and all she did was borrow a million to raise her families status with cars house mocys and living the life... instead of budgeting the 200k a month the family blew it and when I left. ... yes that was ALL my fault...Thai people have little or none knowledge of managing finances. ... the whole country is living in debt to the most part

Sent from my GT-N7000 using Thaivisa Connect App

<i was giving my ex 200k THB a month>

I am completely and utterly boggled!

[maturebrit]

most just take debt as a way of life....several yrs back i bought my tgf a motocycle....well I gave her the cash price of the bike 40k and she did it on finance 5k down etc.....when she missed payments it was a repo job....I told her to go find another sucker...she was well looked after but I hate being blatently being lied to

Sent from my GT-N7000 using Thaivisa Connect App

[pokerkid]

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.

so now all your cash is in us$ ? not sure if that is a safe bet

[ronz28]

The biggest microlender of them all:

http://www.economist.com/blogs/schumpeter/2013/01/microfinance-thailand