The Condo Bubble

[enrico2]

Depends a bit what type of condo you’re talking about.

I’m under the impression that the majority of condo’s being build are for the lower end Thai market.

Plenty of demand there and still a long way to go before Thailand reaches unemployment levels such as in Europe which would make people default on their payment.

Unemployment in Thailand DO NOT EXIST...I saw an The Economist survey 2 months ago stating TH unemployment at 0.5%!!!!

[chiangmaikelly]

You don't know anything about Thailand. You don't know if the past 10 years have been boom or bust. You don't know the shape the Thai economy is in today. Thailand is not in a recession. Google the definition of recession. Yes there is a definition. This is not the US. Thailand has 0 unemployment. The currency of Thailand has dramatically increased against the US dollar.

Detroit has closed auto factories Thailand has opened new ones built by Ford and GM. I sold my house in the US and converted the cash to Thai baht because I know something about the Thai economy. I changed my money and assets to Thai baht when they dollar was worth 40 baht and housing prices in the US were good.

Today look at the value of your home and multiply it by 30 baht to the dollar. Then look at the value of your home 8 years ago and multiply it by 40 and tell me how much money you lost by not listening to me 8 years ago? Perhaps you should also listen to me today. Or not. Just saying....

There is no unemployment in Thailand. By that standard there was no unemployment in the US during the Great Depression. People didn't have jobs. They just stayed home and raised gardens and small crops on their farms. They were then mostly rural. They bartered and did for each other. How Isaan that is.

There is no poverty in Thailand. No one is being left behind. Same with China and India.

The few get rich at the expense of the many. There is, BTW, no unemployment in Russia or China either. Just poverty.

Thailand is a third world country where to the extreme the few do well at the expense of the many. I will show you the same in every third world country including Mexico, just to the South of the US.

Thailand today reminds me of that proverbial group of guys, all standing in a circle with their hands in each other's pockets, believing they will all get rich.

You can export cars. Cars are also a depreciating asset. Not so of condos and houses. If you can't sell them where they stand, you have to eat them.

Pass the ketchup.

So tell us how much more would you have made selling your home in the US and moving to Thailand 8 years ago as opposed to today?

Bangkok has 10 million people. None of them farm. There is no unemployment in Thailand. Thailand imports thousands of people from Burma to do construction and manual labor jobs because they don't want them. You have never lived in Thailand and your opinion is in error.

There are 130 universities and colleges in Thailand where many do well. The average wage of Thai professionals is going up daily. Doctors and dentists go to the US for advanced training and come back to Thailand to practice medicine because it is a better place to live.

I was under the impression you also want to live in Thailand. Maybe someday you will get lucky and be able to afford to move here.

[NeverSure]

Depends a bit what type of condo you’re talking about.

I’m under the impression that the majority of condo’s being build are for the lower end Thai market.

Plenty of demand there and still a long way to go before Thailand reaches unemployment levels such as in Europe which would make people default on their payment.

Unemployment in Thailand DO NOT EXIST...I saw an The Economist survey 2 months ago stating TH unemployment at 0.5%!!!!

Tell that to the people in poverty in the villages. I have yet to see a government which didn't skew those kinds of numbers including the inflation rate and all...

Does anyone really believe that there is a real job for every able adult in Thailand?

This is about an oversupply of condos and houses in LOS, and there is. There are still empty units from the crash 15 years ago!

[chiangmaikelly]

Depends a bit what type of condo you’re talking about.

I’m under the impression that the majority of condo’s being build are for the lower end Thai market.

Plenty of demand there and still a long way to go before Thailand reaches unemployment levels such as in Europe which would make people default on their payment.

Unemployment in Thailand DO NOT EXIST...I saw an The Economist survey 2 months ago stating TH unemployment at 0.5%!!!!

I see the corporate recruiters every day at the markets trying to get help for Ford, GM and other companies. I see the maids from Burma at the hotels in Pattaya because they can't find Thais to fill the jobs. I see the service people from Burma waiting on tables and I have to hire them to work on my lawn because Thai people won't work on Sunday.

[pigeonjake]

unemployment in thailand,

i dont think anyone knows who is employed, its not like in the west, there isnt a state system were if you dont work you go and sign on and get money, then they can keep records,

there is people in thailand that dont work, ive only got to look round the village and see people not working, its just that thailand dosnt have records,

if there was a state system were they got money then you would see how many were out of work

[chiangmaikelly]

Depends a bit what type of condo you’re talking about.

I’m under the impression that the majority of condo’s being build are for the lower end Thai market.

Plenty of demand there and still a long way to go before Thailand reaches unemployment levels such as in Europe which would make people default on their payment.

Unemployment in Thailand DO NOT EXIST...I saw an The Economist survey 2 months ago stating TH unemployment at 0.5%!!!!

Tell that to the people in poverty in the villages. I have yet to see a government which didn't skew those kinds of numbers including the inflation rate and all...

Does anyone really believe that there is a real job for every able adult in Thailand?

This is about an oversupply of condos and houses in LOS, and there is. There are still empty units from the crash 15 years ago!

There are not enough Thais in Thailand for the available jobs that is why there are hundreds of thousands of people from other countries working in Thailand.

[pigeonjake]

i wonder how many thai workers pay tax and are employed properly, paying tax ?

i dont think there would be to many,

you cant say the girls in the bar have a proper job, do they pay tax are they all registerd?

there is to many questions about thais being in work,

[NeverSure]

So tell us how much more would you have made selling your home in the US and moving to Thailand 8 years ago as opposed to today?

How much would I have lost if I had sold my home in the US 16 years ago and moved to Thailand before Thailand's big crash? What some people don't realize is that even with our crash, that last rise in prices was so thunderous that if you bought your home ten years ago, it has fallen back to that value.

It's only those who bought during the big runup who got burned! Be forewarned!

When the stock market is in a big upward run and people tell you it will always go up, GET OUT!

[pigeonjake]

at this time i wouldnt put my money into condos,

i dont know were to put it to be honest, but i wouldnt buy condos here, to many,

years ago there was more people coming here, pattaya was full of falang, it isnt the same place as it was 10 years ago,

look at the bht,50bht to the pound i can just remember 74bht, things were cheaper, no so much cheaper but you got more for your pound,

[NeverSure]

So how did we get from a condo bubble to unemployment?

Are there or aren't there going to be enough ready and willing buyers for a sustained building boom with ever increasing prices?

Is there a price point at which people will balk; either from unwillingness or inability to pay?

[pigeonjake]

no there isnt

[chiangmaikelly]

So tell us how much more would you have made selling your home in the US and moving to Thailand 8 years ago as opposed to today?

How much would I have lost if I had sold my home in the US 16 years ago and moved to Thailand before Thailand's big crash? What some people don't realize is that even with our crash, that last rise in prices was so thunderous that if you bought your home ten years ago, it has fallen back to that value.

It's only those who bought during the big runup who got burned! Be forewarned!

When the stock market is in a big upward run and people tell you it will always go up, GET OUT!

I wouldn't have told you to sell your house 16 years ago. I didn't. I asked you a question. You didn't answer. But you gave us meaningless mumbo jumbo about stock market run ups. Now is a good time to buy a business in Thailand. Americans can do that through the treaty of Amity. Cowboy boots might be a good business or cowboy hats.

[NeverSure]

Well, I've had my say. Take it or leave it. I've done enough of this.

I'll be happy to be the first one to tell you I told you so.

Outta here, good folks.

[GreenSnapper]

i wonder how many thai workers pay tax and are employed properly, paying tax ?

i dont think there would be to many,

you cant say the girls in the bar have a proper job, do they pay tax are they all registerd?

there is to many questions about thais being in work,

They don't pay tax because their income is too low. 10-20000 Baht is enough for a simple life, but not enough to buy a condo. Unless a boyfriend comes into the game of course.

On the other hand, there is a serious middle/upper class of people who do have money. It may be less than 10% of the population, but that still makes hundreds of thousands. That's what the bubble lives from.

[Happyman108]

Bangkok condo may seem high and close to bubble burst, but again is depending on location if we consider to rent it or sell. Chances of losing in say 5-10 years may be 10-20% from purchase price but consider possible value increase 30-50% on possible side. I bought a condo "again" in CM near to new Platinum mall and future central festival mall, looking for rental return 6% and I'll not hesitate to rent it for min of 3% which is much higher return as compare to fix deposit in bank.

Bought a unit 5 years ago in CM, currently renting return at 8% and resale value gain 80% which giving me about 16-20% / year return on paper........but not going to sell anyway, will just keep it for rental return. I'm not expecting renting out at market price but instead just what the fastest time to get it rent out at the right price. Guess I'll only face problem of not able to rent out if all Thais have their own home, or no more long stay foreigner in Thailand.......is that possible??

Still a long way for bubble to burst I guess.

[chiangmaikelly]

i wonder how many thai workers pay tax and are employed properly, paying tax ?

i dont think there would be to many,

you cant say the girls in the bar have a proper job, do they pay tax are they all registerd?

there is to many questions about thais being in work,

They don't pay tax because their income is too low. 10-20000 Baht is enough for a simple life, but not enough to buy a condo. Unless a boyfriend comes into the game of course.

On the other hand, there is a serious middle/upper class of people who do have money. It may be less than 10% of the population, but that still makes hundreds of thousands. That's what the bubble lives from.

What bubble? In the first quarter of 2012, the banking system reported net profit of 40.1 billion

baht, increasing 29.0% from last quarter. The ratio of delinquent loan to total loan fell to 2.0%, with the reduction noticeable in consumer loan. Corporate loans are 70% and consumer loans only 30%.

[chiangmaikelly]

In case anyone wonders. If an American had sold his $200,000 home 8 years ago and moved to Thailand he would have banked on an average of 4 million more baht that he would bank today.

So If you are wondering why there are less yanks here today, you now know.

If I had waited I would really be kicking myself for not listening to those intelligent posters who said 8 years ago was the time to jump.

[McMagus]

On topic ! BKK Cono Bubble burst. I'm assuming people are saying that the prices may fall? Well they may, or they may stay the same for years, or they may go up. A couple of observations; One thing probably is clear and that is the degree to which Thais burden themselves with personal debt, whether it be in BKK for the latest iphone or out in the sticks for a new pickup etc., etc. They do seem to like borrowing from all and sundry. Second point, the wealthy Thais almost never cut their losses and sell the way many westerners would. Rather than sell and take a loss then invest elsewhere to 'catch up', they seem to be pathologically against selling at a loss (not sure what they did in the 1997 financial crisis) and I think it is about losing 'face', so maybe that ensures the Thai idea that 'prices always go up', I don't know. Yes, BKK is a world capital city but I don't think it is valid to compare prices with say London or Tokyo. I still think that many condos in BKK are over priced... maybe it's because I don't particularly like living in BKK. I for one would not be buying a condo for investment. If I were planning on living here for the rest of my days.... well maybe that might be different.

[TommoPhysicist]

Bangkok condo may seem high and close to bubble burst, but again is depending on location if we consider to rent it or sell. Chances of losing in say 5-10 years may be 10-20% from purchase price but consider possible value increase 30-50% on possible side. I bought a condo "again" in CM near to new Platinum mall and future central festival mall, looking for rental return 6% and I'll not hesitate to rent it for min of 3% which is much higher return as compare to fix deposit in bank.

I get 3.25% interest on my Thai bank account.

If I moved it to Australia, I would get 5%

What bank are you using?

Bank profits ..... interesting concept.

In Thailand when a bank forecloses on a property they won't sell the property for less than their loan value. The house sits empty until it falls down, but a loss is never recorded, and the value of the wrecked house is never reduced. I can see housing estates where 25% of the houses are deserted wrecks and have no value, but the bank books still record them at full price.

Edited October 21, 2012 by TommoPhysicist

[Happyman108]

Bangkok condo may seem high and close to bubble burst, but again is depending on location if we consider to rent it or sell. Chances of losing in say 5-10 years may be 10-20% from purchase price but consider possible value increase 30-50% on possible side. I bought a condo "again" in CM near to new Platinum mall and future central festival mall, looking for rental return 6% and I'll not hesitate to rent it for min of 3% which is much higher return as compare to fix deposit in bank.

I get 3.25% interest on my Thai bank account.

If I moved it to Australia, I would get 5%

What bank are you using?

Not in any bank for FD interest return, the current interest return of 3.25 or 5% not too interesting as compare to investing in property for rental return + asset gain (or lost, but chances of gain and % of gain is much higher as comapre to lost). Say if invest in a 2 million baht condo and expecting a 6% return will need to rent it out at 10,000 baht.....on the lower side if I can get it rent out for just 5,000 baht I'll be able to achieve 3% return min exclude the property lost/gain value in long run.......but don't expect a short term investment of 2-3 years, taking it for a min of 5-10 years investment at least. (I'm refering to buying in cash without loan from bank, otherwise will be the banker who took the profit.)

[asiawatcher]

Interesting to see you can still buy condo's new around Bangkok under Baht1M. I first rented here on arrival more than 10 years back at 13,000 THB/mth plus outs of around 2k. The studio apartment at the time was 28th floor of a building with gym, squash court, pool, heaps of parking and 5 mins walk to BTS. Value at the time was around 2.3M I understand. Today it is about 3.2M so not a bad increase. Amortised since 2000 (12 years) it has gained 28% or 2.3% p.a. but if you look at it on rental paid against capital gains (if the owner paid cash) she was getting 156,000 p.a. (6.7%) plus the 2.3% capital gains (gross).

Where I am now is a townhouse which has risen 1M baht on 3M purchase in 8 years, and an investment 1 Br we bought as investment for 900k is now 2.2M and been returning 10k a month. The low end apartments are definitely a better bet than high end but then if you put down a deposit of 20% on say 3M you have invested 600k, say rent pays the mortgage and let's say it rises 30% in value over 10 years, then you would be getting 50% earn on investment gross or 5% p.a. over 10 years on the capital you invested. Real estate in the west where I come from has averaged doubling every 10 years so Thailand is not in that category to my knowledge.

Overall there are far better performing cash management trusts exceeding 10%p.a. compounding where you can cash out quickly - far more liquid - than investing in Thai real estate. Even gold is a far better deal - when I got here it was 6,500 THB/BHT now in excess of 24,000. It would have been wiser than bar girls and beers

Edited October 21, 2012 by asiawatcher

[Happyman108]

Bangkok condo may seem high and close to bubble burst, but again is depending on location if we consider to rent it or sell. Chances of losing in say 5-10 years may be 10-20% from purchase price but consider possible value increase 30-50% on possible side. I bought a condo "again" in CM near to new Platinum mall and future central festival mall, looking for rental return 6% and I'll not hesitate to rent it for min of 3% which is much higher return as compare to fix deposit in bank.

Bank profits ..... interesting concept.

In Thailand when a bank forecloses on a property they won't sell the property for less than their loan value. The house sits empty until it falls down, but a loss is never recorded, and the value of the wrecked house is never reduced. I can see housing estates where 25% of the houses are deserted wrecks and have no value, but the bank books still record them at full price.

Guess we are discussing condo bubble.......btw wil you borrow from a bank & deposit in fix deposit and expect a gain?? Those who took loan from bank to purchase are those need a place to stay (not all of course but mostly), for people who have the cash to deposit in FD, some will be doing it by investing in condo for rental and capital return for long period, if anyone who is looking for short term investment not advisable to property investment. And many Thais and retiring foreigner that I know are doing just that, some of them are having more than 10 condo for rental and almost all taken up with average 6% rental return......exclude capital gain.

[chiangmaikelly]

Bangkok condo may seem high and close to bubble burst, but again is depending on location if we consider to rent it or sell. Chances of losing in say 5-10 years may be 10-20% from purchase price but consider possible value increase 30-50% on possible side. I bought a condo "again" in CM near to new Platinum mall and future central festival mall, looking for rental return 6% and I'll not hesitate to rent it for min of 3% which is much higher return as compare to fix deposit in bank.

I get 3.25% interest on my Thai bank account.

If I moved it to Australia, I would get 5%

What bank are you using?

Bank profits ..... interesting concept.

In Thailand when a bank forecloses on a property they won't sell the property for less than their loan value. The house sits empty until it falls down, but a loss is never recorded, and the value of the wrecked house is never reduced. I can see housing estates where 25% of the houses are deserted wrecks and have no value, but the bank books still record them at full price.

The ratio of delinquent loan to total loan fell to 2.0%, with the reduction noticeable in consumer loan.

Performance of Thai banking system first quarter 2012.

[Gweiloman]

So, to cut to the chase, buy or not buy?

[chiangmaikelly]

So, to cut to the chase, buy or not buy?

Buy in industrial areas that don't flood.

[Bender]

Finally, all those "12%" investments stay empty, they have to pay for loans and maintanace fees, nobody rents and nobody buys (people buy new condos).

absolutely true.

Few years ago i have 2 friends on separate case, a thai and a foreigner, who did buy both 8 condo on the seaside. They keep repeating me for month that it will be a good investment, they will do a 10 % interest p.a. And for years, they were begging to rent them, as there are a huge oversupply. So empty half the year.

I have another friend who wanted to buy a condo, in a building that was build 15 years ago. He visited the place. No tiles on the floor, no paint on the wall...

In fact nobody has never occupied the condo in the last 15 years... since it was build.

Edited October 21, 2012 by Bender

[davejones]

Personally I think investing in condos anywhere doesn't make sense when compared to other alternatives.

But that's just my opinion.

Condos in prime London locations have risen 50% in the last 3-4 years. Are you saying you have investments that do better than that?

[wimtomlinson]

All investments have a risk, some more than others. I would myself put Thailand property in the higher risk category as its a foreign country to me and I don't know the laws and I don't know a good solicitor like I do in the UK so that is the biggest factor to put me off.

The last Thai bubble burst about 15 years ago, bubbles usually burst within 20.

[GreenSnapper]

All investments have a risk, some more than others. I would myself put Thailand property in the higher risk category as its a foreign country to me and I don't know the laws and I don't know a good solicitor like I do in the UK so that is the biggest factor to put me off.

The last Thai bubble burst about 15 years ago, bubbles usually burst within 20.

Most investments you can sell in a few days. Be it stocks, gold, bonds, funds...

This does not apply to real estate. You may believe that the condo, you bought for 10 million Baht, is now worth 12 million. But if you don't find someone who buys for 12 million, your gain is only in your books. If you need the money, you may finally be forced to sell for 9, or just leave it empty as the Thais do and dream of your alleged value of 12 million Baht in your books.

[firestar]

15 million Baht for 100 sqm in my vicinity (BKK). Crappy building standards made by cement and cheap Burmese labor. Cheapest kitchen, cheapest floor, smelly bathroom.

And 90+% empty building since more than a year.

Good business for the developer, bad for all the silly investors.

if its 90% empty, how would it be good business for the developer?

It's all sold in the hope of high rentals and/or even higher resale prices. Wet dreams of the clueless investors.

Haha I love these definite answers..

I bought a condo for 4.5M close to Thonglor sold it for 7.5M three years later. The condo I currently live in I was paying rent of 60 000bht bought it for 11M it's been two years now I am saving 6%, the building is full, and a similar unit recently sold for 15M. I didn't predict the invasion of russians in Pattaya but those who did will have easily doubled their money if they bought condos close to beach road.

Will it last forever? Of course not but like any market it's about when you get in and when you get out, some people will get burned but in the meantime there is also a lot of us "clueless investors" making great returns