The Condo Bubble

[TommoPhysicist]

But I would rather have some property rather than money sitting in the bank. Inflation can easily wipe out cash in a matter of a few years.

I can think of several things which would wipe out your condo investment overnight.

[RudieTheFoodie]

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.

[cheeryble]

Dave Jones:

Agree entirely vis a vis one must be reasonably nearby the place one is renting out. Seen many friends get big probs like that.

Tommophysicist:

Suggest for the security you require....being deported, no visa, entirely losing condo etc....you go to church.

Rancid:

You suggest the books are cooked on indicators. Are you aware of the Financial Sector Master Plans pt 1 and 2. (They are successful enough to be emulated abroad in the aftermath of 2007). Among many other conservative approaches this made sticking to standardised international indicator methodology obligatory.

Happy 108:

Thankyou for the reality that there is always risk but upside potential far outweighs it especially as your holding term gets longer. The chart comes I ottos left and goes out top right.

To all our doom and gloom posters:

Thankyou for the reality that if you make a stupid unskilful purchase you may not do so well.

To the population of China:

Congratulations on property price rises reducing to 1.77% in the last quarter. Seems like natural economic feedback mechanisms work and bubbles aren't always bubbles.....in fact rarely are.

To all:

There seem to me to be about three times as many cars on the roads of CM as twelve years ago. Is it a bubble and we can all expect them to be off the road anytime soon? (Not holding breath......)

Edited October 21, 2012 by cheeryble

[davejones]

But I would rather have some property rather than money sitting in the bank. Inflation can easily wipe out cash in a matter of a few years.

I can think of several things which would wipe out your condo investment overnight.

No need to worry. I've owned enough condos and other property to know what I'm doing. And if one gets wiped out I don't really care. I won't lose any sleep over it. My choice and I'm happy.

If you want to have a negative attitude to everything then that is your choice.

Edited October 21, 2012 by davejones

[GuestHouse]

I expect the introduction of casinos to Thailand (Pattaya) to have an impact on property prices.

Please don't tell me casinos are not planned.

Google Satalite views of Pattaya show large empty plots of land in prime locatioms - what are the owner's waiting for?!

Edited October 21, 2012 by GuestHouse

[chiangmaikelly]

I expect the introduction of casinos to Thailand (Pattaya) to have an impact on property prices.

Please don't tell me casinos are not planned.

Google Satalite views of Pattaya show large empty plots of land in prime locatioms - what are the owner's waiting for?!

Same thing they were waiting for in Nevada before the boys moved in. Do you know how many empty rooms there are South of Pattaya every night?

[clockman]

Thailand is all smoke and mirrors. There is no transparency in any sectors. The hammer is coming. Maybe 2015?

[Baloney pony]

My very first post on thai visa awhile ago was inquiring about the step by step process in purchasing a condo.

I've been doing a lot of research on the condo market here and looked at probably every major property along the bts and mrt route either on the internet or in person.

I'll list some of the pros and cons i've learned thus far..

Buying a condo purely for investment purposes seems like a bad idea all around. If you actually plan on residing in Thailand in your newly purchased condo if you can't rent it out then it's not a bad idea. A good strategy would be to always advertise your condo for rent and live in it until someone actually rents it out. Then you can sit back and earn 6-7% and explore other options. That way you're always getting some kind of value out of it.

Condo appreciation here for older units is pretty wretched. A friend of mine bought a unfurnished condo unit around the Ekkamai area in an 15 year old building for 7 million back in 2009. It was a very nice large 3 bedroom unit in an old but well maintained building. The inside of his condo had a great floor plan and a fantastic view. Today I browsed condos for sale advertised in the same building and they are going for the exact same price per sqm completely furnished! There was absolutely zero appreciation even though the location is considered a prime area and close to the main road.

It's all about the BTS/MRT. All the condos that have retained their value or even appreciated have been along this obvious route or within reasonable walking distance <400m.

Low rises are a big risk. A recent thing that i've seen is that a lot of new developers are throwing up these fancy low rise condominiums that are hidden in side sois off main roads in desirable areas like around Thonglor or Ekkamai. Usually they are built on small plots of land and are wedged between empty land or existing buildings. The risk i'm talking about is that at any point they could decide to build some shopping complex or high rise and wedge your low rise building in dropping your investment to something that you will never be able to sell. No one wants to live in a blocked in low rise no matter how good the location is.

There are really only a handful of major developers worth looking at. On the low end of things..LPN, U-delight, etc.. On the high end.. AP, Siri, etc..

Don't buy off plan. Delayed projects are very common. It's a speculators game with Thais with huge net worth playing games with new developments. You aren't missing much if you just wait awhile and shop around for actual owners of lived in units willing to sell. There's still a rather abundant supply on the market. The speculators will probably hold onto their empty units for a long time and won't give ground so it pays to shop around.

Buy unique. Besides the obvious stuff like being located next to a major BTS/MRT stop there has to be some other reason. The building has a great maintenance and facilities reputation. It's located within walking distance to a major shopping mall. The furnishing is of extremely high standard. Great view. Lots of local food and shop stalls. Every condo development i've seen that has 3 or more of these qualities always seems to retain or appreciate in value. They tend to be in lived in units that have active management as well.

The thai real estate site Prakard is also real nice for gaining inside intel. Thais won't tell you anything if you ask them directly so it pays to do a lot of translating and reading of thai msg boards. I spent hours combing through the msgboards on there of various condo complexes. You'll see Thais complaining and talking openly about problems in the developments they live in. It's also pretty easy to figure out which condo units are full of speculator bought units because the msgboard traffic from live in residents is very low.

Don't buy on a flood plain or a drainage valley. If you do a little search you can bring up a nice map of flooded Bangkok from last year. It will highlight all the areas which you should NOT buy. The prices around lad prao and upper ratchadapisek in particular should be half of what they are asking for. A lot of developers are building around there asking for silly prices per square meter and betting on the sheer ignorance of potential buyers.

Risks of buying a condo in proximity to a nightlife area. I'm talking about lower Sukhumvit and lower Ratchada in particular. Despite having some fancy bars and other expat establishments lower Sukhumvit is still pretty sleazy. If you rent out your unit there's a high possibility you'll just attract whoremongers who will do god knows what in your unit with how many people coming in and out of there. I talked to a couple condo owners in that area and they say they have a tough time finding regular people to rent to and that area tends to wear on the nerves after awhile too.

Edited October 21, 2012 by Baloney pony

[NeverSure]

Oh I agree, there is no such thing as certainty. My post was only in response to blanket-statements presented as absolute truths by some members here.

Well I thought I was outta here but I can't resist this.

Believing that past successes are a barometer of the future is a fool's game. Now, I'm not at all saying you are that, just making a point.

Those who get burned worst in a stock market or real estate crash are usually those who've been making a lot of money, begun to believe it's easy, and continue the game in bigger and bigger ways until they are suddenly trapped.

Someone else said we aren't in a global recession. I'd like to see some GDP numbers posted to prove that. The global economy at best is going nowhere. Some nations in the West are on life support. Others are printing money to stay afloat. The US is basically running a zero percent interest rate in a failed attempt to stimulate. That's why the dollar is so low. Who wants dollars when they don't earn anything. Now other nations are lowering interest rates in what will be a failed attempt to stimulate. Easy credit has always been a road to trouble.

All I can say is to be careful.

[RAZZELL]

But at the moment I'm really undecided. Bangkok property is massively oversupplied and seems way overpriced to me. Pattaya and Chiang Mai are both growing cities and I think there could be opportunities there. But in both cities it still means buying well in good areas.

Totally agree.

I don't know how the vast majority of Thais can pay 3.5m for a shoe box unless credit is cheap and easy.

RAZZ

[chiangmaikelly]

Thailand is all smoke and mirrors. There is no transparency in any sectors. The hammer is coming. Maybe 2015?

Jade a club on Soi 7 or 8. Very transparent. Ya the hammer is coming. Hundreds of thousands of people out in the street demonstrating, wait, that's not Thailand is it!

[chiang mai]

But at the moment I'm really undecided. Bangkok property is massively oversupplied and seems way overpriced to me. Pattaya and Chiang Mai are both growing cities and I think there could be opportunities there. But in both cities it still means buying well in good areas.

Totally agree.

I don't know how the vast majority of Thais can pay 3.5m for a shoe box unless credit is cheap and easy.

RAZZ

Credit is cheap and easy, if you read the thread you'll see that the banks retail lending has soared massively.

[chiangmaikelly]

Oh I agree, there is no such thing as certainty. My post was only in response to blanket-statements presented as absolute truths by some members here.

Well I thought I was outta here but I can't resist this.

Believing that past successes are a barometer of the future is a fool's game. Now, I'm not at all saying you are that, just making a point.

Those who get burned worst in a stock market or real estate crash are usually those who've been making a lot of money, begun to believe it's easy, and continue the game in bigger and bigger ways until they are suddenly trapped.

Someone else said we aren't in a global recession. I'd like to see some GDP numbers posted to prove that. The global economy at best is going nowhere. Some nations in the West are on life support. Others are printing money to stay afloat. The US is basically running a zero percent interest rate in a failed attempt to stimulate. That's why the dollar is so low. Who wants dollars when they don't earn anything. Now other nations are lowering interest rates in what will be a failed attempt to stimulate. Easy credit has always been a road to trouble.

All I can say is to be careful.

Only a nutcase would have any money left in US dollars or land or anything else when the writing was on the wall 10 years ago.

[farang000999]

Say what you want about the USA/Europe but if you think the emerging markets have decoupled then you are going to be in for one helluva surprise. A crash in the USA/Europe will be immediately followed by an asset bubble in emerging markets. If you want to go back and study the MBS scandal you will see just how connected the global economy is. Like a cheer leading pyramid.

[chiangmaikelly]

Say what you want about the USA/Europe but if you think the emerging markets have decoupled then you are going to be in for one helluva surprise. A crash in the USA/Europe will be immediately followed by an asset bubble in emerging markets. If you want to go back and study the MBS scandal you will see just how connected the global economy is. Like a cheer leading pyramid.

The USA/Europe already crashed. We are doing fine thank you.

[meatboy]

But at the moment I'm really undecided. Bangkok property is massively oversupplied and seems way overpriced to me. Pattaya and Chiang Mai are both growing cities and I think there could be opportunities there. But in both cities it still means buying well in good areas.

Totally agree.

I don't know how the vast majority of Thais can pay 3.5m for a shoe box unless credit is cheap and easy.

RAZZ

Credit is cheap and easy, if you read the thread you'll see that the banks retail lending has soared massively.

just looking at the q3 for 2012 compared to q3 2011,profits for thai banks,

cimbt up 228%

ktb up 62%

all the rest showed healthy profits except thanacharts who are expected to return to normal.

it makes you think where is all this profit coming from when household debt is at an alltime high.

somethings got to give,i remember late 80's-90's in patts.when they were building anywhere only it came unstuck.

[farang000999]

Yeah the Shanghai index is only down 70% since it's 2008 highs.

Did you miss the SET falling 50% through 2008?

Are you going to turn this thread into round 2 of your war against common sense CMK? count me out then.

[samran]

I've become increasingly skeptical about prognostications of CRASH! in the BKK property market, purely because (anecdotally) I notice that most purchases are done in cash. In which case the need to sell during distressed times isn't a real factor for most. They are happy to leave them empty if not in use.

Sure prices are sticky and there is probably less transparency in the prices advertised. That doesn't make it less legitimate however, and only puts the onus on the purchaser to do their homework.

Factors which led to a crash during the Asian financial crisis just aren't here at the moment. People then were borrrowing offshore at low interest rates, bringing it into Thailand via an artifically fixed exchange rate, and then investing those cheap funds into a run-away market. Those conditions don't exist anymore given the currency has floated and the interest rate differential between THB and USD are relatively small compared to 1997.

[chiangmaikelly]

Yeah the Shanghai index is only down 70% since it's 2008 highs.

Did you miss the SET falling 50% through 2008?

Are you going to turn this thread into round 2 of your war against common sense CMK? count me out then.

Bye. Everyone will sorely miss you.

[candid]

Yeah the Shanghai index is only down 70% since it's 2008 highs.

Did you miss the SET falling 50% through 2008?

Are you going to turn this thread into round 2 of your war against common sense CMK? count me out then.

Bye. Everyone will sorely miss you.

We was kinda hoping you would up and join him. Like arguing with a demented woman

[chiangmaikelly]

Yeah the Shanghai index is only down 70% since it's 2008 highs.

Did you miss the SET falling 50% through 2008?

Are you going to turn this thread into round 2 of your war against common sense CMK? count me out then.

Bye. Everyone will sorely miss you.

We was kinda hoping you would up and join him. Like arguing with a demented woman

We? Whom do you speak for? A class, nationality or particular mental disorder?

[Happyman108]

For those who need a loan to buy condo, you are actually needed a place to stay......just find some place suitable to your own preference and budget, either buy or rent it. (being near bar area, near 7/11, quiet far away area whatever you like). Is not worth to loan from bank for the purchase and expect to gain after some time, the interest rate from bank will sure to eat up whatever profit you can make.

Once I own a condo in Indonesia, bought 8 years ago and sold recently for 100% profit (paying cash when purchase).......friend of mine stay beside buy on bank loan with 18% first year and down to 12% when he sell almost same time as me. And he realise all profit of 100% goes to the bank interest. I'm cashiing out 100% profit plus rental return of 50% after 8 years purchase (I stayed for 4 years and rent 4 years) total mkaing a 150% profit return investment for 8 years while my friend got free stay of 4 years and almost 0% profit.

So is depend whether you want to buy & stay or to invest for rental profit. But for sure borrow from bank for purchase is a no no for me......save enough to buy cash, if not just rent if or chose a right budget / location within budget condo to loan from bank, stay on and dun even think of selling it until you pay off your loan.

[Baloney pony]

I've become increasingly skeptical about prognostications of CRASH! in the BKK property market, purely because (anecdotally) I notice that most purchases are done in cash. In which case the need to sell during distressed times isn't a real factor for most. They are happy to leave them empty if not in use.

I foresee a problem with Thailand's condo market that does impact future appreciation and that's the low % growth of the middle class relative to the population and the effect of stagnant real wages. Thailand's current easy credit seems to be based off of domestic bond markets. You're right in saying that it's not like the asian crisis where a lot of outside money was flowing in and being speculated on property. However the people you see buying loads of condo units for flipping are all rich to upper middle class Thais which is a tiny % of the overall population. I assume you know many people like this and they are sticking their money into property. I bet the regular middle class people are more into fixed savings accounts rather than property speculation. If you're a regular middle class family with a few million spare baht lying around it's much better to stick it into a 3% account with no tax withholding rather than gamble on property for a marginally better but much higher risk non liquid 5-6% return. The lower income people are probably net borrowers and carry debt so I won't even mention the large majority of Thailand's population who can't afford condos at all.

That means a lot of condo units aren't being sold to people who are living in it. What this means in the long run is hard say. Thailand does lack other growth drivers such as a robust growing educated immigrant population etc.. too. Foreign investors and long stay individuals in Thailand's real estate market is still tiny.

I don't think there will be a major crash since most of the money being locked into Thai real estate are from wealthy individuals in Thailand anyways. This is fairly different from bubbles in let's say the UAE where a lot of the money was from foreign investors in other gulf states and western banks.

Edited October 22, 2012 by Baloney pony

[davejones]

Someone else said we aren't in a global recession. I'd like to see some GDP numbers posted to prove that. The global economy at best is going nowhere.

Take a look at this --> http://www.google.co...dl=en&ind=false.

And individual countries here --> http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG. Note that the vast majority of countries have had 5 years of growth. i.e. no recession at all. Even US only had two down years.

World GDP is at an all time high. On the left there is a menu that shows GDP for different regions. They all seem to be growing. EU and USA are a bit flat or maybe slightly in recession, but still at or very near all time highs. Asia is growing very strongly. I just don't see any evidence of a global recession. Just because EU and US aren't doing well doesn't mean the whole world is in a recession. There is a big world out there; perhaps you need to get out into it and see what's really going on.

Edited October 22, 2012 by davejones

[NeverSure]

Someone else said we aren't in a global recession. I'd like to see some GDP numbers posted to prove that. The global economy at best is going nowhere.

Take a look at this --> http://www.google.co...dl=en&ind=false.

And individual countries here --> http://data.worldban....GDP.MKTP.KD.ZG. Note that the vast majority of countries have had 5 years of growth. i.e. no recession at all. Even US only had two down years.

World GDP is at an all time high. On the left there is a menu that shows GDP for different regions. They all seem to be growing. EU and USA are a bit flat or maybe slightly in recession, but still at or very near all time highs. Asia is growing very strongly. I just don't see any evidence of a global recession. Just because EU and US aren't doing well doesn't mean the whole world is in a recession. There is a big world out there; perhaps you need to get out into it and see what's really going on.

Uh, adjust those figures for inflation and get back to me.

From your own link, but delving deeper (I'm sure you must have heard that term before somewhere but just don't use it) LOOK at the government deficits.

http://data.worldbank.org/indicator/GC.BAL.CASH.GD.ZS/countries

They sure are thriving all right. Look up these terms in the dictionary: Eurozone, PIIGS, IMF (who's "bonds" the Thailand government is buried in) and then see how they are doing.

Keep skimming along the surface or keep your head buried in the sand. Either will work well for you I'm sure.

[chiang mai]

I'm not sure exactly what message either of the two sparring parties are trying to deliver other than "I know more than you do", but since we're talking numbers, let's not forget the 1.3 trillion baht of unpaid IMF debt that now sits on the books of BOT.

[MALJR]

Some good arguments both ways. Reminds me of my Army days and something one of my better leaders taught me. Data and statistics can usually be manipulated to show what ever someone wants you to see.

[meatboy]

Some good arguments both ways. Reminds me of my Army days and something one of my better leaders taught me. Data and statistics can usually be manipulated to show what ever someone wants you to see.

yes they can be manipulated just look at what the conservative's found when they took office in the uk.

[NeverSure]

I'm not sure exactly what message either of the two sparring parties are trying to deliver other than "I know more than you do", but since we're talking numbers, let's not forget the 1.3 trillion baht of unpaid IMF debt that now sits on the books of BOT.

Exactly. If Thailand is so strong, why are they still deep in debt to the International Monetary Fund for bailouts back to 1997?

And what was the cause of the bust of 1997? Excess capacity in housing brought by offshore developers who overbuilt and then defaulted on loans when they couldn't sell the product. That took the real estate market and the stock market and the banks down. The IMF and the US stepped in. Thailand hasn't paid it back, either.

Today those debts are still on the books and Thailand is doing the same thing all over again. There is massive oversupply of housing, and the nation's #1 export, rice, is so cheap the government has to buy it to support prices. Soon they have to unload it and further depress the world market.

In 1997 the baht was pegged to the dollar at 25bht=$1 by international agreement for trade, but that had to be backed away from and now it takes about 31 baht to buy a dollar. When things were at their worst, it took about 50 baht to buy a dollar.

This condo/housing boom is going to bust. Again. Thailand still hasn't recovered from the last bust. The debts are still there and some of those condos are still empty.

Why is anyone doubling down?

[roamer]

Some good arguments both ways. Reminds me of my Army days and something one of my better leaders taught me. Data and statistics can usually be manipulated to show what ever someone wants you to see.

But people believe data and statistics, they rarely believe the evidence in front of their own eyes, if they did then they wouldn't be thinking of buying into the the Thai property boom. I say that because you only have to look around and see how many of these buildings are unoccupied. So your buying as an investment ? Waiting for the emerging Thai middle class to explode and let you turn over a profit ? You've bought it for your 6 year old daughter for the future ?

Good luck. I shudder to think of the state of some of these buildings with a 5% occupancy rate in a few years time.