The Bubble For Studio/1-Bed Is Ripe For Bursting

[trogers]

Notice the heavy and constant advertisements on projects launched 6-12 months ago everywhere we go along the mass transit and along major roads? Are we getting many messages on our phones of attractive discounts being offered by this and that project?

This signals that projects in the pipeline are not being taken up. The inflated bubble cannot expand much further.

All that is needed now is some crisis, can be financial or even political, to be the pin to burst the bubble.

I have estimated the next period to acquire cheap properties is in 2015, and expecting the bursting of this bubble sometime in the last quarter of next year. So save up your capital.

In the one bedroom condominium market performance has been more mixed. The results of some public listed developers show that some projects launched in 2010 and 2011 have not sold out.

Generally the best performing projects have been those close to mass transit stations. In some areas the one bedroom sector is going to come under pressure from developers unsold inventory and shadow inventory from units bought by speculative purchasers who want to resell before completion.

We expect that developers will become more selective about location focusing on mass transit stations. The challenge for developers will be to acquire land at a price where they can still build condominiums that are within the purchasers’ maximum budgets.

Their choice is either to buy cheaper land away from mass transit stations or to reduce the size of the units. Developers are trying to balance affordability with usability.

http://www.thailandp...d-location-4489

Edited November 13, 2012 by trogers

[PattayaPhom]

Thailand has had crisis after crisis the past 6 years and none of them had any effect on the property market. This report dosnt actually highlight anything new......we all know and its obvious that property in a good location built well sells.......shoeboxes in the boonies dont sell so well...whats new....and as for the author..lets quote

'Toby has been living in Bangkok for a number of years and has a strong research background'

Hardly an expert...

[Rancid]

Well the mania phase in a bubble is when every man and his dog enters the market. It is true that Thailand tends to not deflate in prices as dramatically as the West, however good buys are to be had especially from banks if things do go off the boil.

[fish fingers]

they said the same in london back in the late 90's... now its 2012 and prices are still rising. Property is always a safe haven, long-term.

[chaiyapoon]

There are a lot of empty units in a lot of developements and have been empty for a long time.That doesn't seem to stop them building more and more someone is still making money or it wouldn't be going on.

There are a lot of people in the USA who no longer think property is a good investment some areas are now as cheap as Thailand and who would have said that 10 years ago?

[johnnyk]

Thais don't trust paper, they prefer gold or property. Empty units? Don't discount the wash, rinse and spin game.

[guzzi850m2]

Thais don't trust paper, they prefer gold or property. Empty units? Don't discount the wash, rinse and spin game.

I agree, the house opposite mine is owned by a BKK Thai, it's a +8 mill bath property and he uses it maybe 5 days a month.

I Pattaya they are building studio condo's all over the place, we went to have a look at a very ugly double condominium project next

to Sukhumvit road (near BKK/Patt hospital) here in Pattaya and were told they only have 2 units left of the app. 700 units in the buildings and it's only 99%

completed. 27/32 M2 units with hardly any balconies, I can't understand why people buy those units, I think it's mostly Thais.

[PattayaPhom]

There are a lot of empty units in a lot of developements and have been empty for a long time.That doesn't seem to stop them building more and more someone is still making money or it wouldn't be going on.

There are a lot of people in the USA who no longer think property is a good investment some areas are now as cheap as Thailand and who would have said that 10 years ago?

How do you know they are empty...probably another judging by how many lights are on at night..................Many people from cities all over the world buy a retreat at the seaside, maybe a caravan, beach hut or apartment and use them rarely...its the same in Thailand, many units are sold but only used by the owners occasionally, or bought for their kids when they are older...

[khunken]

As far as BKK goes I think the article is spot on. In my area - On Nut - there are 3 recently completed & another 3 in various stages of construction, each with 20+ floors of 1-bed or bedsit units. As this is only one tiny part of the city, the total numbers must be enormous. Bubble? maybe, but most likely in the smaller units.

[chaiyapoon]

In Pattaya I know two guys who buy up options on the best units at the off plan stage.They have been doing this for many years and they told me loads of units are still empty shells behind the doors and have never been fitted out.These are in the Thai allocation percent.Some are turned into rental units many are empty for years.

Edited November 16, 2012 by metisdead
: Bold foont removed.

[Khun Jean]

Thais don't trust paper, they prefer gold or property. Empty units? Don't discount the wash, rinse and spin game.

This! And with no real estate taxes to speak of it is seen as a 'safe haven'.

Also the reason why prices not go down, ever!

Only poorer people that have financial difficulties resort to lowering prices to sell.

Edited November 16, 2012 by Khun Jean

[BlackPuddingBertha]

Only poorer people that have financial difficulties resort to lowering prices to sell.

I can think of many reasons for wanting to get rid of a property rapidly that don't involve being in financial difficulties, or being poor.

[Khun Jean]

Only poorer people that have financial difficulties resort to lowering prices to sell.

I can think of many reasons for wanting to get rid of a property rapidly that don't involve being in financial difficulties, or being poor.

Reasons such as what? If you have no time constrains prices can stay closer to asking prices.

Topic is about studio/1 bed condos which are largely bought up by the richer segment to sit on it with speculation in mind.

Edited November 16, 2012 by Khun Jean

[BlackPuddingBertha]

Reasons such as what?

Aside from personal reasons like wanting to buy an ideal place that you have just found, or wanting to leave the country/region permanently, how about things that might have a medium or long-term effect on the value? Like subsidence, soil erosion, flooding, change of building management, nearby planned building work or other infrastructure developments that may become a nuisance, likely change of government, civil unrest, believing that a property crash is on the horizon, a property crash having started, imminent changes to property or personal taxation, or legislation relating to ownership structures. That should keep you going.

Sometimes it is better to take a small loss quickly than to hang on and take a big loss later.

[Heng]

Thais don't trust paper, they prefer gold or property. Empty units? Don't discount the wash, rinse and spin game.

I agree, the house opposite mine is owned by a BKK Thai, it's a +8 mill bath property and he uses it maybe 5 days a month.

I Pattaya they are building studio condo's all over the place, we went to have a look at a very ugly double condominium project next

to Sukhumvit road (near BKK/Patt hospital) here in Pattaya and were told they only have 2 units left of the app. 700 units in the buildings and it's only 99%

completed. 27/32 M2 units with hardly any balconies, I can't understand why people buy those units, I think it's mostly Thais.

That Pattaya property is kind of a lower middle type property at about a million change (Baht) per unit. If you want more space, try Reflection by Major, or Centara Grand Residence. Both reputable well known developers and better neighbors (you know, better to do Bangkok Thais rather than lower middle class Bangkok Thais), and not 'that' pricey.

;-)

Edited November 17, 2012 by Heng

[Asiantravel]

they said the same in london back in the late 90's... now its 2012 and prices are still rising. Property is always a safe haven, long-term.

you really think so ?

http://www.dailymail.co.uk/news/article-2124273/Thousands-houses-sell-10-000.html

[Briggsy]

My condo block. 40% occupancy. 100% ownership. Investors buy multiple units and/or provincial backstops and then rent them out or don't really bother to do that. I don't quite see the economics of it but there must be some point to having an unoccupied condo as so many seem to do it. Prices are rising as it is outside the Chao Phraya flood basin but still within easy striking distance of Bangkok.

The best insight I have had is the Asian (Chinese) (Thai Chinese) convential wisdom that one-third of your wealth should be in property. Maybe that explains it.

All of the above doesn't mean there won't be a burst bubble but judging from previous Thai property price events, expect many of the owners and developers and financiers to sit on their loss for a decade rather then sell cheap and take a hit.

[Heng]

The math for many is: If you're not paying interest (cash purchase), you're only paying maintenance fees (which typically aren't much even in higher priced/valued properties), and IME the property's value is likely increasing beyond the rate of what your holding cost is. Applies better to dirt rather than air boxes (condos), but it's not as nice a getaway to take your family to your plot of dirt in Hua Hin, that's why a lot of folks give in and add condos to their portfolio. That said, I rarely let any property go unoccupied, but I'm not going to worry too much if I do have vacancies.

Edited November 17, 2012 by Heng

[farang000999]

they said the same in london back in the late 90's... now its 2012 and prices are still rising. Property is always a safe haven, long-term.

Japan says LOL.

Edited November 18, 2012 by farang000999

[Khun Jean]

Reasons such as what?

Aside from personal reasons like wanting to buy an ideal place that you have just found, or wanting to leave the country/region permanently, how about things that might have a medium or long-term effect on the value? Like subsidence, soil erosion, flooding, change of building management, nearby planned building work or other infrastructure developments that may become a nuisance, likely change of government, civil unrest, believing that a property crash is on the horizon, a property crash having started, imminent changes to property or personal taxation, or legislation relating to ownership structures. That should keep you going.

Sometimes it is better to take a small loss quickly than to hang on and take a big loss later.

Context, blackpudding, context. I was talking about the more wealthy who hold condos as an investment.

Except for that they are all very valid reasons, from a poorer Thai and/or foreigner western viewpoint.

Now tell that to a Thai (who bought for speculation and own most of those condos) and see what they think.

Edited November 18, 2012 by Khun Jean

[BlackPuddingBertha]

Reasons such as what?

Aside from personal reasons like wanting to buy an ideal place that you have just found, or wanting to leave the country/region permanently, how about things that might have a medium or long-term effect on the value? Like subsidence, soil erosion, flooding, change of building management, nearby planned building work or other infrastructure developments that may become a nuisance, likely change of government, civil unrest, believing that a property crash is on the horizon, a property crash having started, imminent changes to property or personal taxation, or legislation relating to ownership structures. That should keep you going.

Sometimes it is better to take a small loss quickly than to hang on and take a big loss later.

Context, blackpudding, context. I was talking about the more wealthy who hold condos as an investment.

Except for that they are all very valid reasons, from a poorer Thai and/or foreigner western viewpoint.

Now tell that to a Thai (who bought for speculation and own most of those condos) and see what they think.

I think you will find that (mostly) they are valid reasons regardless of how much money the owner has.

I long ago gave up trying to understand why Thais and farangs hang onto the sort of decaying wrecks that seem to be on every street and beachfront here. Unused, unrented, costing them money in common fees, producing little or no income and depreciating in value daily due to lack of maintenance. I think they are bonkers. In their shoes I would ditch them and buy something productive, or renovate them properly and rent them out at sensible prices.

But hey, I'm just a self-made GBP millionaire who retired at 50 and doesn't need to own any property here, so what the hell do I know?

[Baloney pony]

I have observed the same phenomenon of 1br and studio units just sitting empty in many areas. These are "entry" price units that are easy for laymen speculators to purchase for about 1-3 million apiece. In most cases it averages around 70k-90k psqm which is very pricey for a closet. Even units close to the MRT/BTS that are tiny shoeboxes in "luxury" developments aren't guaranteed to have renters either. The multitude of IDEO developments sitting empty around the lad prao and Huay Kwang route comes to mind.

People need to stop comparing Thailand with Japan, the U.K., U.S. etc.. Thailand is a developing world country where city wage stats look like a deformed bell curve with all the wealth concentrated at the very lowest percentage of the population. The relatively small Thai middle class simply can't support a growing real estate market into maturity like U.K., U.S. etc.. cities.

BKK real estate is getting VERY pricey now as it is. If you break it down to sqf costs it's right up there with downtown Miami but not quite San Francisco levels. It'll certainly never reach London unless someone waves a magic wand and your average BKK Thai starts making 20-30x their current median wage.

[Baloney pony]

I long ago gave up trying to understand why Thais and farangs hang onto the sort of decaying wrecks that seem to be on every street and beachfront here. Unused, unrented, costing them money in common fees, producing little or no income and depreciating in value daily due to lack of maintenance.

I don't think these people are totally irrational, they are probably still hoping for future appreciation or value based on location. Except that the value was probably priced in by the developer long ago and it will take a really long time for the demand to catch up with the supply.

Plus Thailand doesn't really have the magic of gentrification. You have upper class trendsetters buying into certain areas but it's really the same set of wealthy people doing the same things. It's not a fresh batch of hip young upwardly mobile types with professional skills bringing life into an area.

[Heng]

Again, IMO holding costs are minimal. The whole argument is whether you believe those holding costs are unacceptable or trivial. There are plenty of people to fill both groups. Not sure why folks keep insisting on trying to make it all one way or the other.

[trogers]

The heart of this post is "developers are now spending heavy on advertisements to try to sell stocks in hand". This implies the demand market is fully saturated. Whether past purchases are by end users, investors or speculators is not the issue, but that further demand by these people is now not forth coming. The bubble is not getting inflated further.

[rgs2001uk]

The heart of this post is "developers are now spending heavy on advertisements to try to sell stocks in hand". This implies the demand market is fully saturated. Whether past purchases are by end users, investors or speculators is not the issue, but that further demand by these people is now not forth coming. The bubble is not getting inflated further.

Well just change your demand market.

I often drive by these adverts, advertising, live free for one year, 1 million baht condos for 8,000 baht per month.

Have you driven on Seri Thai lately, cant believe how that area has changed, there must be at least 6 developments going up, hardly what I would call an upmarket area, nowhere near the BTS/MRT yet someone has decided there is potential there.

[trogers]

The heart of this post is "developers are now spending heavy on advertisements to try to sell stocks in hand". This implies the demand market is fully saturated. Whether past purchases are by end users, investors or speculators is not the issue, but that further demand by these people is now not forth coming. The bubble is not getting inflated further.

Well just change your demand market.

I often drive by these adverts, advertising, live free for one year, 1 million baht condos for 8,000 baht per month.

Have you driven on Seri Thai lately, cant believe how that area has changed, there must be at least 6 developments going up, hardly what I would call an upmarket area, nowhere near the BTS/MRT yet someone has decided there is potential there.

The same great potential was once thought in a large housing development located next to the Bang Prakong river back in the late 80's. You can still see the dark silhuoette of the development on the left as you drive over the Bang Prakong bridge towards Chonburi.

[Khun Jean]

Reasons such as what?

Aside from personal reasons like wanting to buy an ideal place that you have just found, or wanting to leave the country/region permanently, how about things that might have a medium or long-term effect on the value? Like subsidence, soil erosion, flooding, change of building management, nearby planned building work or other infrastructure developments that may become a nuisance, likely change of government, civil unrest, believing that a property crash is on the horizon, a property crash having started, imminent changes to property or personal taxation, or legislation relating to ownership structures. That should keep you going.

Sometimes it is better to take a small loss quickly than to hang on and take a big loss later.

Context, blackpudding, context. I was talking about the more wealthy who hold condos as an investment.

Except for that they are all very valid reasons, from a poorer Thai and/or foreigner western viewpoint.

Now tell that to a Thai (who bought for speculation and own most of those condos) and see what they think.

I think you will find that (mostly) they are valid reasons regardless of how much money the owner has.

I long ago gave up trying to understand why Thais and farangs hang onto the sort of decaying wrecks that seem to be on every street and beachfront here. Unused, unrented, costing them money in common fees, producing little or no income and depreciating in value daily due to lack of maintenance. I think they are bonkers. In their shoes I would ditch them and buy something productive, or renovate them properly and rent them out at sensible prices.

But hey, I'm just a self-made GBP millionaire who retired at 50 and doesn't need to own any property here, so what the hell do I know?

It means you know a lot about England and probably not so much about Thailand. No worries, you will understand soon that many things in Thailand are completely opposite. Also one of the reasons why many come with a lot of money and leave with a lot less or nothing. Do you make money with real estate in Thailand? Because i do.

[BlackPuddingBertha]

But hey, I'm just a self-made GBP millionaire who retired at 50 and doesn't need to own any property here, so what the hell do I know?

It means you know a lot about England and probably not so much about Thailand. No worries, you will understand soon that many things in Thailand are completely opposite. Also one of the reasons why many come with a lot of money and leave with a lot less or nothing. Do you make money with real estate in Thailand? Because i do.

My, don't you make a lot of (erroneous) assumptions?

I've been coming and going to Thailand for nearly 40 years. I haven't lived in the UK for nearly 40 years either, and all my money was made outside the UK. I don't need to make money with real estate: not here, not in the UK, not anywhere. As far as I'm concerned real estate as an investment is just too much work for not enough return, and I can do a lot better for less effort elsewhere. And so I do.

[Khun Jean]

But hey, I'm just a self-made GBP millionaire who retired at 50 and doesn't need to own any property here, so what the hell do I know?

It means you know a lot about England and probably not so much about Thailand. No worries, you will understand soon that many things in Thailand are completely opposite. Also one of the reasons why many come with a lot of money and leave with a lot less or nothing. Do you make money with real estate in Thailand? Because i do.

My, don't you make a lot of (erroneous) assumptions?

I've been coming and going to Thailand for nearly 40 years. I haven't lived in the UK for nearly 40 years either, and all my money was made outside the UK. I don't need to make money with real estate: not here, not in the UK, not anywhere. As far as I'm concerned real estate as an investment is just too much work for not enough return, and I can do a lot better for less effort elsewhere. And so I do.

So sorry about that, you just made the impression you know nothing about thailand. My mistake.