Thai Property Market: Bubble Warning As Signs Of Speculation Appear

[bkk_mike]

1. China hasn't devalued it's currency. (It's appreciated against the US Dollar slowly over the years). Admittedly, if it was allowed to freely float, it would probably be even higher than it is now, but it's not been devalued at any point.

2. The Chinese workforce is actually starting to decrease now (the effect of the one child policy means that more people are retiring now than entering the workforce).

All that said, I do tend to agree that although China is making money from selling stuff, that there are a lot of bad loans in the country, and something is likely to go wrong at some point. (It's when that happens, that I wouldn't want to be Taiwanese... as the government will almost certainly try to change the story in some way)

As for the condo market in Thailand... There's no 100% mortgages here, and I've never heard of interest-only mortgages here, so speculation simply can't get to the state it reached in the US. I'm not saying there isn't speculation, just that, with the demographics of Thailand where the population is rising, property in the centre of Bangkok is a reasonably safe purchase over the long term.

Add in that the banks DO check income, and DO run credit checks (although they're rather rudimentary here), and it's nowhere near what it was like in the US where people could get mortgages that they had no ability to pay on the day they took them out...

[IsaanUSA]

But look at the true vacancies coupled with the non stop construction. Yes, many condos may be sold, but to investors and too often on easy credit. These people are counting on rents to pay for them, but vacancies are massive. Never in my life, not even in the US before the housing crash, have I seen so many vacancies. Yet construction goes unabated.

When I did my condo tour in Bangkok, there were not many vacancies. A few developments were completely full. A couple developments had maybe 5 rooms available in the whole development. I'm not seeing "massive vacancies" in the mid-range products.

[waza]

But look at the true vacancies coupled with the non stop construction. Yes, many condos may be sold, but to investors and too often on easy credit. These people are counting on rents to pay for them, but vacancies are massive. Never in my life, not even in the US before the housing crash, have I seen so many vacancies. Yet construction goes unabated.

When I did my condo tour in Bangkok, there were not many vacancies. A few developments were completely full. A couple developments had maybe 5 rooms available in the whole development. I'm not seeing "massive vacancies" in the mid-range products.

My friend just complete a condo tour of BKK looking for an upmarket condo. He was shocked at the amount of not only vacant condos but the amount of condo just built to the lock up stage, not just one or two condo but buildings with multiple floors of incomplete units and many building to boot. By lock-up stage I mean devoid of heating cooling decoration ect ect. He was told that if he signed a lease his condo would be decorated and furnished to his choice of style and he could select the furniture up to the value of Bt700,000. He chose a corner condo with an excellent view and it took about 2 weeks for them to complete the fixtures and deliver the furniture. He is very happy because he has no neighbours, if fact his nearest neighbour is 4 floors away.

Edited March 15, 2013 by waza

[NeverSure]

1. China hasn't devalued it's currency. (It's appreciated against the US Dollar slowly over the years). Admittedly, if it was allowed to freely float, it would probably be even higher than it is now, but it's not been devalued at any point.

Oh really. The efforts of the US to weaken the dollar to enhance trade exports have nothing to do with this? And China hasn't been also devaluing its currency in what some might call a currency war? Link

2. The Chinese workforce is actually starting to decrease now (the effect of the one child policy means that more people are retiring now than entering the workforce).

You haven't read about the layoffs and long lines for jobs in China? Link Link

All that said, I do tend to agree that although China is making money from selling stuff, that there are a lot of bad loans in the country, and something is likely to go wrong at some point. (It's when that happens, that I wouldn't want to be Taiwanese... as the government will almost certainly try to change the story in some way)

China isn't making money. It's a communist country and it owns the means of production. When businesses lose money, China loses money. China is losing money. It's banking system is nearing collapse. In fact it has collapsed and just won't be transparent about it. READ THIS

As for the condo market in Thailand... There's no 100% mortgages here, and I've never heard of interest-only mortgages here, so speculation simply can't get to the state it reached in the US. I'm not saying there isn't speculation, just that, with the demographics of Thailand where the population is rising, property in the centre of Bangkok is a reasonably safe purchase over the long term.

Add in that the banks DO check income, and DO run credit checks (although they're rather rudimentary here), and it's nowhere near what it was like in the US where people could get mortgages that they had no ability to pay on the day they took them out...

What does this have to do with overbuilding, empty buildings, or the debt owed to banks by individuals and developers? There is a massive surplus with prices rising beyond anything realistic. It's a speculative bubble.

Thai banks now have 40% of their assets in condo loans!!!!!!!!!!! This is horribly "all your eggs in one basket" risky. Link

Please do some research and post some links when you make claims. Thank you.

Edited March 15, 2013 by NeverSure

[Ulic]

The collapse will take longer to happen than anyone thinks but when it happens it will be faster than

anyone thought possible.

Ratings agencies know little and it seems accounting is opaque/self serving like Greece,Iceland, Worldcom, Nortel, Enron etc, etc...

Not sure how the housing market will fare. Down yes but it could be supported by allowing foreigners to own all condos in a project not just

the current % of a complex allowed currently. (I would never trust the Thai company method) This would help the banks and allow the

local politicians and higher up police captains to get out of crippling leverage debt. But we shall see. All I really know is most of the people

commenting here know way more than I do and I see no positive comments.

[IsaanUSA]

So if there is a bubble and if that bubble were to "pop", do you think property prices would come down? I would seriously think about buying a place if the prices came down dramatically. Right now I think the prices are too high.

[NeverSure]

Well, in the recent US housing bubble and crash, prices dropped about 40% on average, depending on where you lived. Many people who can afford the payments today owe much more than the house is worth. Others with less moral fiber regarding their promises, walked away and ruined their credit. Others who also lost a job couldn't sell for what they owed so they were foreclosed on, or walked away also ruining their credit.

Having just lived through a screaming price rise and over building "boom" followed by an abrupt crash, I have no problem thinking it can happen.

The only thing that "saved" me was that I had owned my land for many years and then built before prices reached the top, and owning the land free and clear and having another house to sell to pay for the building of the new one, I was never into the house for more than it was worth. I never had any payments either.

Housing prices are, after about 6 years, starting to recover some. I think the reported statistic is that they've gone up about 12% in our area in the past 2 years. Buyers are still nervous and sales are better but nowhere near what they were. In order to actually sell my home I'd have to price it about 40% less than what I could have gotten at the top of the bubble.

So I'm no seer, nor am I a magician. Experience is a hard teacher. A lot of people in Thailand are insisting on learning the hard way. I've been there and done that so I'm out.

[IsaanUSA]

But as someone else said, after the previous crash in Thailand, the real estate prices did not go down in Thailand.

[NeverSure]

This studied account of 1995-1997 reads like an exact repeat of today to me. Link

So does this. Link.

It isn't reasonable to say that real estate values didn't drop in 1997. There are too many factors at work. The Thai baht depreciated almost 80% against the dollar, meaning that I could have taken at most 25% as many dollars and bought a condo. Worldwide, that's certainly a drop in value of the property. A huge drop.

Also, Thailand was not willing to write off losses on real estate. There are many condo projects from 1997 still standing as ghost reminders of the crash. If they wouldn't sell for the anticipated price, then I have to say the value dropped. Some of those projects were and are still being demolished. Surely that's a loss of value.

But mostly, lenders foreclosed and then didn't sell because they couldn't sell for enough to pay off the loan. They didn't want to write off the loan as a bad debt and ruin the bank's supposed but corrupt balance sheet. The Thai government borrowed money from the IMF, some of it still owed, and bailed out its banks. The collateral for the condo loans sat and rotted just as rice is rotting in warehouses.

By the way, has it occurred to anyone that the price of rice hasn't gone down either? It is the Thai way. Pay my price or I'll let it rot.

So on the surface it may have appeared that prices didn't go down much, but there weren't buyers at the asking price either. There just weren't sales. Had there been sales, the prices surely would have been lower. If you had owned a condo and wanted to sell it you surely would have had to accept a lower price. Sales dried up.

Thailand is in exactly the same position, and doing exactly the same wrong things as 1995 and 1996 and those reports linked above explain it.

I just don't know when 1997 will arrive again.

[waza]

This studied account of 1995-1997 reads like an exact repeat of today to me. Link

So does this. Link.

It isn't reasonable to say that real estate values didn't drop in 1997. There are too many factors at work. The Thai baht depreciated almost 80% against the dollar, meaning that I could have taken at most 25% as many dollars and bought a condo. Worldwide, that's certainly a drop in value of the property. A huge drop.

Also, Thailand was not willing to write off losses on real estate. There are many condo projects from 1997 still standing as ghost reminders of the crash. If they wouldn't sell for the anticipated price, then I have to say the value dropped. Some of those projects were and are still being demolished. Surely that's a loss of value.

But mostly, lenders foreclosed and then didn't sell because they couldn't sell for enough to pay off the loan. They didn't want to write off the loan as a bad debt and ruin the bank's supposed but corrupt balance sheet. The Thai government borrowed money from the IMF, some of it still owed, and bailed out its banks. The collateral for the condo loans sat and rotted just as rice is rotting in warehouses.

By the way, has it occurred to anyone that the price of rice hasn't gone down either? It is the Thai way. Pay my price or I'll let it rot.

So on the surface it may have appeared that prices didn't go down much, but there weren't buyers at the asking price either. There just weren't sales. Had there been sales, the prices surely would have been lower. If you had owned a condo and wanted to sell it you surely would have had to accept a lower price. Sales dried up.

Thailand is in exactly the same position, and doing exactly the same wrong things as 1995 and 1996 and those reports linked above explain it.

I just don't know when 1997 will arrive again.

The Thai government took a Bt1.14 trillion bath on the 1997 crash, which is hidden off the books at the moment......

However, after serving for just about four months, he was removed in a Cabinet reshuffle reportedly for opposing the government's policy to make the central bank responsible for the country's Bt1.14-trillion debt incurred during the 1997 financial crisis. http://www.thaivisa.com/forum/topic/625040-former-thai-finance-minister-thirachai-warns-against-off-budget-loan/?p=6192120

[USNret]

When I did my condo tour in Bangkok, there were not many vacancies. A few developments were completely full. A couple developments had maybe 5 rooms available in the whole development. I'm not seeing "massive vacancies" in the mid-range products.

I'm curious about this condo tour and how it was conducted. Were you escorted by a developer or sales agent? Also, how did you determine that developments were completely full or that there were few vacancies? Was this info from sales material, or did you look inside each unit?

[MaiChai]

Condo building in Bangkok has really ramped up in the last couple of years. It seems pretty clear this will lead to over supply.

Thai economics defies logic. I can understand the country has expanded manufacturing considerably, but its difficult to see how the country can move up a notch without improved education. There are also lack of consumer safeguards in law and alot of dishonesty in society. The economy races ahead but society is not keeping up. Thus its certainly heading for a bubble. But when will it burst?

[NeverSure]

I don't personally think that Thai economics defy logic. I think that Thais defy logic.

No one has repealed the law of supply and demand. I read the scholarly studies on 1995 - 1997 in Thailand (and Asia) and they read exactly like what's happening right now. I posted a couple of links above. They read as if they were written about today, but they are about 1997.

The laws of reality caught up with Thailand and Thailand crashed. The baht really crashed. The government borrowed money "off the books" from the IMF to bail out banks, and they still haven't paid it back.

Politicians won't take responsibility for what's happening because responsibility doesn't buy votes. Thailand is looking all over the world for money to borrow for the government, to spend even more into debt. When they do borrow and spend there is so much corruption that who knows where the money really goes. Who knows the real condition of the banks?

[nev]

these are all calculated moves by the (big) bankers.

it's all about of who control the debts. there's one guy in Dubai who has to push it through on a large order. he has to pay back his debts or else ...

roll back and find out of who finally controls the debt. this is slavery in the making and the best slaves are those who don't know that they are.

it all plays together, with the tax free car promotion that will submit hundreds of thousands into slavery. this is the way it works, kinda matrix.

real estate is just another chapter and just part of the game.

Its one big game indeed, thats why i opted out of the game in Australia to live a quiet life here in isan to sit back and watch the slaves battle it out.

[TommoPhysicist]

Add in that the banks DO check income, and DO run credit checks (although they're rather rudimentary here), and it's nowhere near what it was like in the US where people could get mortgages that they had no ability to pay on the day they took them out...

I can assure you they don't check income or the borrowers ability to pay.

[nev]

Condo building in Bangkok has really ramped up in the last couple of years. It seems pretty clear this will lead to over supply. Thai economics defies logic. I can understand the country has expanded manufacturing considerably, but its difficult to see how the country can move up a notch without improved education. There are also lack of consumer safeguards in law and alot of dishonesty in society. The economy races ahead but society is not keeping up. Thus its certainly heading for a bubble. But when will it burst?

Happening up here in Khonkaen too, condo buildings going up everywhere and new housing estates too, who are the buyers? i have heard many thais and companies are moving up here from Bangkok, maybe so but are thai's happy to live in a 28sq condo that are going for nearly a million baht i very much doubt it.

[chiangmaikelly]

1. China hasn't devalued it's currency. (It's appreciated against the US Dollar slowly over the years). Admittedly, if it was allowed to freely float, it would probably be even higher than it is now, but it's not been devalued at any point.

2. The Chinese workforce is actually starting to decrease now (the effect of the one child policy means that more people are retiring now than entering the workforce).

All that said, I do tend to agree that although China is making money from selling stuff, that there are a lot of bad loans in the country, and something is likely to go wrong at some point. (It's when that happens, that I wouldn't want to be Taiwanese... as the government will almost certainly try to change the story in some way)

As for the condo market in Thailand... There's no 100% mortgages here, and I've never heard of interest-only mortgages here, so speculation simply can't get to the state it reached in the US. I'm not saying there isn't speculation, just that, with the demographics of Thailand where the population is rising, property in the centre of Bangkok is a reasonably safe purchase over the long term.

Add in that the banks DO check income, and DO run credit checks (although they're rather rudimentary here), and it's nowhere near what it was like in the US where people could get mortgages that they had no ability to pay on the day they took them out...

My wife got 100% mortgage and it is my understanding not a problem on new construction homes.

[chiangmaikelly]

The sky is falling I get that but how do we know when it has fallen or the bubble burst? Will the baht go down against the US dollar or pound? Will interest rates spike? Will home prices sink and if so how much? I know time will tell but when is all this stuff going to happen? 1 year? 5 years? 27 years?

To sum it up, how will I know the buttle has burst?

Kelly, the bubble has usually burst a couple of years before people come out of denial. I think it has burst already, at least in several cities. Now individuals who are buying homes and especially condos are doing it because prices have been going up and "therefore will always go up."

But look at the true vacancies coupled with the non stop construction. Yes, many condos may be sold, but to investors and too often on easy credit. These people are counting on rents to pay for them, but vacancies are massive. Never in my life, not even in the US before the housing crash, have I seen so many vacancies. Yet construction goes unabated.

Sure, there are some wealthy people and some conglomerates with investor money who are building without debt. But those investors will want their money back and the piper must be paid.

If I had just built a big condo project in Bangkok or Chiang Mai with investor money and then got pressure put on me to return the money soon with a profit, or if too many investors wanted to sell their investment, I'd be the emperor with no clothes.

I think you're staring it right in the eyeballs.

So the bubble has burst already? And the baht stays strong and production keeps growing and GDP keeps going up. Hmmmm

[NeverSure]

1. China hasn't devalued it's currency. (It's appreciated against the US Dollar slowly over the years). Admittedly, if it was allowed to freely float, it would probably be even higher than it is now, but it's not been devalued at any point.

2. The Chinese workforce is actually starting to decrease now (the effect of the one child policy means that more people are retiring now than entering the workforce).

All that said, I do tend to agree that although China is making money from selling stuff, that there are a lot of bad loans in the country, and something is likely to go wrong at some point. (It's when that happens, that I wouldn't want to be Taiwanese... as the government will almost certainly try to change the story in some way)

As for the condo market in Thailand... There's no 100% mortgages here, and I've never heard of interest-only mortgages here, so speculation simply can't get to the state it reached in the US. I'm not saying there isn't speculation, just that, with the demographics of Thailand where the population is rising, property in the centre of Bangkok is a reasonably safe purchase over the long term.

Add in that the banks DO check income, and DO run credit checks (although they're rather rudimentary here), and it's nowhere near what it was like in the US where people could get mortgages that they had no ability to pay on the day they took them out...

My wife got 100% mortgage and it is my understanding not a problem on new construction homes.

Kelly, I have a friend in Isaan who's a Thai school teacher. Last year she bought a new Toyota pickup with nothing down and that discount. Now she's buying a small new house with nothing down. I have no idea how she'll make the payments and live, when she also helps her parents all on less than 15k baht pm.

I have another school teacher friend near Udonthani who signed mortgages for her parents and her sister. She has to make the payments because they don't/won't. She can hardly afford to live.

Frankly, something like that first one "might" be the perfect situation for a farang. Drop in out of the sky, make the small house payments and pickup payments and pay for utilities, groceries etc. Let her keep her salary for her needs and her parents. With any luck, she might get government health insurance for the farnang - maybe?

Then if it all went to hell, the farang walks and all he's out is his monthly living he would have had anyway, plus a little extra for dinner out or something, and his own wheels etc.

Beats the hell out of signing a mortgage and a car loan or putting up the cash, and then getting "Isaan girled" out of it all. ??

[NeverSure]

The sky is falling I get that but how do we know when it has fallen or the bubble burst? Will the baht go down against the US dollar or pound? Will interest rates spike? Will home prices sink and if so how much? I know time will tell but when is all this stuff going to happen? 1 year? 5 years? 27 years?

To sum it up, how will I know the buttle has burst?

Kelly, the bubble has usually burst a couple of years before people come out of denial. I think it has burst already, at least in several cities. Now individuals who are buying homes and especially condos are doing it because prices have been going up and "therefore will always go up."

But look at the true vacancies coupled with the non stop construction. Yes, many condos may be sold, but to investors and too often on easy credit. These people are counting on rents to pay for them, but vacancies are massive. Never in my life, not even in the US before the housing crash, have I seen so many vacancies. Yet construction goes unabated.

Sure, there are some wealthy people and some conglomerates with investor money who are building without debt. But those investors will want their money back and the piper must be paid.

If I had just built a big condo project in Bangkok or Chiang Mai with investor money and then got pressure put on me to return the money soon with a profit, or if too many investors wanted to sell their investment, I'd be the emperor with no clothes.

I think you're staring it right in the eyeballs.

So the bubble has burst already? And the baht stays strong and production keeps growing and GDP keeps going up. Hmmmm

No, I could have worded that better. I think you're staring at the headlight of the train that's coming at you. Things always look great in a bubble just before a crash. That's how we get bubbles and crashes.

Production, GDP growth and baht value can collapse almost overnight as it all did in '97.

[chiangmaikelly]

I don't personally think that Thai economics defy logic. I think that Thais defy logic.

No one has repealed the law of supply and demand. I read the scholarly studies on 1995 - 1997 in Thailand (and Asia) and they read exactly like what's happening right now. I posted a couple of links above. They read as if they were written about today, but they are about 1997.

The laws of reality caught up with Thailand and Thailand crashed. The baht really crashed. The government borrowed money "off the books" from the IMF to bail out banks, and they still haven't paid it back.

Politicians won't take responsibility for what's happening because responsibility doesn't buy votes. Thailand is looking all over the world for money to borrow for the government, to spend even more into debt. When they do borrow and spend there is so much corruption that who knows where the money really goes. Who knows the real condition of the banks?

The 1997 crash occurred because Thailand had low reserves of foreign currency. Now it has more foreign currency reserve than the USA and three times as much as Canada and Australia. http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

Maybe a short course in the crash of 1997 s in order.

[NeverSure]

I don't personally think that Thai economics defy logic. I think that Thais defy logic.

No one has repealed the law of supply and demand. I read the scholarly studies on 1995 - 1997 in Thailand (and Asia) and they read exactly like what's happening right now. I posted a couple of links above. They read as if they were written about today, but they are about 1997.

The laws of reality caught up with Thailand and Thailand crashed. The baht really crashed. The government borrowed money "off the books" from the IMF to bail out banks, and they still haven't paid it back.

Politicians won't take responsibility for what's happening because responsibility doesn't buy votes. Thailand is looking all over the world for money to borrow for the government, to spend even more into debt. When they do borrow and spend there is so much corruption that who knows where the money really goes. Who knows the real condition of the banks?

The 1997 crash occurred because Thailand had low reserves of foreign currency. Now it has more foreign currency reserve than the USA and three times as much as Canada and Australia. http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

Maybe a short course in the crash of 1997 s in order.

Maybe a short course in where all that foreign currency is coming from and how fast it would leave if investors got nervous. That's exactly what happened in 97. Thailand had to unchain the baht from the dollar because they couldn't get dollars, and the baht dropped like a rock.

[chiangmaikelly]

I don't personally think that Thai economics defy logic. I think that Thais defy logic.

No one has repealed the law of supply and demand. I read the scholarly studies on 1995 - 1997 in Thailand (and Asia) and they read exactly like what's happening right now. I posted a couple of links above. They read as if they were written about today, but they are about 1997.

The laws of reality caught up with Thailand and Thailand crashed. The baht really crashed. The government borrowed money "off the books" from the IMF to bail out banks, and they still haven't paid it back.

Politicians won't take responsibility for what's happening because responsibility doesn't buy votes. Thailand is looking all over the world for money to borrow for the government, to spend even more into debt. When they do borrow and spend there is so much corruption that who knows where the money really goes. Who knows the real condition of the banks?

The 1997 crash occurred because Thailand had low reserves of foreign currency. Now it has more foreign currency reserve than the USA and three times as much as Canada and Australia. http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

Maybe a short course in the crash of 1997 s in order.

Maybe a short course in where all that foreign currency is coming from and how fast it would leave if investors got nervous. That's exactly what happened in 97. Thailand had to unchain the baht from the dollar because they couldn't get dollars, and the baht dropped like a rock.

http://en.wikipedia.org/wiki/1997_Asian_financial_crisis

[NeverSure]

I don't personally think that Thai economics defy logic. I think that Thais defy logic.

No one has repealed the law of supply and demand. I read the scholarly studies on 1995 - 1997 in Thailand (and Asia) and they read exactly like what's happening right now. I posted a couple of links above. They read as if they were written about today, but they are about 1997.

The laws of reality caught up with Thailand and Thailand crashed. The baht really crashed. The government borrowed money "off the books" from the IMF to bail out banks, and they still haven't paid it back.

Politicians won't take responsibility for what's happening because responsibility doesn't buy votes. Thailand is looking all over the world for money to borrow for the government, to spend even more into debt. When they do borrow and spend there is so much corruption that who knows where the money really goes. Who knows the real condition of the banks?

The 1997 crash occurred because Thailand had low reserves of foreign currency. Now it has more foreign currency reserve than the USA and three times as much as Canada and Australia. http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

Maybe a short course in the crash of 1997 s in order.

That's "why" the crash occurred? I'd better go edit wikipedia as anyone can do. The crash occurred because the real estate market collapsed, leaving the banks without reserves which the Thai government had to borrow from the IMF and which they still owe.

[NeverSure]

I don't personally think that Thai economics defy logic. I think that Thais defy logic.

No one has repealed the law of supply and demand. I read the scholarly studies on 1995 - 1997 in Thailand (and Asia) and they read exactly like what's happening right now. I posted a couple of links above. They read as if they were written about today, but they are about 1997.

The laws of reality caught up with Thailand and Thailand crashed. The baht really crashed. The government borrowed money "off the books" from the IMF to bail out banks, and they still haven't paid it back.

Politicians won't take responsibility for what's happening because responsibility doesn't buy votes. Thailand is looking all over the world for money to borrow for the government, to spend even more into debt. When they do borrow and spend there is so much corruption that who knows where the money really goes. Who knows the real condition of the banks?

The 1997 crash occurred because Thailand had low reserves of foreign currency. Now it has more foreign currency reserve than the USA and three times as much as Canada and Australia. http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

Maybe a short course in the crash of 1997 s in order.

Maybe a short course in where all that foreign currency is coming from and how fast it would leave if investors got nervous. That's exactly what happened in 97. Thailand had to unchain the baht from the dollar because they couldn't get dollars, and the baht dropped like a rock.

http://en.wikipedia.org/wiki/1997_Asian_financial_crisis

Please don't give me wikipedia. Any of us can go in there and edit it right now. Give me scholarly links like the ones I posted, say a group at a university that's not in Thailand.

Edited March 16, 2013 by NeverSure

[chiangmaikelly]

I don't personally think that Thai economics defy logic. I think that Thais defy logic.

No one has repealed the law of supply and demand. I read the scholarly studies on 1995 - 1997 in Thailand (and Asia) and they read exactly like what's happening right now. I posted a couple of links above. They read as if they were written about today, but they are about 1997.

The laws of reality caught up with Thailand and Thailand crashed. The baht really crashed. The government borrowed money "off the books" from the IMF to bail out banks, and they still haven't paid it back.

Politicians won't take responsibility for what's happening because responsibility doesn't buy votes. Thailand is looking all over the world for money to borrow for the government, to spend even more into debt. When they do borrow and spend there is so much corruption that who knows where the money really goes. Who knows the real condition of the banks?

The 1997 crash occurred because Thailand had low reserves of foreign currency. Now it has more foreign currency reserve than the USA and three times as much as Canada and Australia. http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

Maybe a short course in the crash of 1997 s in order.

That's "why" the crash occurred? I'd better go edit wikipedia as anyone can do. The crash occurred because the real estate market collapsed, leaving the banks without reserves which the Thai government had to borrow from the IMF and which they still owe.

Had nothing to do with major funds attacking the baht? Aw come on. 1997 Thailand was low on foreign currency now they are flush.

[chiangmaikelly]

The 1997 crash occurred because Thailand had low reserves of foreign currency. Now it has more foreign currency reserve than the USA and three times as much as Canada and Australia. http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

Maybe a short course in the crash of 1997 s in order.

Maybe a short course in where all that foreign currency is coming from and how fast it would leave if investors got nervous. That's exactly what happened in 97. Thailand had to unchain the baht from the dollar because they couldn't get dollars, and the baht dropped like a rock.

http://en.wikipedia.org/wiki/1997_Asian_financial_crisis

Please don't give me wikipedia. Any of us can go in there and edit it right now. Give me scholarly links like the ones I posted, say a group at a university that's not in Thailand.

I know Wiki is nonsense and Fitch and credit rating agencies can't be trusted and all the Thai financial figures are phoney. I'm out of this one. It's the same bs over and over. You guys are the guru's and the world don't know nuttin.

[p_brownstone]

as an outsider with an interest in the property market in thailand I see that bubble thingy is well overdue.I predicted that to burst back in 2010November given it 3 to 6 month.I was wrong and it carried on blwoing even bigger and bigger with more condos rising up into the BKK sky.

The price per m2 is ridiculouslyy high and when we look at purchasing price v income from rental it is not wise to go that way but to rely on an annual property value increase of 20%.This speculative moves will indeed come to an end and very soon.

I agree with you and the only reason why the bubble hasn't burst and probably won't is that the main driver of the thai real estate market is money laundering .

People don't care to buy units that never will be rented,will never produce any ROI, they have achieved what they wanted : launder dirty cash .

Quite simple.

One can only "launder" money in the Property Market if it is possible to sell the Property bought with the "dirty money" fairly quickly and easily..

By and large this is not possible in Thailand because new Properties are coming on the Market all the time and the Thai attitude is to buy new, not second hand.

Patrick

[NeverSure]

I know Wiki is nonsense and Fitch and credit rating agencies can't be trusted and all the Thai financial figures are phoney. I'm out of this one. It's the same bs over and over. You guys are the guru's and the world don't know nuttin.

I'm out of it too because I've said my piece more than once here. While you go, read from your Wiki link:

"At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. ^[1] As the crisis spread, most of Southeast Asia and Japan saw slumping currencies,^[2] devalued stock markets and other asset prices, and a precipitous rise in private debt.^[3]"

Sounds a lot like today, doesn't it? Those "other assets" should say "real estate" because that's what got the banks and brought in the IMF.

Later...

[p_brownstone]

A large amount of Condos "bought" in Thailand are not actual sales, where the Buyer has already obtained a Mortgage based on the full price of the Unit - as most people would understand a "Sale".

Thais will put down a relatively small Deposit (usually from Cash) on an un-built Condo - betting on being able to sell the "Deposit" and thus the right to the actual Condo when it is completed - to a genuine Buyer who will live in, or possibly rent out the Unit. That's why you see so many "Sold out" or "last 5 Units" signs on barely started Condo Projects around town.

This "system" of investment has 2 problems attached:

1) The "Developer" believes he has sold out his unfinished Project and gets greedy, goes to the Bank with his evidence of how well his business is doing (his "Sales" figures) and obtains a loan for another Project (or two).

2) There are so many new Condominiums being built (see 1 above) more "Deposit only" buyers rush in to make a killing so there is no demand for anyone to buy "old" Deposits and the original "Deposit holder" cannot sell on, cannot obtain a Mortgage to complete the purchase and the Developer is left with unsold Units and a new Project to finance.

Patrick