Thailand ( or BKK) Property Bubble

[mmh8]

I have been reading about a property bubble in Thailand, or maybe just Bangkok for at least 3 or 4 years.

My question is doesr does it just mean that all property is overpriced in thailand or BKK in particular?

I have been waiting for this to pop but it has not done so yet.

Any advice? I mean any useful advice on entering property market ( bearing in mind the whole argument of not owning anything in Thailand as afarang and not investing anything in Thailand and not anything you don't want to lose....bal bal bal... etc)

Is the property market overpriced, is that riverview condo 3 or 4 bedrooms worth 7 million, is the house 2 story 3 beddroom worth the 5 million? is the eagerness of owner to sell below market price despite improvements a sign of difficulty in unburdening or something else?

[falang07]

Basic rule in Thailand is that everyone offering anything for sell is trying to exaggerate the price as much as possible and hope to find some fool who will buy. This applies to local markets, selling a car, condo, house, and basically everything. The rule is to bargain aggressively, and move over to another offer in case the owner keeps asking the ridiculously overpriced amount since the market is over-saturated already.

[KittenKong]

" is the eagerness of owner to sell below market price despite improvements a sign of difficulty in unburdening or something else?"

Market price is the price achieved, not the price asked. So by definition you can only ever sell at market price.

Many things in Thailand are seriously overpriced, including the Baht.

[SantiSuk]

CEO of Dusit Thani hotels was interviewed on a Channel Asia business magazine programme recently. He said that it was difficult making money from new hotels in Bangkok because so many new hotels have opened and land prices have doubled in the last 3-4 years. I live in Isaan - land prices around me have doubled in the last 3-4 years. I think it's the general Thai bubble. History suggests that such sharp rises are usually bubbles that get pricked.

Land prices doubling does not of course mean that property prices have to double but building costs seem to have risen sharply too.

You would be a mug buying property anywhere in Thailand at the moment if it was for investment purposes .... IMO

40 year investor

[trogers]

CEO of Dusit Thani hotels was interviewed on a Channel Asia business magazine programme recently. He said that it was difficult making money from new hotels in Bangkok because so many new hotels have opened and land prices have doubled in the last 3-4 years. I live in Isaan - land prices around me have doubled in the last 3-4 years. I think it's the general Thai bubble. History suggests that such sharp rises are usually bubbles that get pricked.

Land prices doubling does not of course mean that property prices have to double but building costs seem to have risen sharply too.

You would be a mug buying property anywhere in Thailand at the moment if it was for investment purposes .... IMO

40 year investor

Yes, lousy time to invest, but a great time to speculate...double or nothing anyone?

[zyphodb]

Yep, I'd say that everything is overpriced right now, & I would have thought that the bubble will burst sooner rather than later...

[olfu]

I have an impression that a lot of people hoped for bubble to blow as it did in USA but it never happened.

To buy anything as investment in Thailand you better to know something most don't know.

My opinion is to buy only for private use and if you have extra money.

[trogers]

I have an impression that a lot of people hoped for bubble to blow as it did in USA but it never happened.

To buy anything as investment in Thailand you better to know something most don't know.

My opinion is to buy only for private use and if you have extra money.

A bubble may burst, or may slowly deflate.

Property prices in Japan peaked at 1990 and then deflated for over 20 years to reached pre-bubble levels. A generation of working class avoided buying homes and rented instead.

[olfu]

I think Japan is a bad example for me as I know nothing about Japan houses prices.

Somebody knowledgeable?

I go to Tokyo every year and prices for hotels are high compare to US.

[Khun Jean]

A plate of Goaw pad Kai doubled in price in the last 5 years, if land also doubled in the same time it tells you that it is caused by a Thai baht that is worth less.

Inflation en devaluations of the Thai baht are the main reason why real estate 'never' go down in price. (Not only a Thai phenomenon, happens everywhere where QE is the new normal.)

Add to that the unwillingness of most Thai people and companies to sell at a loss, combined with virtually no taxes.

At the moment we have that slump in real estate sales and lower Thai baht value.

[danphuket]

Talking about Phuket for instance. A lot of Thais are taking loans from banks to get a house or 2 to speculate and get rental return. Can we really see something like what happened in USA with housing bubble?

[trogers]

Talking about Phuket for instance. A lot of Thais are taking loans from banks to get a house or 2 to speculate and get rental return. Can we really see something like what happened in USA with housing bubble?

Doubt to the extend of the subprime crisis of the US, as banks here are more prudent.

I am looking out for new condo launches that suffer construction delay due to lack of liquidity from poor pre-sales. Why condo projects? Because construction cost is a higher multiple to land value.

[johnnyk]

It's not a good time for falangs to invest in Thai property (is it ever?) for lots of reasons. But for Thais, buying land, not condos, is ok. They don't trust paper money and why should they when you see who is steering the bus. Condos can be overbuilt and run into the ground by myopic owners but land can sit at little cost and maybe even leased for 30 years to a falang doofus for cash on the nail. Rinse and repeat 30 years later.

Bottom line, Thais like land and gold.

[attrayant]

Thailand's Bubble Economy Is Heading For A 1997-Style Crash

So says this Forbes contributor:

Thailand is part of the overall emerging markets bubble that I have been warning about in recent years, along with Indonesia, Malaysia and other Southeast Asian countries.

/snip/

As international capital clamored into Thai assets, the countrys 10 year government bond yields fell from their prior 4 to 6.5 percent range to just over 3 percent, while total external debt more than doubled:

/snip/

Even more worrisome is the fact that Thailands short-term debt to total external debt ratio has roughly doubled in the past decade, which means that the country is more vulnerable to short-term interest rate increases.

/snip/

The Thai stock market, as measured by the SET index, quadrupled since 2008.

/snip/

Thailand is currently experiencing a dangerous credit bubble that is helping to boost its economic growth and consumer spending.

/snip/

Surging automobile sales in 2012, courtesy of a first-car tax rebate, has been a significant contributor to the recent increase in Thai households debt. The World Bank estimates that the tax breaks cost Thailands government $2.5 billion, but simply pulled automobile demand forward only to subsequently plunge when the tax break expired and over 100,000 indebted consumers defaulted on their auto loan payments.

Thailands household debt grew at an alarming 13.6 percent per year since 2008, bringing the countrys household debt-to-GDP ratio to 77 percent from 55 percent, which is up radically from just 45 percent a decade ago.

/snip/

Other costly Thai government spending or tax break schemes abound such as:

• A subsidy scheme for first-time home buyers that will cost the government 12 billion baht in lost revenues
• A three-year debt moratorium program that will cost 1.5 billion baht per year
• A 2012 corporate income tax cut from 30 percent to 23 percent, which resulted in a 52 billion baht revenue loss. Corporate income taxes were further cut to 20 percent in 2013, which is expected to cause a 74 billion baht revenue loss
• Personal income tax has been cut to promote consumption, which will result in a 32 billion baht revenue loss in 2013
• A fuel subsidy that cost 90 billion baht
• Free computer tablets for students that cost the government 16 billion baht in 2012 and is expected to cost 12 billion baht this year
• A salary increase for government officials that cost 18 billion baht in 2012 and is expected to cost 23 billion baht in 2013
• A rubber subsidy that will cost 21.2 billion baht

Those were just selected snippets from the article. There's a lot more if you follow the link.

[johnnyk]

Subsidies, tax breaks etc. = buying voters with their own money.

[johnnyk]

Subsidies, tax breaks etc. = buying voters with their own money.

[trogers]

Subsidies, tax breaks etc. = buying voters with their own money.

With future taxpayer money, debts, debts and more debts - increasing money supply and inflating bubbles.

[PhillyBoy]

I heard people say 8 years ago and then again four years ago before I purchased my condo that things were bad. Don't invest. I bought because I had the money, wanted to live here and own my own place. All the negative prone people will eventually be right, maybe in 10 or 20 years.. Currently my condo has increased in value by about 1.5 million baht. All of the new condos being built are mostly 25 or 32 sq m in size. Nice if you are a cockroach. Prices are actually pretty stable and costs have not gone up all that much per Square meter outside of BKK.

I think most of the people making comments about buying a condo or not simply just don't have the money available to make a purchase. Good luck waiting for the bubble to burst.

Bubble boy

[PhillyBoy]

I heard people say 8 years ago and then again four years ago before I purchased my condo that things were bad. Don't invest. I bought because I had the money, wanted to live here and own my own place. All the negative prone people will eventually be right, maybe in 10 or 20 years.. Currently my condo has increased in value by about 1.5 million baht. All of the new condos being built are mostly 25 or 32 sq m in size. Nice if you are a cockroach. Prices are actually pretty stable and costs have not gone up all that much per Square meter outside of BKK.

I think most of the people making comments about buying a condo or not simply just don't have the money available to make a purchase. Good luck waiting for the bubble to burst.

Bubble boy

[Senechal]

You can't walk 10 meters in Bangkok, Phuket, Hua Hin or Pattaya without bumping into another gigantic billboard for condos. Of *course* it's a bubble. There are almost zero ads for anything *but* condominiums. Household debt in Thailand is at dangerous levels already. To believe that this is sustainable is to ignore basic mathematics.

Save your money. When the Federal Reserve stops printing money (which they mathematically must) there will be carnage across all emerging markets. Thailand is in for a particularly bad bruising on that front, having leveraged the economy on credit, rice buying schemes, car loan schemes, doubled minimum-wages and a host of other unsustainable policies.

The carnage is coming. Anyone who thinks it won't hasn't spent enough time watching emerging market economies. The tendency is to soar first, giving everyone hope that being "first world" is around the corner, and then to collapse with incredible intensity, reminding everyone of where they are -- and shocking the hell out of those who have never seen it before.

Just wait. This will end like it always does.

[Senechal]

I heard people say 8 years ago and then again four years ago before I purchased my condo that things were bad. Don't invest. I bought because I had the money, wanted to live here and own my own place. All the negative prone people will eventually be right, maybe in 10 or 20 years.. Currently my condo has increased in value by about 1.5 million baht. All of the new condos being built are mostly 25 or 32 sq m in size. Nice if you are a cockroach. Prices are actually pretty stable and costs have not gone up all that much per Square meter outside of BKK.

I think most of the people making comments about buying a condo or not simply just don't have the money available to make a purchase. Good luck waiting for the bubble to burst.

Bubble boy

Oh LOL. I remember hearing exactly the same thing from proud owners in Spain, Ireland, Florida, Greece, Italy, etc. Good luck "bubble boy".

Edited December 10, 2013 by Senechal

[KittenKong]

I am highly suspicious of any economy that seems to be getting all its power from debt and borrowing, be it personal, corporate or government or any combination thereof. Unfortunately most of the planet falls into this category, including Thailand.

There's far too much debt everywhere for any good to ever come of it.

[mmh8]

my question is more house orientated but within one of these villages,so it would still be land, but a sliced bit of it.

[Jasun]

my question is more house orientated but within one of these villages,so it would still be land, but a sliced bit of it.

You'll be sweet as long as you have the right to redevelop or do what you want with the land in the future. Not all landed housing estates allow this, and it's not always practical. In which case you are in the same position as owning a townhouse, no guarantees of capital growth but least the bottom shouldn't completely fall out of it, as is possible with the condo market.

[meand]

I don't believe in "waiting for the right time to buy" in Thailand. Imo, what will probably happen, is even if you did that, somebody who bought years before you and realized gains, will probably be way ahead of you after you buy, even when considering the potential crash. All those years you fail to buy, and the economy does well, you are "losing" as well.

The people just sitting around waiting all their lives for the "right time to buy" are the ones working until they are 70.

A big key to life and financial independence is owning your residence. Don't let anybody dissuade you if you have the money and you want your own place

[danphuket]

I am highly suspicious of any economy that seems to be getting all its power from debt and borrowing, be it personal, corporate or government or any combination thereof. Unfortunately most of the planet falls into this category, including Thailand.

There's far too much debt everywhere for any good to ever come of it.

A recent article from The Nation states that household debt to gdp ration was 77% in 2012. http://www.nationmultimedia.com/business/Thais-household-debt-jolts-S&P-30218322.html

Is it normal?

[Senechal]

I don't believe in "waiting for the right time to buy" in Thailand. Imo, what will probably happen, is even if you did that, somebody who bought years before you and realized gains, will probably be way ahead of you after you buy, even when considering the potential crash. All those years you fail to buy, and the economy does well, you are "losing" as well.

The people just sitting around waiting all their lives for the "right time to buy" are the ones working until they are 70.

A big key to life and financial independence is owning your residence. Don't let anybody dissuade you if you have the money and you want your own place

Ha! Tell that to the people who bought in 1995 and lost their shirts. Or to the smart souls who said "no way" in 1995, and bought wisely in 1998.

Think it won't happen again? You don't know Thailand, IMHO.

[KittenKong]

I am highly suspicious of any economy that seems to be getting all its power from debt and borrowing, be it personal, corporate or government or any combination thereof. Unfortunately most of the planet falls into this category, including Thailand.

There's far too much debt everywhere for any good to ever come of it.

A recent article from The Nation states that household debt to gdp ration was 77% in 2012. http://www.nationmultimedia.com/business/Thais-household-debt-jolts-S&P-30218322.html

Is it normal?

What do you mean by "normal"? Normal by current world standards? Normal by historical standards pre-1970?

Personally the idea of 77% household debt (or national debt) to GDP absolutely horrifies me. But there are countries with a lot worse.

I speak as someone who only ever had 4 loans in his entire life and was brought up to save for what he wanted rather than borrow for it. It certainly paid off well for me and it taught me patience to boot. But I dare say that those (individuals and countries) who borrow endlessly and end up going bankrupt and getting the debts written off would also say that that technique works for them.

But the real question is which approach is sustainable over time?

[farang000999]

If they bought in cash they will not want to sell for cheaper and take a loss even if it does coming crashing down.

Edited December 18, 2013 by farang000999

[farang000999]

Seems like half on my wife's facebook directory has purchased a second condo/home for speculative ambitions...