Will the Chinese property buyers hugely affect Thailand's property market?

[kizz06]

»But will this policy cause even more Chinese property buyers to come to Thailand and fundamentally make the sales price reach a new high level?«

Presume OP is thinking of private property and not commercial transactions.

I think “rich Chinese” already for long time has bought property in Thailand. Reading the history they began more than hundred years ago – around 1900 half on Bangkok’s population were Chinese – and in the area I live, I’ve been told that many of the really expensive estates are owned by Chinese. May not be China Chinese, but from Hong Kong and Singapore. Presume it is that kind of property we normal farangs do not look for – only in our dreams – during the so-called financial depression a real-estate agent told me, that only the affordable property market suffered; the high-end were business as usual. Seems like also some rich Thais are buyers at that level.

But if OP is thinking about the more newly rich “middle class” Chinese, the additional demand may push the more affordable property market upwards. However looking at the land prices at Isaan, they have gone up quite a bit over the last decade – where you 10 year ago could buy (farm) land for some 10,000 to 20,000 baht a rai, same area today is 70,000 to 80,000 baht or more a rai – so locals seems also to be able push prices up to reach a new high level.

Thanks!

[umbanda]

I seriously doubt it, China is teetering already...tho' there may be some high net worth individuals who will buy high end RE here to get money out of China and into assets.

The RE bubble here is ready to burst, prices to rent numbers are already stupid.

Can you explain that ratio to someone who knows little about RE language. Whats the tipping points for that ratio. (No Bubble/Bubble/Burst Bubble)

The Value/Rent ratio is the % obtained dividing the rental price by the value price. The best ratio for people looking in investing in rental properties is 1% to 2%, That means...If the Property values is 2000000THB the best rental value for that property will be 1% = 20000THB.... Something not easy to achieve in most Thailand areas. Phuket, Pattaya and BK may be exceptions. Because the US properties values went down after 2008, but rental values went up, Chinese people are buying everything they can in the US now. That action is improving the values there.

May happen here, but now rents values still very low. Example... 2 million property in Chiang Rai may rent for about 8000THB or less.

[mrdome]

I agree much fewer Chinese will be so stupid to take rent-a-wife relationships so seriously.

Good article on the scene there, seems same-same as here:

http://aeon.co/magazine/living-together/why-young-women-in-rural-china-become-the-mistresses-of-wealthy-older-men/

And of course they'll be dealing in much larger numbers, and for pure business purposes, not just settling down and sitting on their butts.

Now there's a scene I would never have time for...

Excerpt: "What’s more, some young Chinese women infantilise themselves, often with the aid of plastic surgery, to imitate the big-eyed heroines of Japanese cartoons. The aesthetic is popular with older men, who are aroused not just by the fragile look, but by affected sa jiao, ‘cute whining’, done in the fashion of a demanding child. In their private pictures, the girls look all of 14, while the men play alongside them in childish games or make faces at the camera."

[Thai at Heart]

The new line from BKK to an nongkhai.

What I know of is a 3000 rai industrial estate, 2 massive shopping come market areas and 3 condos paid for with up front capital from Hong Kong.

It is probably the same all over the country. So when you wonder "where do they get the money from"? All is not quite as it seems.

The local Thai Chinese families manage the investment for a fee. And now you see why falangs will never be allowed to own land.

You give the money to buy 3000 rai of land and an industrial estate, 2 massive shopping centers and 3 condos and I guarantee any American can buy the land.

Well this is being paid for with Hong Kong money through local thai chinese businessmen. They were all very chipper until the protests in bkk happened.

Might be q financial blood bath up country if this govt falls

[Thai at Heart]

I seriously doubt it, China is teetering already...tho' there may be some high net worth individuals who will buy high end RE here to get money out of China and into assets.

The RE bubble here is ready to burst, prices to rent numbers are already stupid.

Can you explain that ratio to someone who knows little about RE language. Whats the tipping points for that ratio. (No Bubble/Bubble/Burst Bubble)

The Value/Rent ratio is the % obtained dividing the rental price by the value price. The best ratio for people looking in investing in rental properties is 1% to 2%, That means...If the Property values is 2000000THB the best rental value for that property will be 1% = 20000THB.... Something not easy to achieve in most Thailand areas. Phuket, Pattaya and BK may be exceptions. Because the US properties values went down after 2008, but rental values went up, Chinese people are buying everything they can in the US now. That action is improving the values there.

May happen here, but now rents values still very low. Example... 2 million property in Chiang Rai may rent for about 8000THB or less.

Rents in thailand have always been low except for absolute cbd in bangkok.

[wym]

Rents in thailand have always been low except for absolute cbd in bangkok.

Where the stratospheric purchase prices make the ratio even more favorable towards renting vs buying.

[robertthebruce]

Where i Live , i have had new neighbours, and they are Chinese and they have paid top notch for the property..

So, thats a plus....., and they seem nice...

[wym]

The Value/Rent ratio is the % obtained dividing the rental price by the value price. The best ratio for people looking in investing in rental properties is 1% to 2%, That means...If the Property values is 2000000THB the best rental value for that property will be 1% = 20000THB.... Something not easy to achieve in most Thailand areas. Phuket, Pattaya and BK may be exceptions. Because the US properties values went down after 2008, but rental values went up, Chinese people are buying everything they can in the US now. That action is improving the values there.

May happen here, but now rents values still very low. Example... 2 million property in Chiang Rai may rent for about 8000THB or less.

I guess you're calculating based on the MONTHLY rent cost?

Usually this is done based on annual, with western advisers saying only buy if the purchase price is less than 15-20 years' rent. Of course fully loaded must include taxes, maintenance, financing legal etc.

And that's in a politically stable, investor-friendly environment with good rule of law.

Here I'd say 12 at the most, and that's very very rarely seen in Thailand.

If the purchase price is a tiny fraction of your net worth so it's a consumption expense you're willing to pay for the convenience and psychological satisfaction fine, but it's very rarely a reasonable investment here for foreigners from a purely financial POV.

[mick220675]

I live in a village of approx 30 houses for many years the only none Thai's were a danish man and myself. When the danish man died i was left having to drive 20 km to talk to a English speaker, but then came Lee a Chinese man in a gay relationship with a local man he is one of the most intelligent and well spoken people I have ever met. He told me many gay Chinese are coming to Thailand and yes they have plenty of cash.

[khunPer]

I seriously doubt it, China is teetering already...tho' there may be some high net worth individuals who will buy high end RE here to get money out of China and into assets.

The RE bubble here is ready to burst, prices to rent numbers are already stupid.

Can you explain that ratio to someone who knows little about RE language. Whats the tipping points for that ratio. (No Bubble/Bubble/Burst Bubble)

The Value/Rent ratio is the % obtained dividing the rental price by the value price. The best ratio for people looking in investing in rental properties is 1% to 2%, That means...If the Property values is 2000000THB the best rental value for that property will be 1% = 20000THB.... Something not easy to achieve in most Thailand areas. Phuket, Pattaya and BK may be exceptions. Because the US properties values went down after 2008, but rental values went up, Chinese people are buying everything they can in the US now. That action is improving the values there.

May happen here, but now rents values still very low. Example... 2 million property in Chiang Rai may rent for about 8000THB or less.

»Can you explain that ratio to someone who knows little about RE language. Whats the tipping points for that ratio. (No Bubble/Bubble/Burst Bubble)«

IMO the short answer is a question about “input” and “output”, i.e. if your rental income is in balance with your operating costs and funding expenses, like mortgage or bank loans. The “tipping point” is the percentage income you need from the property investment to cover the expenses – and that depends on funding. The bubble burst causing the Western depression around 2008 was caused by too high badly secured real estate loans.

To my knowledge, professional investors in rental properties normally calculate with an income rate on 8 to 12 percent per annum; administration and interest on loans and/or mortgage included in the percentage; sometimes also part of operating costs. The profit lay ahead in long-term rise of value, either when sold or using the raised property value as security/mortgage for further investments to gain a small profit from. Even you may have calculated some 10 percent as your “tipping point” it may not work if the interest rate is flexible and rise, or you cannot rent out “full house”, then the result can be negative if your external funding is too high. If property market value also drops the security for loans or mortgage disappears, and the banks or loan institutions wish to secure themselves, either by demanding extra pay off or file for bankruptcy to minimize their loss.

However it may not be that simple. Many Thais I know off seems to calculate a little different – at least in the area I live in – like 10 per cent a year of the actual building costs for long time renters/lease; but not including the cost of land, as they already owns the land and the land itself at least keeps the value, while a building may loose it’s value over time. Commercial investments in Thailand, such as larger projects and business, may be a different story, depending of owners and market.

A Thai investing in a 2 million bath house (land not included) will typically ask for around 200,000 baht/year or some 15,000 baht/month for a long time agreement. However, an outstanding location may affect the rent. A Thai friend inherited a tiny beachfront plot and builds a smaller two-storey house for around 4 million bath in 2008, but quite luxurious and with a little swimming pool. They should charge something like the 30,000 baht/month with the 10 percent calculation, but they get more than 100,000 baht/month. Adding a reasonable value of the tiny, but fairly expensive beachfront land, and again using 10 percent, the 100,000 seems to fit, i.e. a total value of land & house of 12 million, as going rate today in that area may well be 20 million up for such a house.

Some projects promise buyers of a condo or house a guaranteed pay back of 6 per cent pro annum for a limited number of years, if the projects administration can dispose over the condo/house for renting it out. I am not sure what the guarantee is worth and if some costs will be deducted. However looked at as a pure investment only, 6 percent seems Okay if it’s a low risk, which may include an expected rise of property value over a number of years, but too low if higher risk. It’s also depending on your funding, i.e. loans and interest; and if the condo or villa are intended for partly private use or only as an investment. Square meter price for an apartment in Bangkok (ca. 3,000 $) is only 15-25 percent of the square meter price for an apartment in Hong Kong (ca. 20,000 $). The price rise in BKK was some 7 per cent a quarter in 2013. Perhaps BKK-price may have gone up faster than HKG-price, making it interesting for a Chinese investor? 6 percent or less rental pay back may be acceptable when the property value goes up with 10-25 percent a year.

Talking about high-end real estate. When I was looking for a building constructor for my house back in 2008-2009, I was shown some private villas under construction in various stages build by potential constructors; all of them high-end luxury with sea view and five to seven bedrooms plus staff area, and one had a 25 meter long infinity pool. Most of the properties were for investment only and some of them could change owner two or three times during the construction period, meaning also changes in the architecture/construction. I don’t know details about why the properties changed owner, but I was told that selling prices were going up all the time – so seems like somebody made some quick profit.

To my knowledge high-end constructions seems to at least keep its value in Thailand and from what I’ve been told by real estate agents, both selling and rental business with luxury houses were unaffected during the recent (more Western) depression; whilst the affordable level were slightly difficult to deal with. In the area I live, it is said that Chinese owns a number of the high-end villas. Situation may not be the same in Thailand and other areas of South East Asia, compared with USA and/or Europe – or Dubai, for that matter. For example the real estate market in Europe seems still to suffer many places from the depression, whilst the land prices are going up in Thailand, some places fairly rapidly with some 300 percent or more growth over the last 10 years. Then of course, seen from an foreign investors point of view, comes the calculated risk factor on overseas investments compared to keeping the money “home” – may also be a question of simply getting some money out, or have something to do with taxation – and for Thailand especially, how your set-up is.

There might be huge difference in various parts of Thailand and if you are in high-end or low-end market. But let me take a real-life and more affordable example. You had some 800,000 baht cash in your hand in 2005 – and the means of a set-up, company or whatever – and invested your money in a typical 20 rai size Chanute farmland for 40,000 baht/rai. That gives you some 10,000 to 15,000 baht a year in outcome – may be depending of rice harvest and agreement with farmer – but 1-2 percent a year, a little lower than average of a fixed bank account. In 2013, 8 years later, you can sell the land for 100,000 bath/rai. Your gain over 8 years, during the “2008-2012 bubble burst”, is 1,296,000 (2,000,000 +96,000 –800.000) or 162 percent, in plain average 20 percent a year. That means you now hold some 2 million baht cash in your hand instead of 1 million from a fixed bank account.

Now let’s imagine you had only 400,000 baht in cash and a 50 percent mortgage on the initial 800,000 baht investment – i.e. 400.000 at 7-9 percent p.a. – you would still end up with a average profit of 15 percent a year, in total around 1 million baht; but during the 8 years you would have to pay some 60,000 baht every year for mortgage, as 1½ percent lease income only covered a minor part. Your “tipping point” annual lease should have been 9-10 percent to keep you covered.

[NeverSure]

I always figure that 40% of rent will go to expenses. That's maintenance, taxes if any, a fee to the property manager, condo fees if any, of course a vacancy factor, and so on. If there is a mortgage, then that too must be accounted for leaving much less that a 60% net on rents.

So if I bought a condo with a mortgage and leased it for 10,000 baht, I'd hope to be able to pocket 4,000 baht pm, or 48,000 baht per year. Hope because of that vacancy factor being unknown.

Now, If I knew what that condo would cost, I could do a quick estimate of ROI.

As for past appreciation on land or condos, I wouldn't count on that again. If anything I think it's all in a bubble and could crash. Even if not, I don't buy based on hoped-for appreciation. I buy for current cash flow.

[wym]

As for past appreciation on land or condos, I wouldn't count on that again. If anything I think it's all in a bubble and could crash. Even if not, I don't buy based on hoped-for appreciation. I buy for current cash flow.

Very wise, I think the condo market oriented toward westerners is very unlikely to appreciate, especially when buying new and selling used and MOST especially if you actually need to sell within a limited time-frame.

But except as some of the very very low priced units, say only a few hundred thousand baht targeted to Thai owners and tenants with rents below say 3K pm, I don't see the profitable rent levels. The higher rentals often remain empty for a period of time between tenants too. . .

Edited February 9, 2014 by wym

[kizz06]

I seriously doubt it, China is teetering already...tho' there may be some high net worth individuals who will buy high end RE here to get money out of China and into assets.

The RE bubble here is ready to burst, prices to rent numbers are already stupid.

Can you explain that ratio to someone who knows little about RE language. Whats the tipping points for that ratio. (No Bubble/Bubble/Burst Bubble)

The Value/Rent ratio is the % obtained dividing the rental price by the value price. The best ratio for people looking in investing in rental properties is 1% to 2%, That means...If the Property values is 2000000THB the best rental value for that property will be 1% = 20000THB.... Something not easy to achieve in most Thailand areas. Phuket, Pattaya and BK may be exceptions. Because the US properties values went down after 2008, but rental values went up, Chinese people are buying everything they can in the US now. That action is improving the values there.

May happen here, but now rents values still very low. Example... 2 million property in Chiang Rai may rent for about 8000THB or less.

»Can you explain that ratio to someone who knows little about RE language. Whats the tipping points for that ratio. (No Bubble/Bubble/Burst Bubble)«

IMO the short answer is a question ab...

I appreciate your reply.

[khunPer]

Posted Today, 06:57

Land prices to continue to rise in Bangkok
The Nation

BANGKOK: -- Despite the current political turmoil, the demand for prime land in Bangkok's central business district for investment remains robust, according to CBRE.

»Kulwadee Sawangsri, head of investment and land services at CBRE Thailand, said the price for a prime site on Sukhumvit Road had increased by about 480 per cent since 2002 to Bt1.5 million per square wah (Bt375,000 per square metre), the highest percentage increase of all of Bangkok's prime areas. This is followed by the Silom/Sathorn area, with an increase of about 400 per cent to Bt1.4 million per square wah, and the Ploenchit/Lumpini area at about 320 per cent to Bt1.5 million per square wah.«...

http://www.thaivisa.com/forum/topic/703589-land-prices-to-continue-to-rise-in-bangkok/

[asiamint]

foreigner can not buy land... only dumb westerner will buy in their gf's name.

And you know that much to make an assumption like that, i think not

[Showbags]

How to find a Chinese buyer in Los ?

I have some land for sale.

[nonthaburial]

In answer to the original question posted, my answer is most DEFINATELY, yes it will. Let me try to explain this to those who have No Chinese living experience, and believe me you don't know the Chinese mind set by having a local chinky at Mr Chans takeaway once a week.

I am married to a Chinese lady, one who I met whilst working in BKK, she had and still has a company in BKK fully registered and doing very lucrative business with a number of Thai government projects that are annually ongoing. Now for reasons I don't know, if a bid is opened and entered, nearly every western interest is immediately discarded, the remaining bids are whittled down and most of the Chinese registered companies that bid, go through to the electronic bidding WHY ?

Let me try to help with your thoughts, Thailand today is becoming closer and closer to being "colonialised" for the first time. Look how China, rightly or wrongly have almost bought every African nation available - purely for their minerals. Telling a very poor African country that the Chinese will build them a thousand schools, hospitals you name it, for what seems a huge figure to these financial inept countries, results in China reaping a hundred times more from their minerals. In a sad way these countries are prostituting themselves.

And I tell you what the Chinese are bloody clever.

Slowly the same "colonialisation by China to Thailand is happening, Thailand is prostituting itself, and like these African countries, it's the leaders who benefit not the country. What's the bloody point of allowing China to build thousands of schools for you if you don't have the competent staff to run them.

Let's move onto the link published about the rich taking mistresses, this is age old, and when China first opened its border at Shenzhen to HK, it was the Honkie business men who started to trade with China through Shenzhen that took second wives, buying them property and chattels etc. This has continued all over China. I am talking serious money.

Now let's try to compare the situation between Mr Chan in China. of who there are millions,and Mr Smith in Thailand who there are probably thousands of, the Chans buy there undercover girlfriends expensive properties in the girls name purely for two or three nights of pleasure a month. Mr Smith puts his hard earned money, which is probably minuscule compared to his Chinese counterpart, into a bar girl to buy in her name hoping he can have that property to live in for the rest of his life. Sure some get the end result, but unlike Mr Chan, Mr Smith has sleepless nights.

The Chinese are unbelievably awash with money, and they know the bubble will burst,probably sooner than later , so they are very happy to spend spend and spend in places like Thailand. Knowing their money is safe and cannot be clawed back by the communist party..

Because of our knowledge of Thailand and the fact that we have a registered company there, we have been invited to countless meetings by the rich asking what would be the best area of Thailand to build multiple 5 star hotels exclusively for Chinese occupation. Another hot one at the moment is the plans to buy huge swathes of land south of Hua Hin to build retirement villages for the Chinese which would include restaurants, hospitals.in other words totally self contained moobans. FOR CHINESE ONLY.

THE WRITING IS DEFINATELY ON THE WALL, BELIEVE ME. If I was Mr Smith I would not be worried I would be petrified.

Take or leave my comments is totally up to you, flames from pretenders are expected

[kizz06]

So when the bubble bursts,what will happen to the Chinese investments in Thailand?

Edited February 11, 2014 by kizz06

[nonthaburial]

So when the bubble bursts,what will happen to the Chinese investments in Thailand?

Do you not comprehend kizz06, that their money is no longer in China, it's elsewhere, so when the bubble burst, they are not involved, their money is safe and probably accumulating . But they will not be putting their money into trivials such as a 200 SQ meter go go bar in some Pattaya back street, they are ambitious not stupid. If you read the posted link, the Chinese second wives ( three times a month mattresses ) were desperate to open off shore accounts in HK.

They want to get their money out of China, now if they think that, how do you think the big players think ?.just to add, Chinese law only allows a payment of $50,000 annually to be paid into a mainland account from outside, unless of course you are a registered big boy, then there are ways round it. HK account, with internet banking ....... Perfect

[khunPer]

In answer to the original question posted, my answer is most DEFINATELY, yes it will...

Thanks, a very good explantion and input to think about...