Chiang Mai property bubble?

[kjhbigv]

Over the last few years Chiang Mai has grown immensely.

Just looking around at how many developments are being built in and around Chiang Mai, commercial, condos and houses....it is unbelievable, I have never seen growth like it! It's like a building frenzy!

Are cracks starting to appear eg. Promenade?

Are they selling? Difficult to tell, as a lot are still under construction.

Is there really that much demand or are we heading for a property crash?

[Oscar2]

property crash on the way!

yes many are still under construction but many are also complete - and sitting there empty with security guards looking over huge concrete mazes, watering the plants and so forth.

there is more supply than demand.

[kjhbigv]

Looking at all the development going on in and around Chiang Mai, is it sustainable or are we heading for a property crash?

At the moment, it is difficult to tell as most of the developments are still being built...the amount of apartment blocks being built is unbelievable, literally being built everywhere!

In addition to all the moo baan's heading out of town and commercial units etc.

Is there really that much demand or are cracks starting to appear? eg Promenade.

It seems like an uncontrollable building frenzy!

Who would buy an apartment at the moment?

[chiang mai]

I would, depends on price per square metre and location, I'm currently considering 100 square in Muang at 55K per, doomsayers may not appreciate however, oh well.

EDIT: BTW nobody lives in Promenada, it's just another overseas (Dutch I believe) joint venture shopping mall that has nothing to do with anything, given there is now a choice of several such places.

Edited February 27, 2014 by chiang mai

[WinnieTheKhwai]

As long as the people or companies who own the property are financially sound it won't actually lead to a crash of any kind. They'll just keep sitting on it without appreciably lowering prices.

There may be over supply now but there was oversupply too last year and the year before that, probably going back quite a while.

I wish I was wrong though, I would love a nice crash in prices so I could actually buy something for a good price..

[Thighlander]

I just bought last week. An oldie but goodie. If prices crash; I will buy another one. Seems like there are just too many cash buyers to create panic selling. I've read some stats that indicated very few Thais have more than one mortgage. This was my 9th home purchase of my lifetime; fourth in the last five years. I haven't had a mortgage since number 4. This one was the smoothest transaction of all, and while the owner was more firm than I am used to on price; I did get them to pay all costs at the Amphur. Took me all of five days to get a bed/tv/frig/fan. The new Sony is next.

[eyecatcher]

My cynical view is that a lot of the developments are a way of laundering money and to keep it from the taxman.

So those dodgy characters who acquired through corruption can quickly offload it into development so they have minimal liquid assets.

So actually I suppose many don't care because there was never a loan, mortgage debt against the property.

You can already smell the anti corruption lobbyists making a stand....and with china pulling out of the one billion tons of rice deal with Thailand recently because of their own anti corruption ideals then Thailand will have to clean up its act.

Just my theory.....everyone cannot be as stupid as the Promenade developers......can they?

[heybruce]

As long as the people or companies who own the property are financially sound it won't actually lead to a crash of any kind. They'll just keep sitting on it without appreciably lowering prices.

There may be over supply now but there was oversupply too last year and the year before that, probably going back quite a while.

I wish I was wrong though, I would love a nice crash in prices so I could actually buy something for a good price..

Nice summary. I'd also like to see a crash and the ensuing buying opportunities, but it appears owners will hold onto empty property til the end of time rather than sell at a loss.

Oh well, I can find other things to do with my money. And all the empty properties means that people who are willing to look can find some very good rental bargains, much to the horror of people who were counting on outrageous rents to justify their property purchases.

[onthedarkside]

There can be no specific answer to your question. Much would depend on location, property specifications, and a whole lot of other factors.

who would buy property right now - maybe someone looking for a long time personal residential home. If for rental income or sale profit then read my para 1

[Sparkles]

There is an absolute frenzy of shop house construction going on,everywhere. There are literally 1000's of old shop houses vacant and an equal number under construction or ready to rent/buy. Due to their size, you are very limited on how you can utilise the space. How can there possibly be a financial return now, or in the future? Money laundering is a distinct possibility for some.

Would love to see official figures if there are such a thing.

[NigelKennedy]

Agree with Thighlander some good deals out there for Buy to Let...possible 7 to 12 % yield on older buildings. We are also seeing complete renovation of older buildings such as LC Mansion studios were selling for 350k last year seem to be good rentals now at 799k to buy renamed Airport Home Condo..thinking of buying a couple....any views out there.

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[Oscar2]

you can smell the sellers a country mile away. those who never post about anything C.M. related, but suddenly spring to life when any thread is opened opining on the C.M. property market.

and then it's always roses. "the time is great", "prices are great", "possible 7 to 12 % yield on older buildings", etc., etc.

in other words they are stuck with properties they can't off if their life depended on it and use internet forums to attempt to manipulate sentiment/prices on properties. unfortunately many newbies don't speak or read a word of Thai so they read this crap and fall for it. bingo a sale is made or a rental contract is negotiated between a farang condo landlord and an English only speaking newbie - for 2-3 X what the price would be with a Thai seller/landlord. there have got to be hundreds of thousands of forums that do the same with "penny stocks".

[elektrified]

I've been saying the same thing for years now. Market manipulation...

[NigelKennedy]

Not sure why Oscar2 comments like that....If you do your homework in Chiang Mai or anywhere and buy from motivated sellers then it is possible to make those returns..I certainly do not have condos for sale...also it is prudent to only invest money in Thailand that you are prepared to loose..main property holdings should be in Europe. London properties make you loads of money...and as has been said a million times the best time to buy property was years ago and second best time is now.

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[slipperx]

Agree with Thighlander some good deals out there for Buy to Let...possible 7 to 12 % yield on older buildings. We are also seeing complete renovation of older buildings such as LC Mansion studios were selling for 350k last year seem to be good rentals now at 799k to buy renamed Airport Home Condo..thinking of buying a couple....any views out there.

Sent from my GT-N7100 using Thaivisa Connect Thailand mobile app

When the last person buys all that is left is sellers!

[Thai at Heart]

As long as the people or companies who own the property are financially sound it won't actually lead to a crash of any kind. They'll just keep sitting on it without appreciably lowering prices.

There may be over supply now but there was oversupply too last year and the year before that, probably going back quite a while.

I wish I was wrong though, I would love a nice crash in prices so I could actually buy something for a good price..

The last crash was caused by a mismatch in terms of USD borrowing versus Baht lending. This time around the amount of USD borrowing by private banks is massively less, so it won't cause a currency problem.

It should mean that property companies are ok.

[northernjohn]

As long as the people or companies who own the property are financially sound it won't actually lead to a crash of any kind. They'll just keep sitting on it without appreciably lowering prices.

There may be over supply now but there was oversupply too last year and the year before that, probably going back quite a while.

I wish I was wrong though, I would love a nice crash in prices so I could actually buy something for a good price..

Well it may not be a popular idea but I think we would see a lot less building if there was property tax's. It is one thing to pay tax on an empty lot. But one with an expensive building sitting on it drawing no income is another thing. Even just one home on it no builder likes to keep paying after the building is done.

[northernjohn]

There is an absolute frenzy of shop house construction going on,everywhere. There are literally 1000's of old shop houses vacant and an equal number under construction or ready to rent/buy. Due to their size, you are very limited on how you can utilise the space. How can there possibly be a financial return now, or in the future? Money laundering is a distinct possibility for some.

Would love to see official figures if there are such a thing.

I have a friend who knows some thing about money laundering. He figures there is an awful lot of it going on here in Thailand.

I thought the states were getting on Thailand's case about that a while back.

[Torrens54]

As long as the people or companies who own the property are financially sound it won't actually lead to a crash of any kind. They'll just keep sitting on it without appreciably lowering prices.

There may be over supply now but there was oversupply too last year and the year before that, probably going back quite a while.

I wish I was wrong though, I would love a nice crash in prices so I could actually buy something for a good price..

We bought ours years ago but thinking about an investment property and the prices are just way too high at the moment, bring on a nice cozy little crash.

[beau thai]

I wonder if the posters talking up a crash are those who elected to rent not buy, and are post-rationalizing that decision?

Many people were talking about a crash here last year but try to buy at last year's prices now- not possible. Whether for living or investing

And new condos are mostly sold before built, even at very fancy prices. I thought it was marketing hype until I really pushed to buy an under construction studio near Maya - nothing left.

Riding around today looking for land to the north of CM, I was surprised to find how much 'for sale' land was sold already and how much building was going on. And how many occupied new built shop houses. I guess many thais living in low grade accommodation are finding the wherewithal to upgrade, with the help of the banks.

I had hoped the market would level off with all the political uncertainty but it seems to make no difference-so far.

[puukao]

Wait until Thailand is split, and CM becomes the capitol. Then all BKK companies will buy land, and instantly prices will go up by 1,000%. Population explosion; 5 million. Red Bull now takes on a whole new meaning.

I'm buying 10 houses today!!!!

[threedot]

It seems to me that house price growth has been driven by the availability of cheap credit and market speculation. While the average income has remained fairly constant, disposable income has likely fallen due to CPI inflation.

Sound familiar?

[bristolgeoff]

it is going to happen as a lot of empty places to rent,and many more being built.so it will happen but when is the question

[THAIJAMES]

One of the main reasons that there has been a building frenzy (besides easy money) is because permits to build higher than 12 meters are about to expire this month. You must have started construction this month or you will not be allowed to build anything higher than 12 meters. So for land owners, it is better to build now with no tenants and wait a few years until there is demand, then being limited to less than 12 meters or 3 floors, which will not be commercially viable long term.

although I think there are way too many buildings now. I remember I thought the same thing 7 years ago, when there was a building frenzy of apartments when easy money was available.

[heybruce]

There is an absolute frenzy of shop house construction going on,everywhere. There are literally 1000's of old shop houses vacant and an equal number under construction or ready to rent/buy. Due to their size, you are very limited on how you can utilise the space. How can there possibly be a financial return now, or in the future? Money laundering is a distinct possibility for some.

Would love to see official figures if there are such a thing.

I have a friend who knows some thing about money laundering. He figures there is an awful lot of it going on here in Thailand.

I thought the states were getting on Thailand's case about that a while back.

Uhmm...what? I admit I'm not an expert on money laundering, but what little I learned from my time in Central America is that basic money laundering involves cash businesses--casinos, movie theaters, bars, laundromats, etc. Property purchases usually leave a paper trail, which money launderers hate.

But, as stated, I'm not an expert. Did your friend explain how the restrictive process for foreigner's owning property in Thailand was used in money laundering?

[WinnieTheKhwai]

Well it may not be a popular idea but I think we would see a lot less building if there was property tax's. It is one thing to pay tax on an empty lot. But one with an expensive building sitting on it drawing no income is another thing. Even just one home on it no builder likes to keep paying after the building is done.

There is a property tax, for houses that don't have a registered resident.

My wife got hit with that one, including a fine for not paying it for more than a year.

( It was 39 Baht, and 4 Baht for the fine. )

[northernjohn]

There is an absolute frenzy of shop house construction going on,everywhere. There are literally 1000's of old shop houses vacant and an equal number under construction or ready to rent/buy. Due to their size, you are very limited on how you can utilise the space. How can there possibly be a financial return now, or in the future? Money laundering is a distinct possibility for some.

Would love to see official figures if there are such a thing.

I have a friend who knows some thing about money laundering. He figures there is an awful lot of it going on here in Thailand.

I thought the states were getting on Thailand's case about that a while back.

Uhmm...what? I admit I'm not an expert on money laundering, but what little I learned from my time in Central America is that basic money laundering involves cash businesses--casinos, movie theaters, bars, laundromats, etc. Property purchases usually leave a paper trail, which money launderers hate.

But, as stated, I'm not an expert. Did your friend explain how the restrictive process for foreigner's owning property in Thailand was used in money laundering?

No he did not go in to detail about it. I did not bother to ask him either as it made a lot of sense to me. Paper trails in Thailand are easily covered up and I believe the states has been accusing Thailand of large chunks of money laundering as recently as 6 months ago.

[chiang mai]

Not difficult to achieve by using nominee companies etc.

[Konini]

Personally, I would never buy in Thailand because of the risks that it would mean losing everything. I believe this risk is real in all countries where corruption is rampant; I don't expect everyone to believe the same as we all have our own opinions.

My husband and I (I always feel like the Queen when I say that) are unashamedly bottom feeders. We have a couple of apartments in Melbourne which I personally wouldn't like to live in, although very close approximation to the city means the gentrification is creeping ever closer and a house in England on a council estate that you couldn't pay me to live in. In the 15 to 18 years respectively that we've had these 3 properties, we've never had more than a 2 month vacancy period. We are what I consider to be good landlords and attend to any repairs the day we receive notification of the need, and have therefore only had good tenants who tend to stay for several years; the house in England has had the same tenant since we bought it in 1996, and I can quite confidently say she isn't going anywhere anytime soon. She is on benefits and there have been a couple of times when here entitlement has been reassessed leading to a disruption in payments for a couple of months, but we know we always get back payment when it's eventually sorted out. My mother in law is her contact, and organises any tradesmen as necessary. We have updated the kitchen and bathroom, replaced the heating and double glazing when we were working and offsetting income for tax purposes in the knowledge that the property value was increased by this, and she has made a lovely home of it and spent money improving it. We have an excellent family run estate agent in Melbourne who not only collects the rent but all council and water rates as well as body corporate bills are sent to them and deducted from the rent. They know we would rather have an empty property for a few months rather than a bad tenant so they wait until they find one, and attend to any repairs and maintenance without notifying us now - it took a little time to convince them, but it's just the way we want it. Usually the first we know about a leaking tap or new cooker being installed is when we get the next rent statement. We are even at the stage with them that if a repair is more than the rent collected, they just accrue the amount and carry it over to the next payment. We have currently had the smaller apartment empty from Christmas to early March, with an amount of over $2,000 being having been accrued since the last tenant vacated on 27th December to pay for redecoration (legally required every 5 years) and a couple of minor repairs . We've just received a statement and that amount plus the tenancy-finder fee has been deducted from our new tenant's first months' rent and the month in advance payment. We now owe them a small amount which will be deducted from the next rental payment. Not bad for 3.5% of gross rent commission - negotiated down from the usual 5% because at the time of purchase of the 2nd one because we had the two apartments which we'd purchased through them, on the gentlemen's agreement that we will sell through them when we eventually do. This is without mentioning that the decorators and tradesmen get regular business from the agent's rentals so the rates are unbeatable. I know I certainly couldn't have found anyone to decorate for $1,500, and the tradesmen make sure a good job is done to ensure they get further work. I have to say that I was horrified to find out how much commission the agents charge in England.

In short, a good landlord should have no difficulties with finding good tenants, but the main point is that as bottom feeders, there is always a market for our properties. Rich, middle class people will go home and live with parents if the economy turns, leaving all of those nice expensive properties empty and likely a sizable mortgage to pay. You also have a big risk of damage being done; unfurnished, purpose built apartments have concrete walls, concrete ceilings and concrete floors so there is very little opportunity of costly damage being done. At the bottom of the property ladder that choice usually isn't there. Most of our tenants in Melbourne are newly arrived in Australia and want to build up a good rental record or save for the deposit to buy their own property. In addition, the initial outlay was small, although more people are thinking along the same lines as us now and driving the prices up. For us, the tenants and the agents it is a win-win situation, which I don't think we'd get by investing in more valuable properties. I can't see it being so different here, and wouldn't dream of spending several million baht on an apartment or house. The smaller apartments that Thai's live in, and that you wouldn't live in yourself don't seem to be empty for very long.

Consider the bottom end when purchasing investment properties. It works, we're living proof of it. And by the way, we're not what is commonly known as slum landlords. Our properties may not be suitable for us to live in, but they are decent - just at the bottom end of the market and we are very, very fair with our tenants. Our tenants, in return, are fair with us.

[eyecatcher]

^^

Short and sweet and to the point