Real Estate Bubble

[Donnievino]

In hindsight it is easy to recognize the symptoms of the 2008 US real estate market collapse. Easy credit, wide speculation, overbuilding by developers and a believe that buying real estate was almost risk free. I see these same characteristics in Chiang Mai currently. Hundreds of developments building properties that are yet to be sold, houses being sold with less than two percent down, and ordinary people building houses for rent or sale instead of residences. I have met three people in the last week that have built five houses for rent or sale. Two of the houses have been on the market for over a year. Is anyone else concerned about the future health of the real estate market in Chiang Mai or elsewhere in Thailand?

[Oscar2]

i'm sure many are concerned.

and many are concerned about when the leadership starts going through the title deeds of all these properties to see who actually owns them. that's when some big losses will come.

[kalbo123]

Thailand and Chiang Mai are playing "the China card" they hope and they could be true that the Chinese will buy condo's other stuff.

[Loptr]

The difference between the western housing boom and the Thai version is that the credit market is much tighter in Thailand than the west... Most of the un-occupied homes you see in Chiang Mai are not leveraged... The same is far from the truth in the west...

[mr chow]

There are CITIES in china that are built that no one lives in. These residences of condos,apartments and homes are sold! People bought them as investments due to all the people moving to the cities from rural areas. ONE PROBLEM. those people can't afford to rent them. Thailand has the 9th highest consumer debt in the world. USA # 8. Per capita income US $52k Thailand $10k. Do the math.

B U B B L E

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[evenstevens]

for the condo scene,surely a correction must come.one way or another

presently its in over supply mode

second hand houses, its a buyers market, there are a glutful on r/agents books,and not to mentioned those up for private sales

i have had a nice peice of property up for sale for 18 months,whilst i have had very good activity in views,i have only received three good nibbles

feel very certain the is money out there , its just the important matter of finding the bottom of the market price for my property,and whether to accept or not

I.M.O. most second hand condos and houses are presently grossly over priced in the c/mai market

a bubble, dont think so.......a oversupply ,me thinks so, ........and a correction to come in due course

a very nice morning to all

[TimCM]

Seems to be a few misconceptions about bubbles. A bubble is when the value of the asset rises with no relationship to the rise in income from the asset.

So as I am not familiar with the CM housing market, could some residents share if rental returns have risen at a similar rate to housing prices.

I have a keen interest as I am moving there next week but it seems like a massive change since I was last there (18 months ago)

cheers

[Thai at Heart]

Seems to be a few misconceptions about bubbles. A bubble is when the value of the asset rises with no relationship to the rise in income from the asset.

So as I am not familiar with the CM housing market, could some residents share if rental returns have risen at a similar rate to housing prices.

I have a keen interest as I am moving there next week but it seems like a massive change since I was last there (18 months ago)

cheers

Rental values have rarely been correlated to the value of property in Thailand. It just does not scale in the same manner. Rentals are in my opinion cheap in comparison with the stated value of property

[Thighlander]

There are CITIES in china that are built that no one lives in. These residences of condos,apartments and homes are sold! People bought them as investments due to all the people moving to the cities from rural areas. ONE PROBLEM. those people can't afford to rent them. Thailand has the 9th highest consumer debt in the world. USA # 8. Per capita income US $52k Thailand $10k. Do the math.

B U B B L E

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Mortgage debt is not considered consumer debt. And, you are talking about per capita GDP, not income. But, yes, it is high in both countries. I've seen very healthy markets, where 10% of the homes were on the market, at any given time. It seems to be far less than that here. How many of the 49% didn't pay cash? close to zero. How many require rental income? if they did; they shouldn't have bought new, because the ratios are poor. How many are the banks selling? Mostly the same junk from the 97 meltdown.....and there are much tighter regulations on how the banks handle NPLs; it seems to be more strict than the US.

If, and when the price drops come; they will hit first and hardest in the poor locations.....just seen it too many times in real life. If you want to buy, just remember you can change just about everything, but the location. That's why people, who insist on buying new are often making a big mistake. In the US, people like to say "we're building a new home in Rio Rancho, etc..., when in fact they are buying a new tract home, and their only role is to pick out the shade of beige carpet...and it's not going to be new after they lived in it. Foundation problems can take more than a year to surface....

Edited August 8, 2014 by Thighlander

[worgeordie]

One thing the price of land will never go down,thats 100% certain,

Yes there is an over supply of Condos,and i don't know where the

people are going to come from,that will fill them,and just think what

impact that will have on the influx of yet more cars,plus i am sure

the Electricity company and Water company will have plans in hand

to supply all these extra households,when they all turn the A/cs and

taps on.

regards Worgeordie

[beau thai]

In my view there is quite a strong relationship between realistic condo sale prices, and rentals. I say realistic, as it is free to list, so you see kiteflyers list over valued property in the hope that some mug will buy.

But if you look to buy a condo as a rental investment, you will also take a view as to how likely that building in that location is to appreciate relative to others. And those with low capital appreciation potential generally show a higher rental return.

As a very very broad 'rule of thumb' try annual gross rental as 10% of purchase price. That often works for condo's selling for around 1.2m (rent-10k a month) but a condo selling at 2.4m will not generally make 20k a month gross rental. But may achieve greater capital appreciation.

No substitute for doing the groundwork and I know many will pick holes in the above, but I have found that is a useful rough guide to value for money. Houses are a very different market to condos of course, with different dynamics.

And as for bubbles, the western downturn was a result of imprudent lending often without due regard to the asset quality and/or the borrowers ability to repay. Lending here is far less aggressive in my experience- although many are over-borrowed I think at this point.

But there is a healthy demand (for condos at least) from non-thai buyers, including chinese who have seen huge growth in the values of their own properties in China, and see that market flattening out now. Good time to reinvest their equity somewhere abroad.

But every market is cyclical eventually, so Chiang mai will go ex-growth at some point, and then the naysayers (renters?) will be able to say ' I told you so' - but they will also have been paying rent while owners enjoyed capital growth.

You pays your money and you takes your choice- as they say.

[Thighlander]

It appears that the visa crackdown has impacted some backpacker businesses, it has has zero impact on the growth of Chiang Mai. The coup has likely hurt tourism, but that, too, has not hurt the growth rate of Chiang Mai. It's a desirable place to live, for people from far reaching walks (or motorbike rides) of life. One or two Chinese cities could keep this going. Living in CNX is a dream for many Bangkokians, also. I could tell that from just talking to cab drivers taking me to the DM, 10 years ago. They always seemed envious that I was going to CM.

[clokwise]

Thai wife and I own properties in CM and BKK. Just sold a condo in BKK which we purchased in 2008, for the exact same price. And feel damn lucky to have unloaded it. Fortunately it had been rented by a tenant the entire time, so that was our only gain. We're trying to unload another condo in BKK, but not even a nibble yet. Frankly, putting that money in bonds or other reasonably safe investments would have brought far better returns. Land price in central CM has increased significantly since 2010, so our property value here has nearly doubled. I'm talking about land, not condos btw. We don't want to build on it anymore so we're trying to unload this land too, but the value has gotten so high that the number of potential buyers is quite limited. We may be stuck with it for very long time..

From driving around CM, I'm seeing an insane amount of townhouses and condos, if you drive by them at night you can see just how many are occupied. In many blocks it's not unusual to see the lights on in only one unit. There are certain area of town that are just wall to wall units on both sides of the street and I have to wonder who would ever want to live in a characterless ghetto like that. I've even seen vacant land in front of condos, which you'd think is so small that it could never be built up, is suddenly a towering block of units totally blocking the view of the original building. I just spotted a block of townhouses on a soi off of Nimmanheman which has halted construction and is now for sale by the developer. A friend who is a real estate agent tells me that the developers are approaching her now to sell their units, which a year ago never happened because the developers normally try to keep their sales force in house. To me it appears to be a combination of utter greed and utter foolishness on behalf of the developers at this point. I'd also blame the city for not properly planning for growth - our apartment in Santitham is struggling to keep the electricity and water running 24/7.

I've been watching the ridiculous housing prices in my home town of Sydney for 15 years and every single year I predict it can't possibly keep going higher, and yet nearly every year they have 10%+ growth. Most recent growth there seems to be on the back of the Chinese investors, and perhaps that's what's happening here too.

Is this a bubble? I dunno, but surely something has got to give...

[WinnieTheKhwai]

> Is anyone else concerned about the future health of the real estate market in Chiang Mai or elsewhere in Thailand?

Not as concerned as I am about prices keeping on rising and missing the boat on getting something while I still can.

Specifically for property in the city area. Far out of town things move a lot slower.

Either way I'm not concerned with the real estate market in Chiang Mai in general as it has nothing to do with me. That's something for banks and governments to ponder. A million condo units can get built out on the Canal Road and I couldn't care less if they shift or not. What I care about is if a specific property seems good value to me, and if I expect to get a good rental income from it easily. (Or, if it is actually nice and convenient for me to live in and will hold its value, for the hypothetical scenario where I'm also looking for a place to live, not just for investment)

[Dante99]

One thing the price of land will never go down,thats 100% certain,

regards Worgeordie

That is what most Thais thought until it did go down from a high around 1997.

[roger1999]

My friend recently sold a CM studio condo for almost double the price he paid in 2008. He tried to get triple the price and it sat on the market for months. Once he found the right price point, it sold within 24 hours.

[Chiengmaijoe]

One thing the price of land will never go down,thats 100% certain,

regards Worgeordie

That is what most Thais thought until it did go down from a high around 1997.

Worgeordie gets the prize for one of the daftest comments on here for a while. The price of land only ever goes up? What about the UK property crash in 2008 and the previous one in the 80's, just a dream? Where did the term 'negative equity' come from? Did property in Thailand not fall during the 1997 financial crisis?

http://www.marketoracle.co.uk/Article5563.html

Edited August 8, 2014 by Chiengmaijoe

[apiwan]

It's only worth as much as someone is willing to pay for it.

[mesquite]

It's a great time to be a renter.

[mr chow]

Mega dittos

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[Mousehound]

I have lost a lot of money over the years following "professional advice" regarding property. Generally property needs to be very long term. You also need enough equity and income to ride out financial slumps especially if you don't have other income. Bank calls on loans owing to devaluation can be a major problem. After all if you do have to sell a property when things are down then you are going to lose if you sell it quickly as it will have to be at the buyers price. Property is not often fast to sell and can be expensive to sell. Also the return on investment is not always as good as other investments, Regarding CM I believe many of the properties I have viewed are way over valued. Sure getting in early etc can make a lot of money but unlike HK back in the early 80's when I made some serious cash CM is not a world financial and production centre. It may be a haven for Chinese trying to diversify cash assets but the Chinese may well find themselves in financial difficulties also and then CM could really suffer. Also I get the impression that many rentals by expats are under threat as the visa laws are tightened. Add to that CM is looking a little less attractive than it was even a few years ago simply because of the nature of the condo development. However, your best investment is usually your own home as that gives security and with that I can recommend wine as a good earner. Wine has easily outstripped any investments I have ever made in anything else. Strange, as I don't drink. But if the markets were to totally collapse and I lost everything else I might be persuaded to quaff the lot down!

Edited August 9, 2014 by Rooo
Font

[mr chow]

If it floats, flys or f&@$s rent don't buy. This is also marital advice.

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[alfieconn]

Thai wife and I own properties in CM and BKK. Just sold a condo in BKK which we purchased in 2008, for the exact same price. And feel damn lucky to have unloaded it. Fortunately it had been rented by a tenant the entire time, so that was our only gain. We're trying to unload another condo in BKK, but not even a nibble yet. Frankly, putting that money in bonds or other reasonably safe investments would have brought far better returns. Land price in central CM has increased significantly since 2010, so our property value here has nearly doubled. I'm talking about land, not condos btw. We don't want to build on it anymore so we're trying to unload this land too, but the value has gotten so high that the number of potential buyers is quite limited. We may be stuck with it for very long time..

From driving around CM, I'm seeing an insane amount of townhouses and condos, if you drive by them at night you can see just how many are occupied. In many blocks it's not unusual to see the lights on in only one unit. There are certain area of town that are just wall to wall units on both sides of the street and I have to wonder who would ever want to live in a characterless ghetto like that. I've even seen vacant land in front of condos, which you'd think is so small that it could never be built up, is suddenly a towering block of units totally blocking the view of the original building. I just spotted a block of townhouses on a soi off of Nimmanheman which has halted construction and is now for sale by the developer. A friend who is a real estate agent tells me that the developers are approaching her now to sell their units, which a year ago never happened because the developers normally try to keep their sales force in house. To me it appears to be a combination of utter greed and utter foolishness on behalf of the developers at this point. I'd also blame the city for not properly planning for growth - our apartment in Santitham is struggling to keep the electricity and water running 24/7.

I've been watching the ridiculous housing prices in my home town of Sydney for 15 years and every single year I predict it can't possibly keep going higher, and yet nearly every year they have 10%+ growth. Most recent growth there seems to be on the back of the Chinese investors, and perhaps that's what's happening here too.

Is this a bubble? I dunno, but surely something has got to give...

So it's not a true value then ! " Market value is the likely price a property would bring in a fair sale on a "competitive and open market," not some pie in the sky figure !!!!!!!!

Everything sells if it is priced correctly.

Edited August 9, 2014 by alfieconn

[Oscar2]

My friend recently sold a CM studio condo for almost double the price he paid in 2008. He tried to get triple the price and it sat on the market for months. Once he found the right price point, it sold within 24 hours.

your friend is one of the lucky ones.

[Oscar2]

One thing the price of land will never go down,thats 100% certain,

uhhhh...no.....that is not correct. nothing is ever 100% certain. real estate is cyclical. goes up and then goes down.

[JesseFrank]

Thai wife and I own properties in CM and BKK. Just sold a condo in BKK which we purchased in 2008, for the exact same price. And feel damn lucky to have unloaded it. Fortunately it had been rented by a tenant the entire time, so that was our only gain. We're trying to unload another condo in BKK, but not even a nibble yet. Frankly, putting that money in bonds or other reasonably safe investments would have brought far better returns. Land price in central CM has increased significantly since 2010, so our property value here has nearly doubled. I'm talking about land, not condos btw. We don't want to build on it anymore so we're trying to unload this land too, but the value has gotten so high that the number of potential buyers is quite limited. We may be stuck with it for very long time..

From driving around CM, I'm seeing an insane amount of townhouses and condos, if you drive by them at night you can see just how many are occupied. In many blocks it's not unusual to see the lights on in only one unit. There are certain area of town that are just wall to wall units on both sides of the street and I have to wonder who would ever want to live in a characterless ghetto like that. I've even seen vacant land in front of condos, which you'd think is so small that it could never be built up, is suddenly a towering block of units totally blocking the view of the original building. I just spotted a block of townhouses on a soi off of Nimmanheman which has halted construction and is now for sale by the developer. A friend who is a real estate agent tells me that the developers are approaching her now to sell their units, which a year ago never happened because the developers normally try to keep their sales force in house. To me it appears to be a combination of utter greed and utter foolishness on behalf of the developers at this point. I'd also blame the city for not properly planning for growth - our apartment in Santitham is struggling to keep the electricity and water running 24/7.

I've been watching the ridiculous housing prices in my home town of Sydney for 15 years and every single year I predict it can't possibly keep going higher, and yet nearly every year they have 10%+ growth. Most recent growth there seems to be on the back of the Chinese investors, and perhaps that's what's happening here too.

Is this a bubble? I dunno, but surely something has got to give...

Land price in central CM has increased significantly since 2010, so our property value here has nearly doubled. I'm talking about land, not condos btw. We don't want to build on it anymore so we're trying to unload this land too,

Put it on the market, and you will know how much it hasn't increased in value. Your condo's in Bangkok had no doubt also significantly increased in value since you purchased, yet you were only able to sell at the same price and the other you don't even get an offer.

The value of your property is what people are wiling to pay for it, not what people in the neighborhood are asking for it.

[clokwise]

So it's not a true value then ! " Market value is the likely price a property would bring in a fair sale on a "competitive and open market," not some pie in the sky figure !!!!!!!!

Everything sells if it is priced correctly.

Absolutely true. We could undoubtedly unload it at break even price pretty easily. But this is not pie in the sky, we have looked at properties across the street and a couple others nearby which recently sold at a similar SqWah price, and anyone can tell you the property value in CM has risen dramatically in just the past few years. On top of that our property is in the main city so it's pricey compared to elsewhere. Nevertheless, we are getting nibbles at the current price and already had one buyer knocked back by the bank who wouldn't give him the partial loan he required. I believe the property is correctly valued and I'm happy to sit and wait, and even if the value goes down for a while, I can wait.

The only reason we're selling is because we don't want to build yet another block of empty condos. I'd rather let someone else make that mistake. We're growing bananas on the land now, just because it's easier to maintain the land that way, plus we like bananas.

[AnotherOneAmerican]

> Is anyone else concerned about the future health of the real estate market in Chiang Mai or elsewhere in Thailand?

Not as concerned as I am about prices keeping on rising and missing the boat on getting something while I still can.

Specifically for property in the city area. Far out of town things move a lot slower.

Either way I'm not concerned with the real estate market in Chiang Mai in general as it has nothing to do with me. That's something for banks and governments to ponder. A million condo units can get built out on the Canal Road and I couldn't care less if they shift or not. What I care about is if a specific property seems good value to me, and if I expect to get a good rental income from it easily. (Or, if it is actually nice and convenient for me to live in and will hold its value, for the hypothetical scenario where I'm also looking for a place to live, not just for investment)

Condos and shopfronts are a disaster waiting to happen.

So many empty unsold units something's got to happen.

Plenty of houses (new and old) around the ring roads selling for between 1 and 2M, which seem good value to me.

[Thanet]

There are CITIES in china that are built that no one lives in. These residences of condos,apartments and homes are sold! People bought them as investments due to all the people moving to the cities from rural areas. ONE PROBLEM. those people can't afford to rent them. Thailand has the 9th highest consumer debt in the world. USA # 8. Per capita income US $52k Thailand $10k. Do the math.

B U B B L E

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Mortgage debt is not considered consumer debt. And, you are talking about per capita GDP, not income. But, yes, it is high in both countries. I've seen very healthy markets, where 10% of the homes were on the market, at any given time. It seems to be far less than that here. How many of the 49% didn't pay cash? close to zero. How many require rental income? if they did; they shouldn't have bought new, because the ratios are poor. How many are the banks selling? Mostly the same junk from the 97 meltdown.....and there are much tighter regulations on how the banks handle NPLs; it seems to be more strict than the US.

If, and when the price drops come; they will hit first and hardest in the poor locations.....just seen it too many times in real life. If you want to buy, just remember you can change just about everything, but the location. That's why people, who insist on buying new are often making a big mistake. In the US, people like to say "we're building a new home in Rio Rancho, etc..., when in fact they are buying a new tract home, and their only role is to pick out the shade of beige carpet...and it's not going to be new after they lived in it. Foundation problems can take more than a year to surface....

Consumer debt is only part of the overall picture as it applies to individuals rather than households.

Mortgage debt is considered part of household debt which is very high and is the main drag on economic recovery worldwide. The inability to service high levels of debt makes asset bubbles all the more risky.

[WinnieTheKhwai]

One thing the price of land will never go down,thats 100% certain,

regards Worgeordie

That is what most Thais thought until it did go down from a high around 1997.

And yet I wish I bought in 1997, as it's lots and lots higher again now.

(It was mostly a currency crisis, so if you were bringing in money then that would have made a big difference in the price in a foreign currency. In Thai Baht however it was just a little dip.) Financial institutions (which all had US dollar based debts) were affected the most, which resulted in unfinished big real estate projects.

But I'll gladly take the 1997 Thai Baht price of land over the 2014 one and so would you!

Edited August 9, 2014 by WinnieTheKhwai