Real Estate Bubble

[Thighlander]

I agree that there are many sub markets in Chiang Mai split by geography, price and housing type. But a major correction in the market will drive all segments down but at differing rates. The condo market could hold up a little better because of the higher percentage of foreign buyers. Those markets that have the highest leverage will suffer most. Part of my concern began when I visited several housing developments (non-condo) that we requiring only 50,000 baht down on 3 to 4 million baht properties.

That 50k down is most likely just the amount required to hold the property until you try and get financing from a bank.

I don't know about now but in the past many places had a 5,000 baht deposit and then you made payments for a couple of years just to build up the required down payment the banks required.

Exactly, Wolf'. This gives good insight into the knowledge of the market by some. 50,000 won't get you a lease on a 3-5 million THB property, if you are paying two months deposit plus first months rent. Could probably be enough "key money" for a deceased AIDS patient's Hillside 4 studio. It's part of a strict schedule of payments that will get you 20% down, and you will have to come up with the other 80% plus transfer fees, when it is completed. I can't remember the last time I saw a builder offering financing here....maybe never....they might have a preferred lender; but they aren't giving a farang a mortgage. Some will send you to a Singapore Bank, and it is way tougher than the US. You will need a large downpayment and verifiable current employment income. It is also illegal to have a mortgage past age 65 in Thailand.

Edited August 9, 2014 by Thighlander

[onthedarkside]

off topic post removed.

[evenstevens]

It's a crazy question,

So, which market are we talking about?

firstly why is it a crazy question????, the contributors so far(i.m.o) have contributed in a very dilengent manner, giving their two cents worth

secondly the o./p. from my understanding was saying the market in general etc etc

why break up a happy party?????

You guys party all you want, with my blessing, just be aware that those looking for a blanket answer wont find it, you need to be more specific otherwise you're deluding yourselves.

c/mai..., no one including u. has answer for it, blanket theory, or being specific

all markets are placed that way, a house of mirriors (so to speak)..., makes the world go around....some profit,some lose

seems that u have joined the happy party,thats nice of u , to be with the deluded ones

Edited August 9, 2014 by evenstevens

[AnotherOneAmerican]

I agree that there are many sub markets in Chiang Mai split by geography, price and housing type. But a major correction in the market will drive all segments down but at differing rates. The condo market could hold up a little better because of the higher percentage of foreign buyers. Those markets that have the highest leverage will suffer most. Part of my concern began when I visited several housing developments (non-condo) that we requiring only 50,000 baht down on 3 to 4 million baht properties.

That 50k down is most likely just the amount required to hold the property until you try and get financing from a bank.

I don't know about now but in the past many places had a 5,000 baht deposit and then you made payments for a couple of years just to build up the required down payment the banks required.

Exactly, Wolf'. This gives good insight into the knowledge of the market by some. 50,000 won't get you a lease on a 3-5 million THB property, if you are paying two months deposit plus first months rent. Could probably be enough "key money" for a deceased AIDS patient's Hillside 4 studio. It's part of a strict schedule of payments that will get you 20% down, and you will have to come up with the other 80% plus transfer fees, when it is completed. I can't remember the last time I saw a builder offering financing here....maybe never....they might have a preferred lender; but they aren't giving a farang a mortgage. Some will send you to a Singapore Bank, and it is way tougher than the US. You will need a large downpayment and verifiable current employment income. It is also illegal to have a mortgage past age 65 in Thailand.

Every thing can be fixed with a developer who wants to sell, and their contact in a Thai bank.

Home loan (90%) with falsified employment details (as in no employment at all), totally doable.

Edited August 9, 2014 by AnotherOneAmerican

[puukao]

I would say interest rates (yields on the 10-year note) are very, very low in the USA. I also believe this note has a huge influence over mortgage rates, and is relatively low in Thailand as well. In fact, I think it's also relatively low in Greece, Italy, and a few other countries (maybe Spain) that "should" have higher rates. My point is.......a spike higher in yields will have a huge impact on home prices. Credit is tighter now everywhere, and even a 0.25% increase can mean something like $20,000 more spent in 30-years. This will mean less traveling, less speculating, less everything for most people. It also may mean people who could buy the house with cash might put the money in bonds to get a safer rate. There is no sign of a spike higher......yet. If USA 10-year yields go to 6% (massive move), then I would want to speculate on buying another home.

[northernjohn]

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.

The 800 pound gorilla in that room for sure...

I don't see the Chinese as ever being big players in the Chiang Mai real estate market... They tend to travel in groups so a big development on the sea side is more their style where they control all the cash flow... And the Thais don't really make individual Chinese welcome in the community...

The real housing market gorilla for all of Thailand is living in Hua Hin...

Well it is just small potatoes but look at the Chinese presence in Pai.

[beau thai]

I would say interest rates (yields on the 10-year note) are very, very low in the USA. I also believe this note has a huge influence over mortgage rates, and is relatively low in Thailand as well. In fact, I think it's also relatively low in Greece, Italy, and a few other countries (maybe Spain) that "should" have higher rates. My point is.......a spike higher in yields will have a huge impact on home prices. Credit is tighter now everywhere, and even a 0.25% increase can mean something like $20,000 more spent in 30-years. This will mean less traveling, less speculating, less everything for most people. It also may mean people who could buy the house with cash might put the money in bonds to get a safer rate. There is no sign of a spike higher......yet. If USA 10-year yields go to 6% (massive move), then I would want to speculate on buying another home.

'and even a 0.25% increase can mean something like $20,000 more spent in 30-years' Forgive me but isnt that playing with numbers? Disregarding the effect of inflation over 30 years, doesnt that come to less than 2 bucks a day?? Hardly life changing now, never mind in 30 years time. Just about buy you half a frappucino in Starbucks.

Rates will only go higher to control inflation and/or currency 'misalignment', and there are scant signs of price or wage inflation taking off in major economies-most are still on some degree of life support.

Not sure why you feel Spain 'should' have higher rates-many economists argue that it should have left the euro and devalued its currency (not strengthened with higher rates), to stimulate exports, and reduce its very very high unemployment levels. It already has over 1 million empty properties and higher rates would have driven repossessions even higher.

But I agree, credit is tightening, as the essential low rates are causing some housing markets to overheat again, so growth should slow, but not go ex-growth in my view. But I have been wrong a few times before!!!

[beau thai]

The Chinese are aggressive buyers in California/Arizona/Nevada; they buy here, too. They even buy in Japan, and are likely the biggest foreign buyers in Oz.

Chinese like to buy land, they can't buy land in Thailand either.

A concrete box suspended in the air is rarely worth buying, unless you intend to live in it.

'A concrete box suspended in the air is rarely worth buying, unless you intend to live in it.'

Ridiculous comment. So you dont think anyone in Thailand makes a healthy investment return on condo's??

I know Chinese who are buying here because they believe it is a good investment.

You may not. Up to you.

But many people do, and are earning rather more than they can on bank deposits for example.

[AnotherOneAmerican]

So you dont think anyone in Thailand makes a healthy investment return on condo's??

Not any foreigner buying at today's prices, using today's exchange rates.

(and excluding people buying for money laundering purposes)

Edited August 9, 2014 by AnotherOneAmerican

[northernjohn]

The Chinese are aggressive buyers in California/Arizona/Nevada; they buy here, too. They even buy in Japan, and are likely the biggest foreign buyers in Oz.

Chinese like to buy land, they can't buy land in Thailand either.

A concrete box suspended in the air is rarely worth buying, unless you intend to live in it.

'A concrete box suspended in the air is rarely worth buying, unless you intend to live in it.'

Ridiculous comment. So you dont think anyone in Thailand makes a healthy investment return on condo's??

I know Chinese who are buying here because they believe it is a good investment.

You may not. Up to you.

But many people do, and are earning rather more than they can on bank deposits for example.

Well I have to agree with you about the people owning and renting out at higher rates of return than Bank Deposits. I would wonder how many Chinese you know are buying Condos on speculation. Also what happens if all of a sudden all the Condos are completed where will the people come from to live in them. If they leave their present place of residence what is the gain. Is it just not another building sitting empty and a different person making the money. I admit this is not my line of work but it just seems to me that with so much going up there has to be a loss some where to offset the gains.

Edit

Just read AnotherIOneAmericans post. Yes money laundering could be playing a large part in this whole building show. It is not like Thailand was unknown for that kind of activity.

Edited August 9, 2014 by northernjohn

[beau thai]

So you dont think anyone in Thailand makes a healthy investment return on condo's??

Not any foreigner buying at today's prices, using today's exchange rates.

(and excluding people buying for money laundering purposes)

If foreigners are spending their rental income here why do they care about exchange rates- even if you are correct in your assumption that the baht will depreciate against 'foreign' currencies?

And I dont think you are correct but only time will tell. But if you do believe that, then short the baht and buy it back later when it is lower.

[AnotherOneAmerican]

If foreigners are spending their rental income here why do they care about exchange rates- even if you are correct in your assumption that the baht will depreciate against 'foreign' currencies?

And I dont think you are correct but only time will tell. But if you do believe that, then short the baht and buy it back later when it is lower.

A ridiculous post that had nothing to do with my post.

[Thighlander]

I agree that there are many sub markets in Chiang Mai split by geography, price and housing type. But a major correction in the market will drive all segments down but at differing rates. The condo market could hold up a little better because of the higher percentage of foreign buyers. Those markets that have the highest leverage will suffer most. Part of my concern began when I visited several housing developments (non-condo) that we requiring only 50,000 baht down on 3 to 4 million baht properties.

That 50k down is most likely just the amount required to hold the property until you try and get financing from a bank.

I don't know about now but in the past many places had a 5,000 baht deposit and then you made payments for a couple of years just to build up the required down payment the banks required.

Exactly, Wolf'. This gives good insight into the knowledge of the market by some. 50,000 won't get you a lease on a 3-5 million THB property, if you are paying two months deposit plus first months rent. Could probably be enough "key money" for a deceased AIDS patient's Hillside 4 studio. It's part of a strict schedule of payments that will get you 20% down, and you will have to come up with the other 80% plus transfer fees, when it is completed. I can't remember the last time I saw a builder offering financing here....maybe never....they might have a preferred lender; but they aren't giving a farang a mortgage. Some will send you to a Singapore Bank, and it is way tougher than the US. You will need a large downpayment and verifiable current employment income. It is also illegal to have a mortgage past age 65 in Thailand.

Every thing can be fixed with a developer who wants to sell, and their contact in a Thai bank.

Home loan (90%) with falsified employment details (as in no employment at all), totally doable.

and not in your name......and 10% down is a lot more than 2% or 3.5%..........

[iancnx]

The Chinese are aggressive buyers in California/Arizona/Nevada; they buy here, too. They even buy in Japan, and are likely the biggest foreign buyers in Oz.

Chinese like to buy land, they can't buy land in Thailand either.

A concrete box suspended in the air is rarely worth buying, unless you intend to live in it.

'A concrete box suspended in the air is rarely worth buying, unless you intend to live in it.'

Ridiculous comment. So you dont think anyone in Thailand makes a healthy investment return on condo's??

I know Chinese who are buying here because they believe it is a good investment.

You may not. Up to you.

But many people do, and are earning rather more than they can on bank deposits for example.

I agree I was enjoying a healthy 9% yield in 2012 and 2013.

[puukao]

I would say interest rates (yields on the 10-year note) are very, very low in the USA. I also believe this note has a huge influence over mortgage rates, and is relatively low in Thailand as well. In fact, I think it's also relatively low in Greece, Italy, and a few other countries (maybe Spain) that "should" have higher rates. My point is.......a spike higher in yields will have a huge impact on home prices. Credit is tighter now everywhere, and even a 0.25% increase can mean something like $20,000 more spent in 30-years. This will mean less traveling, less speculating, less everything for most people. It also may mean people who could buy the house with cash might put the money in bonds to get a safer rate. There is no sign of a spike higher......yet. If USA 10-year yields go to 6% (massive move), then I would want to speculate on buying another home.

'and even a 0.25% increase can mean something like $20,000 more spent in 30-years' Forgive me but isnt that playing with numbers? Disregarding the effect of inflation over 30 years, doesnt that come to less than 2 bucks a day?? Hardly life changing now, never mind in 30 years time. Just about buy you half a frappucino in Starbucks.

Rates will only go higher to control inflation and/or currency 'misalignment', and there are scant signs of price or wage inflation taking off in major economies-most are still on some degree of life support.

Not sure why you feel Spain 'should' have higher rates-many economists argue that it should have left the euro and devalued its currency (not strengthened with higher rates), to stimulate exports, and reduce its very very high unemployment levels. It already has over 1 million empty properties and higher rates would have driven repossessions even higher.

But I agree, credit is tightening, as the essential low rates are causing some housing markets to overheat again, so growth should slow, but not go ex-growth in my view. But I have been wrong a few times before!!!

you are correct. A better statement by myself would have been "and even a 0.25% increase in rates can mean thousands of people on the bubble can now no longer afford to buy." Regards to Spain, I don't think they can control rates like USA. I mean to attract foreign investments, they "need" higher yields. Of course the market is right. These thoughts are usually years in the making. But it can take years to make a good investment purchase and sell at a profit. So my guess is in less than 5 years you will be able to buy properties in the USA lower than right now. Banks holding on to tons of supply, etc....I do think the USA will correlate with Thailand. Honestly, like it or not, the USA will likely correlate with many, many countries. On the other hand, I think, not sure, Chinese like to pay with cash and the houses in CM are, to them, likely not terribly expensive. I also remember reading about how condos depreciate much faster than most types of properties, excluding mobile homes. What CM needs is a few more Universities. In my experience, houses near Universities have been excellent investments (my sample size is a whopping 1 over 10-years).

[WinnieTheKhwai]

a couple of units, (a short motocycle ride from Maya)

I see those kind of descriptions a lot, and to me this instantly reads as "Way out off the Superhighway." May not be the case for your particular unit, but these kinds of location descriptions don't sound good.

For example if it was on Nimmanhaemin then the description would say so. Or on Huay Kaew. Or on Suthep Road. But 'a short motorcycle ride from X' sounds like way up the Mae Rim Road, or next to a big company selling construction equipment down a soi off the superhighway.

[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)

Condos and shopfronts are a disaster waiting to happen.

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

Well, they're not very attractive if far out, but not sure why they would be a disaster. A rich family acquired that land next to a ring road, and decided to spend a couple million to build one or two blocks of shophouses. Which don't sell. But they don't care, it's not like they need the money in a hurry.

However, compare this to a shophouse downtown, no matter how old, and then I'm highly interested. They're quite versatile buildings that you can do anything with.

[iancnx]

a couple of units, (a short motocycle ride from Maya)

I see those kind of descriptions a lot, and to me this instantly reads as "Way out off the Superhighway." May not be the case for your particular unit, but these kinds of location descriptions don't sound good.

For example if it was on Nimmanhaemin then the description would say so. Or on Huay Kaew. Or on Suthep Road. But 'a short motorcycle ride from X' sounds like way up the Mae Rim Road, or next to a big company selling construction equipment down a soi off the superhighway.

It wasn't an advertisement, it was part of a discussion. A short motocycle ride is exactly what it says provided you have the knowledge of the back roads in this particular area of CM that many do not. Those in the know avoid the main roads you mention wherever possible.

[hml367]

There seems to be a lot of advice and/or comments on investing in real estate in Chiang Mai with an overtone of Western thinking on the way of investing.

My observations of the Asian way of investing is that it is not the same as the Western way of thinking about it.

[beau thai]

There seems to be a lot of advice and/or comments on investing in real estate in Chiang Mai with an overtone of Western thinking on the way of investing.

My observations of the Asian way of investing is that it is not the same as the Western way of thinking about it.

Seriously, please say more. I for one need more educating about the 'Asian way of investing'. I suspect it may be an impossible catch-all as it includes the 2 most populous countries on the planet - China and India, and they alone have very very diverse cultures- and probably attitudes to investment.

I see people state that 'Asians like gold'; 'Chinese like land'; 'Chinese dont feel welcome in Chiang Mai' etc etc

But I also hear many Thai people (especially older ones) much prefer land ownership to condos, yet over 50% of condos are thai owned- by law.

Most immigrants/tourists are not especially popular in most countries- but their cash is. Even Farang in Thailand right?! Doesnt stop them investing. (and dont mention the Russians...)

China has a population of 1.4bn (growing 37million a year)- if 99.9% dont want to buy in Chiang Mai, then that is still 1.4 million who may. ( I am not saying that they do, but making a point about generalisations and markets)

I am not sure anyone can sensibly categorise their 'way of investing' for any country, let alone for a continent. In my home country I know many radically different attitudes to investment among my own friends and family - and I suspect we all do.

But if there is an ';Asian way of investing' I want to know more about it please.

[Oscar2]

I agree that there are many sub markets in Chiang Mai split by geography, price and housing type. But a major correction in the market will drive all segments down but at differing rates. The condo market could hold up a little better because of the higher percentage of foreign buyers. Those markets that have the highest leverage will suffer most. Part of my concern began when I visited several housing developments (non-condo) that we requiring only 50,000 baht down on 3 to 4 million baht properties.

That 50k down is most likely just the amount required to hold the property until you try and get financing from a bank.

I don't know about now but in the past many places had a 5,000 baht deposit and then you made payments for a couple of years just to build up the required down payment the banks required.

Exactly, Wolf'. This gives good insight into the knowledge of the market by some. 50,000 won't get you a lease on a 3-5 million THB property, if you are paying two months deposit plus first months rent. Could probably be enough "key money" for a deceased AIDS patient's Hillside 4 studio. It's part of a strict schedule of payments that will get you 20% down, and you will have to come up with the other 80% plus transfer fees, when it is completed. I can't remember the last time I saw a builder offering financing here....maybe never....they might have a preferred lender; but they aren't giving a farang a mortgage. Some will send you to a Singapore Bank, and it is way tougher than the US. You will need a large downpayment and verifiable current employment income. It is also illegal to have a mortgage past age 65 in Thailand.

Every thing can be fixed with a developer who wants to sell, and their contact in a Thai bank.

Home loan (90%) with falsified employment details (as in no employment at all), totally doable.

that is exactly what caused the global financial crisis which began in December 2007! "sub-prime loans" were based on this exact same process.

[Oscar2]

Condos and shopfronts are a disaster waiting to happen.

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

Well, they're not very attractive if far out, but not sure why they would be a disaster. A rich family acquired that land next to a ring road, and decided to spend a couple million to build one or two blocks of shophouses. Which don't sell. But they don't care, it's not like they need the money in a hurry.

However, compare this to a shophouse downtown, no matter how old, and then I'm highly interested. They're quite versatile buildings that you can do anything with.

except of course have any form of greenery around. so no garden. basically commercial space unless you are comfortable being surrounded by nothing more than concrete (which many people are). also the guy in the unit next to you could be mixing up hazardous chemicals or.......

[theoldgit]

Offensive remark removed.

[worgeordie]

Most of the comments here are about Condos,yes there is a glut of

Condo projects,and a correction in prices may well happen, but in

respect to land prices,they will never fall,only increase,as they are

not making anymore.

Then there is the difference between land and a built project,with

land ,it can just sit there,its not eating any meat,so no real incentive,

sell cheap,with a built project like a Condo,they have to be sold as

quickly as possible,1,because they start to deteriorate as soon as

they are completed,2, The developer has to repay the banks or

other investors,as interest is accruing daily.and if they cannot sell

they will have to lower prices,supply and demand rules.

regards Worgeordie

[Jdiddy]

If you want to see a bubble go to Australia, in particular Sydney

median apartment price is 21,000,000baht

monthly rent: 84,000baht

[Thighlander]

This is what 32 million THB gets you in Arlington, Virginia. 250 Wah....will likely be torn down. She paid 3.7 million THB in 1984. The cigs got to her, though, now deceased.

http://www.zillow.com/homes/119-n-fillmore-st.,-22201_rb/

[mesquite]

This is what 32 million THB gets you in Arlington, Virginia. 250 Wah....will likely be torn down. She paid 3.7 million THB in 1984. The cigs got to her, though, now deceased.

http://www.zillow.com/homes/119-n-fillmore-st.,-22201_rb/

A large house on a large lot in a nice suburb of the most powerful city in the world. Definitely a reasonable price, all things considered.

Definitely not Chiang Mai, not by a long shot.

In 84, though, there was less demand due to fewer people living in the area working as lobbyists, contractors, lawyers, etc. Mainly government workers.

In 84 a GS worker could have bought that house. Now that would be impossible unless he/she left the government to make the big bucks, still with taxpayer dollars, just no upper limit.

Edited August 10, 2014 by mesquite

[Thighlander]

population only increased from 152,999 in 1980 to 207,627 in 2010.

[mesquite]

I'm talking the entire metro DC area, not just Arlington.

[chiang mai]

Huh! Arlington or Chiang Mai, which one is the thread about!

Edited August 10, 2014 by chiang mai