What are the chances of thai property market crash?

[mataleo]

Hi, questions to experts in fields of properties and economy.

Whats the chances and how far we are from property crash, and what would be consequences (i mean like condos market in pattaya etc.)

I will stop here as I dont want to give any clues to the answer.

Thanks

[jbaldwin]

All markets have downturns from time to time. The answer to your question is Yes but predicting timing is wholly guesswork.

[bkkjames]

Well I am for one amazed at the asking prices for rentals here in Bangkok. With less and less farangs around, who will rent these condos purchased for investment? AEC hopes prevail for a sudden influx of high spending cambodians?

Go take a gander at the classifieds on here and other english language sites (you know them) for some stellar examples. 50-60 sqm 2 beds for 50,000 baht a month at some fancy sounding new build in the cbd. Who's renting these - certainly ain't the locals.

There will be a market for top top buildings at a premium for those of farang MD status or if the company foots the bill, but that market does have a limit in terms of numbers.

Now I believe here at least they will keep building them and locals mostly will keep buying them off plan with hopes of a profitable flip. I for one would not touch one with a 10 foot pole considering all the changes to Visa requirements and so on. But then again, maybe a correction is in order - and an opportunity for some should prices drop to realistic levels.

Edited November 7, 2014 by bkkjames

[Bernard Flint]

Many many new condos are being bought by thais so i cannot see a crash

[mataleo]

But looking at Pattaya, its overbuild. They keep building and very little people buy.

U look at this new projects they empty..

And then 28sqm studio in jomtien cost 50k $, and real value of it is 15k $

In my opinion the bubble is close to burst...

They spend/took loans to build it but not many are sold. And theres many under construction...

Edited November 7, 2014 by mataleo

[Briggsy]

I agree with J(ack(?)). Baldwin. Downturn at some time, who knows when.

Another trigger will be when they eventually bring in property taxes for residential properties. At that time,you will see a big correction. This may not happen till the 22nd century though.

[mataleo]

Fears of housing crash in China raise global alarm

http://m.ft.com/cms/s/0/89a84fe8-43d5-11e4-8abd-00144feabdc0.html

[mataleo]

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

http://www.forbes.com/sites/jessecolombo/2013/11/04/thailands-bubble-economy-is-heading-for-a-1997-style-crash/?optimizely=a

[mataleo]

Anyone loved through Tom yam kung 1997 crash? What was it like?

[happydude303]

Well it's funny you mention this I popped down Pattaya yesterday with the mrs , I was pointing out to her how many condos where for sale an complete buildings empty. Part of me hopes. it does crash but then part of thinks how that my effect the Thai People and there life's which is not good

[Delight]

Prior to the 97 crash 1$ bought you 25 Baht. At the trough 1$ bought you 56 Baht.

Maybe the developers are waiting for another crash. Condos measured in Dollar pricing will be very cheap.

That of course will also be good news for rice exports (priced in Dollars).

Gasoline will be a bit pricey though.

If the crash is going to happen –then my guess it will occur within the next 2 -3 years.

[worgeordie]

Wonder how much of this property bubble is financed with black money,

all that corruption and drug money has to go some where.

regards worgeordie

[Longtooth]

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

http://www.forbes.com/sites/jessecolombo/2013/11/04/thailands-bubble-economy-is-heading-for-a-1997-style-crash/?optimizely=a

Well, I was going to say maybe the Chinese coming in will prevent the bubble from bursting, until I read this. My old house in "Cali" went down to 1/3 the value of it's peak value after that sub-prime fiasco. If anyone knew with 100% certainty the answer to your questions, they could become very, very rich. The only way to know with 100% certainty, is to CAUSE THE ACTION. That thought opens up an interesting can of worms.

[KittenKong]

The problem with property in Thailand today is the same as it was in 1997. Masses of speculation, largely fuelled by credit as far as Thai buyers are concerned, and fuelled by low interest rates elsewhere/money laundering for those with their own money. Very few purchases of property that the buyer actually wants to own for years and live in. As far as I'm concerned the latter type of purchase is the only valid one, and the only one that wont lead to a crash at some point.

Speculation is bad news and punitive taxes should be brought in to stop it. The same applies to short-term stock trading.

[trogers]

Well it's funny you mention this I popped down Pattaya yesterday with the mrs , I was pointing out to her how many condos where for sale an complete buildings empty. Part of me hopes. it does crash but then part of thinks how that my effect the Thai People and there life's which is not good

I believe the downturn has already started since the final quarter of 2013.

I do not see a crash, like in 1997, but prices of newly bought and built condos are already on sales at less than launch prices while unsold units of developers are being offered with free add-ons or price discounts.

These contrast with the previous annual price increases of developers during the construction stage of their projects.

[xylophone]

Well something is not right in the land of property, certainly not here in Patong.

There are four developments within a couple of kilometres of where I live, all of which have stalled, with a couple not having any activity on them for over four months. Add to that quite a few smaller guesthouses and apartment blocks for sale, not to mention the many restaurants and you have what I believe to be the first signs of a big slowdown or even a crash.

Someone mentioned that the Thais were buying the small condos, however the Thais I know who are buying these are buying them off the plan with the hope of on-selling for a profit before completion. Or if that doesn't work, they are being persuaded to keep paying the monthly repayments, despite no building work going on, because when these condos are EVENTUALLY? finished, they can be rented out for 40,000 baht per month!

Low interest rates, easier to borrow money, the main drivers of speculative nvestment, "fear and greed" being very evident and the belief that everything must be okay because companies are still building condos and there is all sorts of building going on everywhere etc etc etc are blinding people to the fact that a possible crisis is looming.

[ToddinChonburi]

I listen to a realtor speak about Pattaya and he said that the Chinese are starting to invest here in Thailand , he showed the average increase from presale to finished product was 35 % . that is a pretty good return on your money. Now this was all based on information from the land office and the stuff he had been tracking .

Even after listening to this i still think something has to give . My home in the US lost 30% of its value.

When will it happen ? Like in the USA, when people stop buying, stop paying there mortgage ,

[Robert24]

hard to say and I don't know the Pattaya market very well. But condos are still selling well in Bangkok and other cities in Thailand and property developers still making good profits. But agree prices are expensive. But is it an outright bubble? Not sure. Lending criteria have been tightened by the BoT and banks are more cautious on approving mortgages. On the other hand, many corporates have started investing big time into property which is worrying, i.e. Singha, ThaiBev, CP etc. I think for the market to crash you need an external shock to the economy, i.e. a recession/China hard landing or some geopolitical event impacting the economy significantly.

[KittenKong]

I listen to a realtor speak about Pattaya and he said that the Chinese are starting to invest here in Thailand ,

So people from a country that has vast numbers of unsold and unwanted buildings are now investing in similar things in Thailand? I wonder why?

....he showed the average increase from presale to finished product was 35 % . that is a pretty good return on your money.

I would not be quick to believe anything a real estate agent here tells me. They all want to sell you something.

Now this was all based on information from the land office ....

What information is that?

[trogers]

I listen to a realtor speak about Pattaya and he said that the Chinese are starting to invest here in Thailand ,

So people from a country that has vast numbers of unsold and unwanted buildings are now investing in similar things in Thailand? I wonder why?

Whitewashing dirty money? Read a couple of news of development company owners absconding with monies of buyers. Edited November 8, 2014 by trogers

[ldnguy]

But looking at Pattaya, its overbuild. They keep building and very little people buy.

U look at this new projects they empty..

And then 28sqm studio in jomtien cost 50k $, and real value of it is 15k $

In my opinion the bubble is close to burst...

They spend/took loans to build it but not many are sold. And theres many under construction...

You ask about a property crash in Thailand but only mention Jontiem. That might crash but lots of Thailand has reasonably priced property. Most property in Thailand is under 1 million baht.

Yes, 28 ssm for $50K in Jontiem seems high but people thought the same in London and prices have tripled since they thought it was too high. People are always expecting a crash. It's impossible to time. Instead of crashing, prices could just stagnate. e.g. stay at $50K for the next 20 years until they are reasonable value. They don't have to crash to get back to reasonable value. They can just stay and wait for inflation to catch up.

I think you'll be waiting for a very long time. If in your example the condos are really worth only $15K and the developer sold a few for 50K, then he's probably covered his costs and any unsold units are free to him. So he can hang on forever waiting to sell. He isn't forced to sell, and with so many cash buyers, there are a very limited number of distressed sellers. It's a very different market to the West where most properties are bought with a mortgage.

[ldnguy]

I also find it odd that most farangs on here seem to agree that prices are too high for new condos, yet plenty of farangs are buying, and when they come to sell they expect high prices themselves.

[KittenKong]

I also find it odd that most farangs on here seem to agree that prices are too high for new condos, yet plenty of farangs are buying, ...

Are they necessarily the same ones?

I bought my (used) condo because I like it and I'd seen very few others that I liked. I know it cost perhaps 20-30% more than it's worth, but that's not a huge amount and any loss probably wont be realised till I die anyway, at which time I will care even less than I do now.

But the likelihood of me buying a new condo is more or less zero: the rooms are too small, they are too expensive per sqm (often double what mine cost) and I hate the modern interior designs.

[KittenKong]

Yes, 28 ssm for $50K in Jontiem seems high but people thought the same in London and prices have tripled since they thought it was too high.

There is a reason for that. There is no empty land in London, so you can't just build to satisfy demand. You cant even spread outside London because of zoning issues and planning consent. But Jomtien had masses of undeveloped land, much of it on or very near the beach, and any demand could be satisfied just by building more units. And if Jomtien ever gets full you could just carry on building all over Na Jomtien and on to Bang Saray and beyond.

[elgenon]

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

http://www.forbes.com/sites/jessecolombo/2013/11/04/thailands-bubble-economy-is-heading-for-a-1997-style-crash/?optimizely=a

Well, I was going to say maybe the Chinese coming in will prevent the bubble from bursting, until I read this. My old house in "Cali" went down to 1/3 the value of it's peak value after that sub-prime fiasco. If anyone knew with 100% certainty the answer to your questions, they could become very, very rich. The only way to know with 100% certainty, is to CAUSE THE ACTION. That thought opens up an interesting can of worms.

My properties in Cali are worth 20% more now than before the crash. Being dumb and holding on can be smart.

[DerkMR]

What are the chances of Christmas?

In most areas of Thailand the prices skyrocketed without any reason other than speculation.

If you see what they ask for Isaan farmland without any proximity to a expanding city and you calculate the annual crop sales you know that noone could afford buying land for farming purposes.

In growing cities there is some demand but apart of Bangkok the demand is not too high.

Many many new condos are being bought by thais so i cannot see a crash

How often ave you seen a crash before it happened?

Bye,

Derk

[Nickthegreek]

But looking at Pattaya, its overbuild. They keep building and very little people buy.

U look at this new projects they empty..

And then 28sqm studio in jomtien cost 50k $, and real value of it is 15k $

In my opinion the bubble is close to burst...

They spend/took loans to build it but not many are sold. And theres many under construction...

You ask about a property crash in Thailand but only mention Jontiem. That might crash but lots of Thailand has reasonably priced property. Most property in Thailand is under 1 million baht.

Yes, 28 ssm for $50K in Jontiem seems high but people thought the same in London and prices have tripled since they thought it was too high. People are always expecting a crash. It's impossible to time. Instead of crashing, prices could just stagnate. e.g. stay at $50K for the next 20 years until they are reasonable value. They don't have to crash to get back to reasonable value. They can just stay and wait for inflation to catch up.

I think you'll be waiting for a very long time. If in your example the condos are really worth only $15K and the developer sold a few for 50K, then he's probably covered his costs and any unsold units are free to him. So he can hang on forever waiting to sell. He isn't forced to sell, and with so many cash buyers, there are a very limited number of distressed sellers. It's a very different market to the West where most properties are bought with a mortgage.

Sorry I wouldnt normally write anything, but where do you get the idea that most property in Thailand is under 1 million baht..take Rayong for example, not many Westerners here and property selling like hot cakes, the condo boom here has been amazing for 32sq m 1.2- 1.4 million up....Thais are buying here with no fear of the economy doing anything, I was recently in Khon Kaen and Korat on Holiday and I saw nothing for a million baht there either, the start prices for 3 bed house now seems to be around 3.5 million baht everywhere, whats holding up thses prices god only knows, but Rayong has gone up.just my tuppence worth

[yellowboat]

See what the inventory is compared to the levels in 1997. If they are similar, you will have your answer.

Middle class Thais do buy condos and then get stuck with them, unable to sell or rent them.

[realenglish1]

There is no question we are in a condo bubble. This is not wishful thinking. Builders artificially up prices as the project developed This is not done anywhere else on earth. So lets say there is a price of 200 dollars for a condo During the course of construction the builder ups the price to 275 or 300 to completion. And people come to buy these units for investment. t Itis investment based on false market conditions. It has nothing to do with market demand and price .

If you buy a condo with the idea of renting it out Lets say 40 square meters. for 35.000 per month then chances are you are going to get stuck with it and not renter because the price does not reflect market conditions. Sit with it long enough without a renter and start to have problems looking after the loan then you get into trouble . The bank repossess and then sells for the the balance of the loan value which will less by at least 20% ( based on your down payment)or more based on how property is sold.

Yes we are in a condo bubble and it will explode When I have no idea but it will The economics to it just don't work. No market driven pricing. Builder driven pricing and that is greed not market forces.

The bubble should start to show its ugly head when builders start to offer ridiculous incentives to buy. Like a free car or huge discount on it

Good luck to those who think condos are a good investment here in Thailand

Edited November 9, 2014 by realenglish1

[sandhurstmolonski]

Pure and Simple there will be no Thai property crash , Condo's rely on Pre - sales , if the sales are not there the project will not commence .

The time for a Crash would have been the absolute low of recent conflicts . But what has happened ? Khun General has had an effect and

has begun cleaning much up , there are buyers and there will be more buyers , and more and more Farang over the Coming years .

Rentals are very high , incredibly so and this is not going to change , so the yields dictate the price . Why pay a Wopping rental ..when you can

purchase an inexpensive Condo with everything ?

I should qualify what I say in line one ..prices would have to rise a LOT more , for there to be a circumstance like that in China , can hardly compare . Generally the people trying to talk this kind of thing up are those who are just " Wishing " for a Crash , for they have never been prepared to Buy . I'm heard the same b/s for many years in Australia also ..but guess what ? prices continue to increase .

Happy to rent in Thai also , But dont expect to see cheap rents in the popular areas at any time in the next 15 years , Barring an absolute Natural tragedy or something like that . I've been involved in this industry for 25 years , and just wish I had of always listened to these claims and kept buying . Having said all that , if buying in Thai , just buy for lifestyle and dont even think about any of the other b/s , consider it an alternative to paying rent and a lifestyle choice .