Household debt keeps Thailand Southeast Asia's sick man

[kieran2698]

When I first arrived in Thailand 15 years ago there was semi developed property and abandoned shop houses every where.

That was after the last crash and wages have increased little in that period.

When I read threads on here with suggestions of farmland in the back of beyond 'worth' 500k a rai I laugh.

This is Thailand not England.

500k/Rai is about three times as much as farmland costs in England.

[Chapy]

And the condominium/housing prices that keeps going up up up, when is it going to crash? It must be a huge bubble by now.

I think the same.

These folks will be in dire straights even if they are unemployed for 2 weeks.

[toybits]

A part of this problem is easy access to finance companies that charge an arm an a leg in interest charges. Thai families purchase new cars or motorbikes even when the clearly cannot afford it. It would be very interesting if someone could give us some idea of the number of item repossessed by these finance or leasing companies.

[Jay Sata]

And the condominium/housing prices that keeps going up up up, when is it going to crash? It must be a huge bubble by now.

I think the same.

These folks will be in dire straights even if they are unemployed for 2 weeks.

The other issue is Thais never insure properly so if something go wrong they take the hit.

Mai Pen Rai is fine until the proverbial hit the fan.

[sanuk711]

The Thai tourism bubble will burst when Burma opens up those beautiful unspoilt beaches on the Andaman coast. Let's face it it has the same climate,people temples and food as Thailand.---Jay Sata

.

I have put in for a Jet ski license there already...........................

[Asiantravel]

New empty buildings everywhere. Apartments, hotels, shops, condos. Notice how many new cars are on the road that no one can afford ? Mark my words a huge crash is coming within a year. Mass tourism and materialism will destroy this country. A serious big bubble is about to blow up in the Thais faces.

You must have seen this Forbes article surely?

Of course the sceptics on this website will immediately jump up exclaiming “ oh that was written in November 2013 “ Implying that because it hasn’t happened yet or that the dire warnings from three Thai tycoons (who have experienced the agony of losing their entire fortunes in the last downturn )are outdated now and that none of this applies any longer? To to which my reply is so what? Absolutely nothing has changed since this article written other than the fact that the bubble has got even bigger!

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

Edited February 11, 2015 by Asiantravel

[rickirs]

"The military has promised to unleash billions of dollars on much-needed infrastructure projects....But the money is yet to kick into the economy."

The Junta will not, despite its promises, engage in massive infrastructure investment:

"Deputy Prime Minister M.R. Pridiyathorn Devakula stated Friday that the government will not be implementing a second round of economic stimulus package in light of indications that previous budgetary injections have made a significant impact on the country’s economy."

"The government could come under pressure to shift the economy out of idle, but gross domestic product should grow on its fundamentals, not from an injection of capital," Somkid Jatusripitak, NCPO Advisor, The Nation 2014-11-20

The Junta's creditability and capability is being seriously questioned:

"If there's no ground-breaking [on government investment projects], I do not believe in anything. One recommendation I have for the government is to 'just do it'. There's enough talk already," Chantana Sukumanont, an adviser to Siam City Cement, The Nation 2015-01-30

The consequences of the Junta's failure may surpass all its other successes:

"Democrat Party leader Abhisit Vejjajiva Sunday warned the government to speed up efforts to revive the economy or else the post-coup administration would [find] it difficult to stay on." The Nation 2015-01-04

The consequence for the nation will be an economic depression.

Edited February 11, 2015 by rickirs

[Fatty123]

One of wife's friends is a teaching asset earning 10k a month. Just bought a brand new pickup over 7 years at 7k bht a month.

If he still has it in a year I'll be amazed.

The irresponsible lending of money is part of the problem.

I agree with this.

I never understand how banks and other financial institutions seem so willing to lend low income earners in Thailand so much money.

Lenders should be held accountable for Thailand's raising household debt.

It's far too easy for Thais to get credit waaaaay beyond their means. Particularly those in secure jobs, like teaching or in the civil service etc. My wife's cousin did a similar thing when buying a new car. The repayments were more than half of his salary.

He ended up taking the bus to work and leaving the car at home as he couldn't afford to put petrol in the car... It's easy to blame the person borrowing beyond their means, but young or poorly educated chaps and ladies are more likely to do this. I know Thailand does have guidelines for borrowing etc...but they need to get tougher with lenders on how much can be borrowed. If somebody breaks this law, then the debt should be written off.

Can't see it though. Too many people getting rich off this and the Thai culture of 'status symbols = an increase in social standing = more respect' makes it a tough nut to crack.

Edited February 11, 2015 by Fatty123

[ttthailand]

I see loads of newly built unoccupied shophouses everywhere.

The hangover after the party looms.

I think people with money are building these as opposed to putting the money in the bank at 2.8 % interest. It really don't cost that much to build the shell and hope 7/11 wants to setup shop.

[Jay Sata]

I see loads of newly built unoccupied shophouses everywhere.

The hangover after the party looms.

I think people with money are building these as opposed to putting the money in the bank at 2.8 % interest. It really don't cost that much to build the shell and hope 7/11 wants to setup shop.

That's fine by me but many of these places will get little or no footfall or passing trade.

One business model I see a lot of is the restaurant opening and closing within months. Seems the money is made churning just like the Farang bars. I was in Khon Kaen the other day and saw about four around the central lake without a customer early evening. Every time I visit Korat or Udon the bars have changed owners.

The Thais seem to love opening identical business's next to each other that last around three months before the shutters go up.

[jacko45k]

One of wife's friends is a teaching asset earning 10k a month. Just bought a brand new pickup over 7 years at 7k bht a month.

If he still has it in a year I'll be amazed.

The irresponsible lending of money is part of the problem.

And to a lesser degree, the irresponsible borrowing of money.

People need to be responsible for their own actions.

[Seastallion]

Oooo, I got the job/had a record day of sales. First thing, buy a new car to show everyone my newfound wealthy status.

No, the bank says I don't qualify for a low interest loan. They tell me my salary/income is not enough to pay it back AND live day to day.

What does a stuffy bank manager know?

Hey, Somchai Loansharkaporn, can you lend me what I want at a high interest rate?

.........

6 months later.....

Hey, Peterporn...can I borrow some money...I am behind in my payments to Somchai.....

[Asiantravel]

I see loads of newly built unoccupied shophouses everywhere.

The hangover after the party looms.

I think people with money are building these as opposed to putting the money in the bank at 2.8 % interest. It really don't cost that much to build the shell and hope 7/11 wants to setup shop.

But even at a paltry 2.8% at least you can access your money easily.

With this situation without a steady return from long-term rental income and without capital growth in this era of deflation, the maintenance costs and other outgoings will eventually lead to a sorry state of affairs. They will also be lucky to get back their original purchase price if they ever need to sell it

[i claudius]

And still as a foreigner who gets far more per month than the average Thai worker i can not get a credit card ,and all i want it for is so i can buy my airline tickets ect online as no one will accept a debit card ,crazy

[bkknow]

And still as a foreigner who gets far more per month than the average Thai worker i can not get a credit card ,and all i want it for is so i can buy my airline tickets ect online as no one will accept a debit card ,crazy

Off-topic but i hope this will help you. Check out www.neteller.com

It's a mastercard prepaidcard. it can be used anywhere just like a regular mastercard creditcard, the only difference is that you can only spend that what you have deposited in your neteller account.

[harada]

And still as a foreigner who gets far more per month than the average Thai worker i can not get a credit card ,and all i want it for is so i can buy my airline tickets ect online as no one will accept a debit card ,crazy

Off-topic but i hope this will help you. Check out www.neteller.com

It's a mastercard prepaidcard. it can be used anywhere just like a regular mastercard creditcard, the only difference is that you can only spend that what you have deposited in your neteller account.

Not with Slik Air.

[LivinLOS]

People should recognize that their loan interest rates is effectively higher by 7%, since every payment they pay additional 7% vat on the total payment. Even they already paid vat on the whole amount when they purchase the item. Essentially they pay vat 2x

Thats simply not true..

Add up your car payments.. Look at it in detail.. The sales tax is charged once.

[GAS]

For years it has gone on, and still it has not crashed. Three years ago I thought the bubble would burst and it has carried on but I now truly feel and SEE that things are starting to crack.

I posted in the biz section about how much more empty the restaurants are in my area of BKK and how much building is going on.

Thai associates of mine took me to Phuket last month, I had never been, we stayed at a hotel owned by a friend of theirs. I could see it was slow. I could also see construction everywhere but an overall feeling I got was that it was overbuilt and that the quality of and quantity or tourists was declining. There is a thread in the Phuket forum basically saying the same thing.

Lots of people said last year that the whole emerging market thing was dying and there has been little talk of it lately, but it appears so. Lots of money came over here looking for investment after the meltdown in the west.

Looking around I just do not see how this ends well...can already see second hand car prices dropping hard, condos are way overbuilt and thy keep putting more up, anyone who wanted a new car probably already bought one...and an iphone or Coach bag....its all been done to death.

I know Thais hang on to things like RE and try and weather it and not discount but I can not see it...this sucker has got to blow and it could be epic.

Edited February 12, 2015 by GAS

[Asiantravel]

For years it has gone on, and still it has not crashed. Three years ago I thought the bubble would burst and it has carried on but I now truly feel and SEE that things are starting to crack.

I posted in the biz section about how much more empty the restaurants are in my area of BKK and how much building is going on.

Thai associates of mine took me to Phuket last month, I had never been, we stayed at a hotel owned by a friend of theirs. I could see it was slow. I could also see construction everywhere but an overall feeling I got was that it was overbuilt and that the quality of and quantity or tourists was declining. There is a thread in the Phuket forum basically saying the same thing.

Lots of people said last year that the whole emerging market thing was dying and there has been little talk of it lately, but it appears so. Lots of money came over here looking for investment after the meltdown in the west.

Looking around I just do not see how this ends well...can already see second hand car prices dropping hard, condos are way overbuilt and thy keep putting more up, anyone who wanted a new car probably already bought one...and an iphone or Coach bag....its all been done to death.

I know Thais hang on to things like RE and try and weather it and not discount but I can not see it...this sucker has got to blow and it could be epic.

" For years it has gone on, and still it has not crashed. "

Maybe in Thailand they can hold it together just as long as the Chinese bubble can hold together?

For eight years, until her resignation last month, Fitch banks analyst Charlene Chu has done just that, warning of the impending collapse of China’s debt-fuelled bubble. Working out of Beijing, Chu has developed a reputation that has seen her hailed by some of the world’s most important money managers as a “heroine” and treated as a pariah by some within China’s financial elite.

In a country where the banks, even the largest, are not known for openness, Chu has warned since 2009 about a rapid expansion in lending that has seen something close to $15 trillion (£9.1 trillion) of credit created, fuelling a property and infrastructure boom that has no equal in history

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10611931/The-15-trillion-shadow-over-Chinese-banks.html

[trogers]

I see loads of newly built unoccupied shophouses everywhere.

The hangover after the party looms.

I think people with money are building these as opposed to putting the money in the bank at 2.8 % interest. It really don't cost that much to build the shell and hope 7/11 wants to setup shop.

But even at a paltry 2.8% at least you can access your money easily.

With this situation without a steady return from long-term rental income and without capital growth in this era of deflation, the maintenance costs and other outgoings will eventually lead to a sorry state of affairs. They will also be lucky to get back their original purchase price if they ever need to sell it

This is what property tax aims to do. Make it painful to hold property vacant and unproductive. Edited February 12, 2015 by trogers

[GAS]

I really hope we do not see a property tax put in place, at that point you never really own your home or condo, you just rent it from the gov't, just like back in USSA.

I could see a tax on properties over a certain valuation or commercial perhaps might possibly be fair.

When China blows up there could definitely be some knock on effect here in LOS. I almost think the bigger problem in China now is not the ghost cities or shadowy banks but the pollution is so bad now it is literally making the place unfit to live in.

We may look back in 5 years and say that this was the big boom period for Thailand, peak tourism, peak exports, peak consumerism.

[doctorproc156]

Want a solution to this? How about removing the ridiculous tax on cars so people don't need these stupid 8 year loans anymore. Cars are pretty much mandatory since organized public transport is still non existent outside of central Bangkok

[trogers]

I really hope we do not see a property tax put in place, at that point you never really own your home or condo, you just rent it from the gov't, just like back in USSA.

I could see a tax on properties over a certain valuation or commercial perhaps might possibly be fair.

When China blows up there could definitely be some knock on effect here in LOS. I almost think the bigger problem in China now is not the ghost cities or shadowy banks but the pollution is so bad now it is literally making the place unfit to live in.

We may look back in 5 years and say that this was the big boom period for Thailand, peak tourism, peak exports, peak consumerism.

Don't know about the US. Property tax here would have a large rebate for one's own home. It is one's 2nd or more property, commercial property, and developer's unsold ones that are subjected to the full rate.

[HiSoLowSoNoSo]

And still as a foreigner who gets far more per month than the average Thai worker i can not get a credit card ,and all i want it for is so i can buy my airline tickets ect online as no one will accept a debit card ,crazy

If you got a bank account in Kasikorn bank you can apply for cyber baking and a Virtual Visa card, you can hook up this to a Thai Paypal account, works great for paying onlince purchases and for tranfering money overseas. http://www.kasikornbank.com/EN/ServicesChannel/SearchServiceChannel/Internet/Pages/KCyberBanking.aspx

[Dogbreath]

And still as a foreigner who gets far more per month than the average Thai worker i can not get a credit card ,and all i want it for is so i can buy my airline tickets ect online as no one will accept a debit card ,crazy

Getting a credit card in Thailand is easy. Deposit whatever amount you want for a credit limit with the bank in a savings account which secures the bank if you default. Years ago, I got a Visa Platinum Card from Bangkok Bank for just the reasons you cited. Very satisfactory. I pay the balance monthly, so no interest and in five years have gotten a bit (a very little bit) of interest as well.

[Cake Monster]

With household debt taken out through " official banking channels " in Thailand running at a current 89% of GDP, and probably an equal amount ( if not more ), taken out through the loan sharks and black banks, Thailand will remain the " sick man " of SE Asia.

It was reported by the BOT several months ago, that one of the main reasons that the BOT could do nothing to stimulate the economy ( rate reductions ) was the massive amount of hosehold debt.

Until this debt is brought under control, the Thai economy will continue to suffer, and the longer the situation continues, the worse the end result will be.

[davejonesbkk]

One of wife's friends is a teaching asset earning 10k a month. Just bought a brand new pickup over 7 years at 7k bht a month.

If he still has it in a year I'll be amazed.

The irresponsible lending of money is part of the problem.

thats incredible, how did he qualify for that on 10k a month??

[apetley]

One of wife's friends is a teaching asset earning 10k a month. Just bought a brand new pickup over 7 years at 7k bht a month.

If he still has it in a year I'll be amazed.

The irresponsible lending of money is part of the problem.

thats incredible, how did he qualify for that on 10k a month??

He went along to the local Toyota dealership and arranged the loan. Because he is a Gov't worker maybe they consider him a good risk! As I said, irresponsible lending is a huge contributor to the problem here.

[trogers]

With household debt taken out through " official banking channels " in Thailand running at a current 89% of GDP, and probably an equal amount ( if not more ), taken out through the loan sharks and black banks, Thailand will remain the " sick man " of SE Asia.

It was reported by the BOT several months ago, that one of the main reasons that the BOT could do nothing to stimulate the economy ( rate reductions ) was the massive amount of hosehold debt.

Until this debt is brought under control, the Thai economy will continue to suffer, and the longer the situation continues, the worse the end result will be.

For once, financial officials of a lowly emerging economy exhibit superior wisdom, compared with those in developed nations pushing out QEs in the face of high household debts. Edited February 15, 2015 by trogers