Analyzing the Bangkok Condo Market

[Asiantravel]

[…] everyone I know in Thailand who bought 10 or more years ago has a property worth more than they paid for it. And I don't mean they just made up an unrealistic value. I mean neighboring properties are actually selling for more. Much more in many cases.

Because of stamp duty plus transfer and withholding tax, the real estate price must go up for the owner to break even (ignoring CAM fees).

I am in the process of buying a condo myself, if I sell this after 10 years, then the annual price increase should be about 1.1% to cover the taxes I will have to pay when selling.

Though the longer I keep the condo, the lower the appreciation need to be to cover the taxes, for example after 15 years it only need to appreciate annually by 0.59%, or 9.2% total.

That said, since I am buying in a central location (for which demand is unlikely to go down), I would be very surprised if the condo doesn’t appreciate with at least 1-2% annually.

As long as you don't pay to much I think you'll make a nice profit after 10 years. Especially in a central area.

How can anyone realistically base their expectations for the next 10 years on what has happened over the past 10 years . Economic conditions were vastly different 10 years ago. For example the world debt was only $26 trillion as opposed to $56 trillion now ( with absolutely no idea or discussion of how this is going to ever be paid back ) . Plus with Increasing talk of an even worse downturn coming than the 2008 crisis. And there will be no QE this time around.

[WorkingTourist]

[…] That said, since I am buying in a central location (for which demand is unlikely to go down), I would be very surprised if the condo doesn’t appreciate with at least 1-2% annually.

As long as you don't pay to much I think you'll make a nice profit after 10 years. Especially in a central area.

How can anyone realistically base their expectations for the next 10 years on what has happened over the past 10 years:blink: . Economic conditions were vastly different 10 years ago. For example the world debt was only $26 trillion as opposed to $56 trillion now ( with absolutely no idea or discussion of how this is going to ever be paid back ) . Plus with Increasing talk of an even worse downturn coming than the 2008 crisis. And there will be no QE this time around.

I don’t think anyone said “because of the last 10 years”.

Rather, people will still need a place to live in 10 years, jobs have historically been moving to big cities, so demand for living quarters here goes up, the rich seems to get richer, regardless of hard times, and those drive the demand for the best locations.

For a good condo in a central location to go down in price (over 10+ years), I think we would either need to see some serious deflation, or a reversal of the trend of people moving from the country to the city.

[ldnguy]

[…] everyone I know in Thailand who bought 10 or more years ago has a property worth more than they paid for it. And I don't mean they just made up an unrealistic value. I mean neighboring properties are actually selling for more. Much more in many cases.

Because of stamp duty plus transfer and withholding tax, the real estate price must go up for the owner to break even (ignoring CAM fees).

I am in the process of buying a condo myself, if I sell this after 10 years, then the annual price increase should be about 1.1% to cover the taxes I will have to pay when selling.

Though the longer I keep the condo, the lower the appreciation need to be to cover the taxes, for example after 15 years it only need to appreciate annually by 0.59%, or 9.2% total.

That said, since I am buying in a central location (for which demand is unlikely to go down), I would be very surprised if the condo doesn’t appreciate with at least 1-2% annually.

As long as you don't pay to much I think you'll make a nice profit after 10 years. Especially in a central area.

How can anyone realistically base their expectations for the next 10 years on what has happened over the past 10 years . Economic conditions were vastly different 10 years ago. For example the world debt was only $26 trillion as opposed to $56 trillion now ( with absolutely no idea or discussion of how this is going to ever be paid back ) . Plus with Increasing talk of an even worse downturn coming than the 2008 crisis. And there will be no QE this time around.

I didn't base my expectations on the last 10 years. City centers all around the world are getting increasingly popular, as many give up living in the suburbs and return to the city. Land is scarcer in the city and demand will outstrip supply.

With s much debt, interest rates are likely to be kept low, meaning property prices will likely stay high. If inflation takes off, then property prices will likely rise as well.I don't see much downside risk for property in central Bangkok over the next decade. Don't forget that many rich people from other countries want to invest in Bangkok and they almost always choose central Bangkok. The only way is up. If you don't agree, then don't buy. Others are want to and that is their choice.

What do you mean by increasing talk? Who is doing he talking? Why do you believe them?

Edited June 8, 2015 by ldnguy

[Asiantravel]

Because of stamp duty plus transfer and withholding tax, the real estate price must go up for the owner to break even (ignoring CAM fees).

I am in the process of buying a condo myself, if I sell this after 10 years, then the annual price increase should be about 1.1% to cover the taxes I will have to pay when selling.

Though the longer I keep the condo, the lower the appreciation need to be to cover the taxes, for example after 15 years it only need to appreciate annually by 0.59%, or 9.2% total.

That said, since I am buying in a central location (for which demand is unlikely to go down), I would be very surprised if the condo doesn’t appreciate with at least 1-2% annually.

As long as you don't pay to much I think you'll make a nice profit after 10 years. Especially in a central area.

How can anyone realistically base their expectations for the next 10 years on what has happened over the past 10 years . Economic conditions were vastly different 10 years ago. For example the world debt was only $26 trillion as opposed to $56 trillion now ( with absolutely no idea or discussion of how this is going to ever be paid back ) . Plus with Increasing talk of an even worse downturn coming than the 2008 crisis. And there will be no QE this time around.

I didn't base my expectations on the last 10 years. City centers all around the world are getting increasingly popular, as many give up living in the suburbs and return to the city. Land is scarcer in the city and demand will outstrip supply.

With s much debt, interest rates are likely to be kept low, meaning property prices will likely stay high. If inflation takes off, then property prices will likely rise as well.I don't see much downside risk for property in central Bangkok over the next decade. Don't forget that many rich people from other countries want to invest in Bangkok and they almost always choose central Bangkok. The only way is up. If you don't agree, then don't buy. Others are want to and that is their choice.

What do you mean by increasing talk? Who is doing he talking? Why do you believe them?

LOL . Why do I believe them? Because just look around the world - where is the growth? Where does the world economy go from here on? In fact I was amazed when even a sitting Prime Minister warned how dire things are because in the USA they just keep covering it up with their fudged figures. Even in Thailand the debt-GDP ratio has risen from 60 per cent to 85 per cent over the past five years.You'd have to be delusional to believe that things can go on by piling debt upon debt forever

http://www.theguardian.com/world/2014/nov/16/david-cameron-third-eurozone-recession-g20-warning

Edited June 9, 2015 by Asiantravel

[WorkingTourist]

Similar to the “reason to rent” thread, we should create a thread dedicated to “why the economy will crash”.

[Asiantravel]

Similar to the “reason to rent” thread, we should create a thread dedicated to “why the economy will crash”.

Well what is markedly noticeable is that those like you who seem to infer things can go on like this forever is not only do you ignore history but there is a noticeable absence of hard facts as to how what you seem to believe can be achieved? i.e. endless growth while remuneration levels at best are stagnant or even declining in real terms.

[WorkingTourist]

Similar to the “reason to rent” thread, we should create a thread dedicated to “why the economy will crash”.

Well what is markedly noticeable is that those like you who seem to infer things can go on like this forever is not only do you ignore history but there is a noticeable absence of hard facts as to how what you seem to believe can be achieved? i.e. endless growth while remuneration levels at best are stagnant or even declining in real terms.

Huh? Where are you getting this from? I don’t think I have said much to indicate what I think about the current or future economic situation, and certainly nothing that would justify the phrase “go on like this forever”.

I’m certainly worried about the future of our world economy, but I still believe, as I have written above, that the rich will get richer (which is part of my worries, i.e. less equality as fewer people earn more of the pie), and they’ll still want to live in central locations. Look e.g. at the British real estate market.

But if you disagree with this, please use this thread to argue why, but if you just want to tell us that the world economy is likely to crash (as you have already told us in other threads), then that’s what I think deserves its own thread, where we could then go into more detail. I’ve wanted to discuss some of the links you have previously posted, but so far I have refrained because I felt it was too far from the original topic.

[Asiantravel]

Similar to the “reason to rent” thread, we should create a thread dedicated to “why the economy will crash”.

Well what is markedly noticeable is that those like you who seem to infer things can go on like this forever is not only do you ignore history but there is a noticeable absence of hard facts as to how what you seem to believe can be achieved? i.e. endless growth while remuneration levels at best are stagnant or even declining in real terms.

Huh? Where are you getting this from? I don’t think I have said much to indicate what I think about the current or future economic situation, and certainly nothing that would justify the phrase “go on like this forever”.

I’m certainly worried about the future of our world economy, but I still believe, as I have written above, that the rich will get richer (which is part of my worries, i.e. less equality as fewer people earn more of the pie), and they’ll still want to live in central locations. Look e.g. at the British real estate market.

But if you disagree with this, please use this thread to argue why, but if you just want to tell us that the world economy is likely to crash (as you have already told us in other threads), then that’s what I think deserves its own thread, where we could then go into more detail. I’ve wanted to discuss some of the links you have previously posted, but so far I have refrained because I felt it was too far from the original topic.

No its not about using this thread to argue the world economy is likely to crash but I am highlighting economic factors which are tied to your belief in further growth in property values.

You said in a previous post “I would be very surprised if the condo doesn’t appreciate with at least 1-2% annually.” I am simply asking how you and the other poster ldnguy (who also seems to have a bullish perspective) can rationalise this based on global current economic conditions and the outlook ahead. It seems more like wishful thinking to me.

You also said that the rich will get richer and I don’t disagree with that but how many of these rich do you think will be remotely interested in buying a condominium in Bangkok?. And haven’t you heard the rich are actually buying up land and property in New Zealand to get away from everyone – not properties in central city locations because they are fearful of the inequality you even refer to.

Do you for one moment believe then that there is just even the slightest possibility of such inequality at some point in the future manifesting in similar human behaviour as we recently saw in some parts of the USA (or even in Bangkok a few years ago for that matter?)

In such scenrio owning a property in a central city location would probably be the last place many rich people will want to be.

http://www.theguardian.com/public-leaders-network/2015/jan/23/nervous-super-rich-planning-escapes-davos-2015

Edited June 9, 2015 by Asiantravel

[WorkingTourist]

You said in a previous post “I would be very surprised if the condo doesn’t appreciate with at least 1-2% annually.” I am simply asking how you and the other poster ldnguy (who also seems to have a bullish perspective) can rationalise this based on global current economic conditions and the outlook ahead. It seems more like wishful thinking to me.

Note here that I am speaking about a specific condo, not the market in general. And I am talking about the price that I am paying for this condo. If that price increase by 1% annually over the next 10 years, then it’s still slightly cheaper than the current asking price, which is inline with the market and a price that I do not find unreasonable based on the fundamentals (materials, build quality, and location).

So I don’t think I’m bullish nor that this is wishful thinking.

You also said that the rich will get richer and I don’t disagree with that but how many of these rich do you think will be remotely interested in buying a condominium in Bangkok?. And haven’t you heard the rich are actually buying up land and property in New Zealand to get away from everyone – not properties in central city locations because they are fearful of the inequality you even refer to.

With that statement, I am unsure if you’re trying to argue that rich people won’t live in the city in the future because of a forthcoming revolution of sorts?

I am sure there are rich people planning for a worst case scenario, but one swallow doesn’t make a summer. It’s attractive to live in the city because of all the amenities it offers, that’s why it’s more expensive to live in a city compared to some big countryside farm in New Zeeland.

Do you for one moment believe then that there is just even the slightest possibility of such inequality at some point in the future manifesting in similar human behaviour as we recently saw in some parts of the USA (or even in Bangkok a few years ago for that matter?)

In such scenrio owning a property in a central city location would probably be the last place many rich people will want to be.

Has the occupy wall street movement affected the demand for Manhattan condos?

[Asiantravel]

You said in a previous post “I would be very surprised if the condo doesn’t appreciate with at least 1-2% annually.” I am simply asking how you and the other poster ldnguy (who also seems to have a bullish perspective) can rationalise this based on global current economic conditions and the outlook ahead. It seems more like wishful thinking to me.

Note here that I am speaking about a specific condo, not the market in general. And I am talking about the price that I am paying for this condo. If that price increase by 1% annually over the next 10 years, then it’s still slightly cheaper than the current asking price, which is inline with the market and a price that I do not find unreasonable based on the fundamentals (materials, build quality, and location).

So I don’t think I’m bullish nor that this is wishful thinking.

You also said that the rich will get richer and I don’t disagree with that but how many of these rich do you think will be remotely interested in buying a condominium in Bangkok?. And haven’t you heard the rich are actually buying up land and property in New Zealand to get away from everyone – not properties in central city locations because they are fearful of the inequality you even refer to.

With that statement, I am unsure if you’re trying to argue that rich people won’t live in the city in the future because of a forthcoming revolution of sorts?

I am sure there are rich people planning for a worst case scenario, but one swallow doesn’t make a summer. It’s attractive to live in the city because of all the amenities it offers, that’s why it’s more expensive to live in a city compared to some big countryside farm in New Zeeland.

Do you for one moment believe then that there is just even the slightest possibility of such inequality at some point in the future manifesting in similar human behaviour as we recently saw in some parts of the USA (or even in Bangkok a few years ago for that matter?)

In such scenrio owning a property in a central city location would probably be the last place many rich people will want to be.

Has the occupy wall street movement affected the demand for Manhattan condos?

" I am sure there are rich people planning for a worst case scenario, but one swallow doesn’t make a summer. It’s attractive to live in the city because of all the amenities it offers, that’s why it’s more expensive to live in a city compared to some big countryside farm in New Zeeland. "

I think we may be talking at cross purposes here? The rich are buying but not moving to these alternative places right now. They are preparing and getting ready to do so when there is an inflection point at some time in the future. At that time there will be no alternative from the point of view of safety and security of that person and their family than to move away from highly populated areas.

I see no difference in Thailand because of the huge inequality which is only being kept in check effectively through suppression.

And I'm basing this on the comments of people who will actually put this into practice. For example

http://www.bloomberg.com/news/articles/2015-06-08/billionaire-cartier-owner-sees-wealth-gap-fueling-social-unrest

Edited June 12, 2015 by Asiantravel

[ldnguy]

I think the Thai economy will grow around 3-6% per year, so I think property prices will rise with it. As people get more prosperous, so property prices rise. But location is key. Many areas are overpriced. Central areas are likely to grow. Central London is up 500%+ since people said prices couldn't go any higher. People are moving to city centers around the world, as they are perceived as a better place to live. They may be civil unrest in places, but it never lasts very long. There was massive civil unrest in London, but people still move there and want to live there. I don't think we'll have civil unrest to the point where society breaks down completely. Even those that create eh unrest want to get on with their lives.

I don't think I'm being particularly optimistic. I don't expect prices in Bangkok to shoot up, I just expect them to rise slowly over time. Maybe a fallback here and there, but nothing to drastic. It's not a place I'd buy property for investment unless I found a bargain, but I'd buy to live. I'm just not as pessimistic as some. I've lived through property booms and bust my whole life and property has always done well. I know that doesn't mean it will do well in the future, but people will always need somewhere to live and I'd rather hold property than cash. Cash can also go down in value.

if there is a big property crash then I guess that other investments will be crashing along with it, so whats the answer. I have always liked property and even if I bought and made a 50% loss, I'd still be way, way ahead. That's what counts, not one condo. I've made losses on UK condos. But who cares. All I care about is my overall record. I don't expect every single property investment to work out perfectly. But buy correctly and you'll get more winners than losers.

Would I buy for investment from a distressed seller in Bangkok offered a 40% discount? Yes I would. There'd be limited risk, so may as well take it. Make a judgement on each individual property rather than the whole market, but be aware of what's going on in the market. I'm not actively looking for an investment, but sometimes they turn up. Never say never. Always be ready to snap up that bargain.

Would I buy a new condo in somewhere like On Nut and expect to make a profit? No. I think that's where most farangs go wrong. The look at glossy brochures rather than hard facts.

[steveromagnino]

Fantastic analysis Steveromagnino. I'm in the market to buy probably in the next 12-18 months. I'd love to pick your brain sometime.

As a matter of interest, I'm curious as to how you define a project as failed (e.g. The Met)

If I can add my 2c to this. Firstly, the Thai real estate sector is running on several distinct tracks, and each has its own strengths and weaknesses. I will only talk about Bangkok as I don't know enough about some provincial markets.

sorry for the late reply - anyheeeeow....

I define the Met has having been a bit of a failure in these terms (specific to that building)

- the prices paid by the original purchasers (around 100k+ per sqm) have not increased at the same rate as other similar buildings in other locations and are now below similar category buildings (at the time it was pitched at the top end of the market, now prices are around 140-150k per sqm, and units at The River, etc have moved higher than that)

- the developer has been unable to sell all their units (I think even today they have some remaining) - which is not so great since it was announced from memory in 2005

- the actual building itself has some issues including the facilities getting increasingly rundown, the inability to manage the building for the service fee, leaks etc; because the developer seems to have almost given up you have people with pets, breaches of regulations, lots of units trying to be sold at the same time.....

- the developer is now trying to sell the land adjacent to The Met to another developer to do a highrise

- the actual design itself of both the building and the units is arguably not so good and has probably resulted in the sales problems and facility problems above

I actually think for value for money in today's market is not bad, except for the maintenance downwards spiral. That's why a listed bigger developer tends to be better at the higher end of the market.

This is just my opinion, any questions you have Cabrinha ask away! Not sure I can help but I will try :-)

Edited June 22, 2015 by steveromagnino

[trogers]

Fantastic analysis Steveromagnino. I'm in the market to buy probably in the next 12-18 months. I'd love to pick your brain sometime.

As a matter of interest, I'm curious as to how you define a project as failed (e.g. The Met)

If I can add my 2c to this. Firstly, the Thai real estate sector is running on several distinct tracks, and each has its own strengths and weaknesses. I will only talk about Bangkok as I don't know enough about some provincial markets.

sorry for the late reply - anyheeeeow....

I define the Met has having been a bit of a failure in these terms (specific to that building)

- the prices paid by the original purchasers (around 100k+ per sqm) have not increased at the same rate as other similar buildings in other locations and are now below similar category buildings (at the time it was pitched at the top end of the market, now prices are around 140-150k per sqm, and units at The River, etc have moved higher than that)

- the developer has been unable to sell all their units (I think even today they have some remaining) - which is not so great since it was announced from memory in 2005

- the actual building itself has some issues including the facilities getting increasingly rundown, the inability to manage the building for the service fee, leaks etc; because the developer seems to have almost given up you have people with pets, breaches of regulations, lots of units trying to be sold at the same time.....

- the developer is now trying to sell the land adjacent to The Met to another developer to do a highrise

- the actual design itself of both the building and the units is arguably not so good and has probably resulted in the sales problems and facility problems above

I actually think for value for money in today's market is not bad, except for the maintenance downwards spiral. That's why a listed bigger developer tends to be better at the higher end of the market.

This is just my opinion, any questions you have Cabrinha ask away! Not sure I can help but I will try :-)

The class of the occupying community would affect condo values. That's why I only buy old condos knowing the the community I am buying into.

[steveromagnino]

^{also very true.}

[Robert24]

I think the Thai economy will grow around 3-6% per year, so I think property prices will rise with it. As people get more prosperous, so property prices rise. But location is key. Many areas are overpriced. Central areas are likely to grow. Central London is up 500%+ since people said prices couldn't go any higher. People are moving to city centers around the world, as they are perceived as a better place to live. They may be civil unrest in places, but it never lasts very long. There was massive civil unrest in London, but people still move there and want to live there. I don't think we'll have civil unrest to the point where society breaks down completely. Even those that create eh unrest want to get on with their lives.

I don't think I'm being particularly optimistic. I don't expect prices in Bangkok to shoot up, I just expect them to rise slowly over time. Maybe a fallback here and there, but nothing to drastic. It's not a place I'd buy property for investment unless I found a bargain, but I'd buy to live. I'm just not as pessimistic as some. I've lived through property booms and bust my whole life and property has always done well. I know that doesn't mean it will do well in the future, but people will always need somewhere to live and I'd rather hold property than cash. Cash can also go down in value.

if there is a big property crash then I guess that other investments will be crashing along with it, so whats the answer. I have always liked property and even if I bought and made a 50% loss, I'd still be way, way ahead. That's what counts, not one condo. I've made losses on UK condos. But who cares. All I care about is my overall record. I don't expect every single property investment to work out perfectly. But buy correctly and you'll get more winners than losers.

Would I buy for investment from a distressed seller in Bangkok offered a 40% discount? Yes I would. There'd be limited risk, so may as well take it. Make a judgement on each individual property rather than the whole market, but be aware of what's going on in the market. I'm not actively looking for an investment, but sometimes they turn up. Never say never. Always be ready to snap up that bargain.

Would I buy a new condo in somewhere like On Nut and expect to make a profit? No. I think that's where most farangs go wrong. The look at glossy brochures rather than hard facts.

May I ask what areas do you like in Bangkok?