Condo glut in Chiang Mai

[beau thai]

I was dramatically effected by the housing bubble in the USA, and it looks exactly the same here to me. I am waiting for the crash to pick up some nice properties

Prices do not drop as they would in the US. They will let the unit turn to dust before they lower the price.

absolutely.. but I am hoping after the impending crash of this outrageous bubble, that they will drop prices. I imagine many will be forced to, if they are borrowing from banks, which it does seem like a large amount of them are.

You will have a long wait as the bank's function differently here and seem able to keep assets (borrowers houses and land) on their balance sheet at the original valuation, so even if prices drop a little, they can sit there patiently.

Different in other countries where a small decline has a domino affect as bank's have to repossess and offload, pushing prices further down.

I would be very surprised if you see a property crash here, but may be some small correction to slow down the over development while demand catches up.

Not sure why you think there is an 'outrageous bubble'?? That surely implies a period of rapid price increases which has yet to be seen in Chiang Mai. There has been slow steady growth but you can still buy and rent cheaply here- hardly an outrageous bubble...

[banagan]

There's a glut of everything in Chiang Mai. Condos, housing projects, shopping malls, shop houses, DIY superstores. The list goes on.

Did I miss anything? Oh yes, a severe lack of infrastructure, planning & public transportation. But who cares about those

coffee shops

[bangmai]

Prices do not drop as they would in the US. They will let the unit turn to dust before they lower the price.

While I know "this time it is different" are the 5 most expensive words in investing but..

I think theres a far greater reliance on credit and finance than there has been in the past.. That may well force liquidation on items that would previously simply sit.

I don't know. Banks are still sitting on empty properties that were built before 1997 and foreclosed. They keep them to avoid "marking them to market" on their books and showing a loss. If they actually sold them for what they were worth the banks would have to "realize" the loss on their books. Right now they are pretending and no outside auditor has called them on it.

In a world with real banking and outside controls, those properties would have to be marked to market on the books and the loss shown even if the didn't sell them. That causes the banks to go ahead and sell at market to avoid the holding costs. This is one thing that worries me about the property market and also the banks. I don't invest in Thailand and I don't keep a lot of baht in the bank either.

The normalcy bias about Thailand does indeed remind me of the US just before the crash. US banks are audited and they had to mark to market and sell at market and some banks went broke or got bailouts because of it.

Cheers

Almost non-sense....they continually monitor NPLs. The banks have websites with their property listings. Prices are reduced until they sell. There are very few in Chiang Mai. This chart shows a steady decline in NPLs...and it is from the St. Louis Federal Reserve Bank...http://research.stlouisfed.org/fred2/series/DDSI02THA156NWDB. Comrade Merkel and friends have been doing a lot worse than Thailand.

Krungsri Property has one townhouse for sale in the entire Province, and 6 single family homes. http://www.krungsriproperty.com/smallassetquery.asp

Edited March 9, 2015 by bangmai

[midas]

Prices do not drop as they would in the US. They will let the unit turn to dust before they lower the price.

While I know "this time it is different" are the 5 most expensive words in investing but..

I think theres a far greater reliance on credit and finance than there has been in the past.. That may well force liquidation on items that would previously simply sit.

I don't know. Banks are still sitting on empty properties that were built before 1997 and foreclosed. They keep them to avoid "marking them to market" on their books and showing a loss. If they actually sold them for what they were worth the banks would have to "realize" the loss on their books. Right now they are pretending and no outside auditor has called them on it.

In a world with real banking and outside controls, those properties would have to be marked to market on the books and the loss shown even if the didn't sell them. That causes the banks to go ahead and sell at market to avoid the holding costs. This is one thing that worries me about the property market and also the banks. I don't invest in Thailand and I don't keep a lot of baht in the bank either.

The normalcy bias about Thailand does indeed remind me of the US just before the crash. US banks are audited and they had to mark to market and sell at market and some banks went broke or got bailouts because of it.

Cheers

I agree with you.

When we read that household debt in Thailand is likely to hit a record high of 90% of GDP this year I am beginning to think that we are going to see a classic example of the phenomenon of what Steve Keene (Professor of Economics at Kingston University London ) has been warning about for years - debt deflation. Things could get ugly in Thailand's property market.

Edited March 9, 2015 by midas

[midas]

Thai developer LPN sees condo market slowing in 2015

(Reuters) - Thailand's biggest condominium developer LPN Development PCL said on Thursday the company is cautious about buying land as domestic demand for high-rise buildings weakens and banks restrict lending to home buyers.

"It (the market for condos) is clearly on a downtrend because most developers are trying to reduce building condominiums, especially those that cost less than 3 million baht per unit," Opas said.

Rising household debt is slowing condo demand in Thailand, and banks are getting cautious about giving loans to home buyers, Opas said

http://www.reuters.com/article/2015/03/05/lpn-development-outlook-idUSL4N0W71V120150305

Edited March 9, 2015 by midas

[scrumba]

I don't argue that there's a glut, but a total of 2,500 units is a drop in a city with a population of 1.65 million. There has to be something else going on.

The population of the city of Chiang Mai is 234,244 as of 2014.

[TheSiemReaper]

If it were Chinese investors buying property here, and it's not - Chinese investors with any money head West to Europe and America, South to Australia, or to places like Cambodia where any amount of dirty money can be washed clean, then the long-term outlook for the property market here would be sub-zero. China is in serious financial trouble.

Its internal debt has tripled in 5 years and it wasn't healthy 5 years ago. More than 40% of internal loans (those given by Chinese banks to provincial authorities) being written today are being used to pay interest on previous loans (the equivalent of taking a new credit card to pay the minimum payments on the old one). The remainder of the money is being spent foolishly on projects which add no value (anyone see what's happening in Gansu Province - another whole city constructed with no-one wanting to live in it - for example?) to the economy long-term.In essence China's economy is slowly collapsing; the insane growth from the 1980s until the late 2000s is done.

If the Communist party doesn't address the problems in the economy now - a crash lurks around the corner. Sadly, this is no reason for anyone to celebrate an "official" crash in China will sink pretty much every struggling economy on earth. The good news is that sinking economies can always stimulate themselves back into recovery. How? By having a good war. I wonder which countries China could invade? Investing in South East Asia... time to roll the dynamite filled dice.

[WinnieTheKhwai]

^ Good morning.

Those are people actually registered on a house registration document. It's likely less than half of the actual number.

(1.65 could be for the province)

[Oscar2]

If it were Chinese investors buying property here, and it's not - Chinese investors with any money head West to Europe and America, South to Australia, or to places like Cambodia where any amount of dirty money can be washed clean, then the long-term outlook for the property market here would be sub-zero. China is in serious financial trouble.

Its internal debt has tripled in 5 years and it wasn't healthy 5 years ago. More than 40% of internal loans (those given by Chinese banks to provincial authorities) being written today are being used to pay interest on previous loans (the equivalent of taking a new credit card to pay the minimum payments on the old one). The remainder of the money is being spent foolishly on projects which add no value (anyone see what's happening in Gansu Province - another whole city constructed with no-one wanting to live in it - for example?) to the economy long-term.In essence China's economy is slowly collapsing; the insane growth from the 1980s until the late 2000s is done.

If the Communist party doesn't address the problems in the economy now - a crash lurks around the corner. Sadly, this is no reason for anyone to celebrate an "official" crash in China will sink pretty much every struggling economy on earth. The good news is that sinking economies can always stimulate themselves back into recovery. How? By having a good war. I wonder which countries China could invade? Investing in South East Asia... time to roll the dynamite filled dice.

this is EXACTLY what i've been saying for years.

[Aussie69]

The population of the city of Chiang Mai is 234,244 as of 2014.

I saw some numbers recently claiming that the foreigner population of Chiang Mai (at any given time) is over 30,000 - that's a large percentage. I cant remember the source, nor do i recall if that was CM city or province.

[KhonKaenKowboy]

I've been on the ground trying to find another condo in the less than 1 million range in an older building, and the supply is very limited. In that price range, prices are up more than 10% in the last year. Some buildings simply don't have any for sale. That would include places like Hillside 2 and 3, condo 103, and the building next to it. The blue one...I was thinking about 600K, but there were none for sale...one came up the other day and it is 930,000. Cheapest at 103 is 850K. Maybe there is a softening of new sales, but no where near a crash or glut, and rental prices are inching up, too. Plenty of owner/investors would rather them sit empty than being paid low rent. Carrying cost are fairly low here, with no real estate taxes, and low condo fees.

[Dante99]

I was dramatically effected by the housing bubble in the USA, and it looks exactly the same here to me. I am waiting for the crash to pick up some nice properties

Prices do not drop as they would in the US. They will let the unit turn to dust before they lower the price.

While I know "this time it is different" are the 5 most expensive words in investing but..

I think theres a far greater reliance on credit and finance than there has been in the past.. That may well force liquidation on items that would previously simply sit.

Doubtful, the banks being the lenders have taken property and sat on it for decades as some are still holding property repossessed in the mid 90s. The ghost buildings.

[northernjohn]

I was dramatically effected by the housing bubble in the USA, and it looks exactly the same here to me. I am waiting for the crash to pick up some nice properties

Prices do not drop as they would in the US. They will let the unit turn to dust before they lower the price.

While I know "this time it is different" are the 5 most expensive words in investing but..

I think theres a far greater reliance on credit and finance than there has been in the past.. That may well force liquidation on items that would previously simply sit.

Doubtful, the banks being the lenders have taken property and sat on it for decades as some are still holding property repossessed in the mid 90s. The ghost buildings.

Just out of curiosity has any one ever enquired into purchasing one of those old buildings that have just been sitting empty for at least ten years.

[Jdiddy]

I also wonder how their other 800+ unit condo beside Central Festival is doing. [/img]

Im there now, half of the condos are empty though who knows if they actually have been purchased or not, 2nd set of condo buildings next door are nearing completion

[LawrenceChee]

I also wonder how their other 800+ unit condo beside Central Festival is doing. [/img]

Im there now, half of the condos are empty though who knows if they actually have been purchased or not, 2nd set of condo buildings next door are nearing completion

If it's Dcondo sign you are talking about ...the second set called Dcondo Nim is open for booking

Love the pool at these condos both are stunningly built with very nice landscape by Sansiri group

I lived there for a while as it was close to the boys school and the office team is helpful along with the maintenance team ...place seems to be bought by loads of Bangkok folks ....holidays pool gets busy other than that the place is always half lit at night and vey quiet

Enjoyed my stay there and will be a shame to leave it ....

[KhonKaenKowboy]

DCondo by CMU is pretty popular, too. The "lights on" approach is almost foolish. The Thais don't leave lights on,and almost never use balcony lights. I was staying on Sukhumvit a few weeks ago, and was surrounded by highrise condos and even hotels. at 3am, you could count on one hand the number of lights visible from the outside...out of hundreds and hundreds of units. But it seems to be a favorite anecdote of the bar stool real estate experts, who have been calling for a crash for 10 years now. The Bangkokians seem to be pretty big buyers of resale units up here by CMU.

[LawrenceChee]

Yes at 8pm when you are having dinner and looking out and see dark lights ...I Guess the Thais don't eat by candlelight

So not the usual armchair speculators ...the Dcondo by CMU is not as expensive as this one next to Central Festival

[KhonKaenKowboy]

my building has two units for sale out of 120, and maybe 3 or 4 for rent. There will be one or two lights on at 8pm on an entire side of the building, and zero balcony lights.

[LawrenceChee]

my building has two units for sale out of 120, and maybe 3 or 4 for rent. There will be one or two lights on at 8pm on an entire side of the building, and zero balcony lights.

Yeap Guess you guys like the candlelight effect there ...we are just normal switch the lights on people

[KhonKaenKowboy]

like I said, same on Sukhumvit and everywhere else in LOS; it ain't Las Vegas.

[WinnieTheKhwai]

Doubtful, the banks being the lenders have taken property and sat on it for decades as some are still holding property repossessed in the mid 90s. The ghost buildings.

Just out of curiosity has any one ever enquired into purchasing one of those old buildings that have just been sitting empty for at least ten years.

Yes. But the price tends to be relatively high: suppose you have some kind of development and it's completely run down mess: to actually renovate one house/unit and live there takes a major expense, and then you're still living in the middle of a post-apocalyptic wasteland. But, of course, if the price is right, then it'd make sense right, and other people would follow in theory. However, the price *isn't* right, because the bank is not looking at the value that the current mess represents (which would be low) but they're just waiting for a big developer to buy the whole area, knock it all down, and build whatever they want there, typically a hotel, condo, shopping area, etc. If it's anywhere near town then the LAND price is potentially high, if not now then in 10 years when that big developer comes along. So the bank is perfectly willing to sit on it for a decade, instead of selling it piecemeal for relatively little money.

[Jdiddy]

DCondo by CMU is pretty popular, too. The "lights on" approach is almost foolish. The Thais don't leave lights on,and almost never use balcony lights. I was staying on Sukhumvit a few weeks ago, and was surrounded by highrise condos and even hotels. at 3am, you could count on one hand the number of lights visible from the outside...out of hundreds and hundreds of units. But it seems to be a favorite anecdote of the bar stool real estate experts, who have been calling for a crash for 10 years now. The Bangkokians seem to be pretty big buyers of resale units up here by CMU.

I was going by the level of quietness ive observed living here (dcondo sign) and the fact 50% of the condos' windows have paper still stuck to them. I could be wrong though.

Being right next to Centralfest is great but a curse for the wallet lol

Edited June 7, 2016 by Jdiddy

[Some One Else]

its interesting to compare with Britain, where there is supposedly a housing crisis, and we don't have enough houses. so people blame the EU and the immigrants. and in thailand theres too many!

i prefer the Thai system, and if some real estate investors get their finger burned, so be it. build enough housing for all, property should be to live in and not an investment