Are the banks sitting on a property timebomb?

[i claudius]

In another post i mentioned that a house near us that has been reposesed is up for sale with the bank ,they want 31 million baht , its worth about 12/15 and would be hard to sell even at that price ,so i rang a couple of others i saw when out today ,both were twice the price they were worth , last timethis happened it was 1997 and we all know where that led .

Now i do not think Thailand is in any way in trouble like then ,but if the banks are holding large stocks of vastly overpriced property and exports ect are down ,where do you think things may be heading ? serious answers boys ,not ,the "we are doomed" brigade

[Pib]

I've seen quite a few pre-owned/lived in houses (maybe approx 10%) in my western Bankgok moobaan for sale and overpriced for the last 8 years...pretty much ops-normal. I don't see a housing bubble in Thailand in the overall sense...but no doubt it does exist in some Thailand locations as that's just the way real estate is.

In fact western Bangkok quite a few new moobaan/housing projects are springing-up and the houses are selling. A lot of new condo buildings are springing-up in western Bangkok also especially with the BTS finally expanding to western Bangkok and central Bangkok just being too crowded and overpriced. I expect a lot will depend on person's location in Thailand, whether it's predominately high priced housing or low-to-mid range priced housing, economy in that particular area, etc.

Location, Location, Location.

[KittenKong]

Most of the property I have ever seen in Thailand has been way overpriced. I estimate that my own condo was overpriced by perhaps 25-30%, and I dont live in an expensive building.

I've also noticed that to make a condo sell in a normal time-frame (which for me would be within a few weeks of putting it on the market), it is often necessary to drop the asking price by 25-50% from the average for a similar unit.

But I've only ever looked at condos near Pattaya and with a nice sea view, such as farangs like me might want to buy. So what happens with houses or Bangkok condos that might be owned by Thai people, I have no idea.

[angiolo]

Mae Sai Lots of new buildings not selling and so many more are being built . I dont understand the economics ,seems crazy to be buildigs more and more

[Halfaboy]

There seems to be a law that does not allow banks selling repossessed houses etc for a rice below the outstanding mortgage. Hence the apparently the high asking prices (in some cases).

Maybe another board member knows more about this.

[samsensam]

i know people who work at the bank of thailand. they do a pretty good job of regulating, auditing and checking the commercial banks here. the top guy is well respected.

[MacWalen]

Hard to say, some properties might be overvalued but there are also many mortgages on properties that appreciated in value. It may not be a bubble yet but who knows. If you look at financial reports banks are profitable.

[Anthony5]

How the bank gets to value of 31 million?

Normally they will sell for the money owed to the bank, which never can be 31 million, unless that is what the house cost to build.

[Torrens54]

There seems to be a law that does not allow banks selling repossessed houses etc for a rice below the outstanding mortgage. Hence the apparently the high asking prices (in some cases).

Maybe another board member knows more about this.

We bought such a house from a Bank about 7 years ago. Got it at "the right price" renovated it and looked at buying another for an investment.

The second property was way over-priced, the boffins at the Bank wouldn't budge....neither has the house....still languishing away, empty and looking worse every passing year.

[ignis]

Going into my Bank look from time to time at there houses for sale, same houses for years..

a detached house near me in our little Village that has been repossessed just under 2 years after it was built in 2003, it stood empty then until last year, by then as windows had been left open bird had made it home for years, termites had a great time, even the back door had fallen off [eaten off] as had some of the windows, one wonders what the Bank were doing ? why no one came to check it in years, why for that matter the Bank did not rent it out ?

​Last year big repairs, new ceilings, new floors, new doors inside and out and new windows, some repair was made to the roof and then totally repainted, as was the whole house inside and out, maybe new electrics as they were in the house for 3 days, garden cleared and made simple and clean., within a few months the house was sold..

now 2 years ago another detached house was repossessed, other than a team coming to clear the house and garden a month later, no one has been near, the cleaners have left a upstairs and one downstairs window open, have seen birds fly in, guess in 8 years time it will be all repaired and sold.... the old owners were friends, been in many times, the house was in tip top condition.

All these years empty we the Village have to get someone in 2x year to clear the gardens and cut the trees of these houses !!

Notice the same in many places, houses empty and when there almost beyond repair, they get repaired and sold.. why let them get into that state in the 1st place is beyond me.. why not rent them out? why wait so many years before doing anything? The For Sale notices go up the same or next day. Appears the same for houses from 600,000 baht right up to 10 million around my area just left empty for so many years.

[Naam]

Mae Sai Lots of new buildings not selling and so many more are being built . I dont understand the economics ,seems crazy to be buildigs more and more

to understand that kind of economics requires the knowledge that real estate is the best way in Thailand to invest "black" money.

[Anthony5]

Mae Sai Lots of new buildings not selling and so many more are being built . I dont understand the economics ,seems crazy to be buildigs more and more

to understand that kind of economics requires the knowledge that real estate is the best way in Thailand to invest "black" money.

How is a building that sits empty considered an investment?

[Naam]

Mae Sai Lots of new buildings not selling and so many more are being built . I dont understand the economics ,seems crazy to be buildigs more and more

to understand that kind of economics requires the knowledge that real estate is the best way in Thailand to invest "black" money.

How is a building that sits empty considered an investment?

a few years ago the Sino-Thai developer of my moo baan gave me a lecture as far as his business is concerned. the essence was "my father taught me it's all a matter of patience!" he does not build condos but single family homes (5 moo baans now, no home less than ฿10mm) and avoids (not evades!) high taxation by immediately reinvesting profits.

[Anthony5]

Mae Sai Lots of new buildings not selling and so many more are being built . I dont understand the economics ,seems crazy to be buildigs more and more

to understand that kind of economics requires the knowledge that real estate is the best way in Thailand to invest "black" money.

How is a building that sits empty considered an investment?

a few years ago the Sino-Thai developer of my moo baan gave me a lecture as far as his business is concerned. the essence was "my father taught me it's all a matter of patience!" he does not build condos but single family homes (5 moo baans now, no home less than ฿10mm) and avoids (not evades!) high taxation by immediately reinvesting profits.

Naam, as I know you are a "seasoned" investor, you should be aware that the past is no guarantee for the future.

If you drive around Pattaya in a radius of 25 Km these days, you will find thousands of finished new build shophouses and townhouses unoccupied.

Most of them having the same phone number for all the buildings in the same project, so clearly no "investors" have picked up yet

I also doubt that 110 Shophouse in a row are all build from black money, but I'm quite confident that a bank loan is involved.

Edited April 21, 2015 by Anthony5

[Utley]

IMHO - like China, the Thai banks are controlled/supported by the government. I doubt if the Thai banks would become insolvent because they are holding onto non-producing assets but I wouldn't invest in their common stock either.

[Naam]

Naam, as I know you are a "seasoned" investor, you should be aware that the past is no guarantee for the future.

If you drive around Pattaya in a radius of 25 Km these days, you will find thousands of finished new build shophouses and townhouses unoccupied.

Most of them having the same phone number for all the buildings in the same project, so clearly no "investors" have picked up yet

I also doubt that 110 Shophouse in a row are all build from black money, but I'm quite confident that a bank loan is involved.

i agree but reality is that no real estate transaction i know of was done 100% "documented". my knowledge is of course limited to single family homes and not condos or shophouses and covers the period of the last 25 years, i.e. pre-crisis and after crisis 1997.

a fact remains also that each and every empty condo / shophouse constructed pre 1997 was sold only a few years later. i remember Jomtien being a graveyard in 2000. take a look at it today!

off topic... i was thinking of you last sunday when an old friend of mine called and told me his horror experience with the Spanish tax authorities demanding a total striptease as far as his offshore holdings are concerned and a raid on his Marbella home confiscating his wife's jewelry as well as works of arts to be evaluated for wealth tax.

Edited April 21, 2015 by Naam

[Anthony5]

Naam, as I know you are a "seasoned" investor, you should be aware that the past is no guarantee for the future.

If you drive around Pattaya in a radius of 25 Km these days, you will find thousands of finished new build shophouses and townhouses unoccupied.

Most of them having the same phone number for all the buildings in the same project, so clearly no "investors" have picked up yet

I also doubt that 110 Shophouse in a row are all build from black money, but I'm quite confident that a bank loan is involved.

i agree but reality is that no real estate transaction i know of was done 100% "documented". my knowledge is of course limited to single family homes and not condos or shophouses and covers the period of the last 25 years, i.e. pre-crisis and after crisis 1997.

a fact remains also that each and every empty condo / shophouse constructed pre 1997 was sold only a few years later. i remember Jomtien being a graveyard in 2000. take a look at it today!

off topic... i was thinking of you last sunday when an old friend of mine called and told me his horror experience with the Spanish tax authorities demanding a total striptease as far as his offshore holdings are concerned and a raid on his Marbella home confiscating his wife's jewelry as well as works of arts to be evaluated for wealth tax.

Be careful, they may have traced the number he called

Europe is definitely not the place to be if you have some savings.

Edited April 21, 2015 by Anthony5

[Robert24]

IMHO - like China, the Thai banks are controlled/supported by the government. I doubt if the Thai banks would become insolvent because they are holding onto non-producing assets but I wouldn't invest in their common stock either.

Only the government owned or partially owned banks are controlled by the government, I.e. KTB, TMB, BAAC etc. privately owned banks like KBank etc are not controlled by the government. But obviously similar to other countries, they have a common regulator with the BoT.

In terms of insolvency you highlight. Banks in general can become insolvent if they have to absorb huge losses due to valuation adjustments of their assets (I.e. Real estate) In such a case , I would agree with you the BoT or Thai government would certainly inject capital/liquidity into any big bank in order to avoid a financial crisis.

[Naam]

Naam, as I know you are a "seasoned" investor, you should be aware that the past is no guarantee for the future.

If you drive around Pattaya in a radius of 25 Km these days, you will find thousands of finished new build shophouses and townhouses unoccupied.

Most of them having the same phone number for all the buildings in the same project, so clearly no "investors" have picked up yet

I also doubt that 110 Shophouse in a row are all build from black money, but I'm quite confident that a bank loan is involved.

i agree but reality is that no real estate transaction i know of was done 100% "documented". my knowledge is of course limited to single family homes and not condos or shophouses and covers the period of the last 25 years, i.e. pre-crisis and after crisis 1997.

a fact remains also that each and every empty condo / shophouse constructed pre 1997 was sold only a few years later. i remember Jomtien being a graveyard in 2000. take a look at it today!

off topic... i was thinking of you last sunday when an old friend of mine called and told me his horror experience with the Spanish tax authorities demanding a total striptease as far as his offshore holdings are concerned and a raid on his Marbella home confiscating his wife's jewelry as well as works of arts to be evaluated for wealth tax.

Be careful, they may have traced the number he called

Europe is definitely not the place to be if you have some savings.

let them trace. Thailand's beauty are its prevailing income tax laws. i wonder when they start tightening the screws.

[MacWalen]

Today in the paper. See the attachment. Banks are doing well and becoming more profitable. There is a little increase in bad loans. Let's not pretend we know so much about banking business. Like every business there is a lot of things we just don't know.

[SamuiRes]

From the Bangkok Bank Web Site - http://www.bangkokbank.com/BangkokBank/AboutBangkokBank/AboutUs/PropertiesForSale/Pages/default.aspx

"We have more than 7,000 listings including land, houses, townhouses, condominiums, commercial buildings and factories which are being sold at reasonable prices. Whether you are looking for a place to live or for an investment property - there has never been a better time to buy."

Their listings here - in Thai only

http://www.bangkokbank.com/BangkokBankThai/AboutBangkokBank/AboutUs/PropertiesforSale/Search%20Properites%20for%20Sale/Pages/Main.aspx

[kennypowers]

With the Pound-Baht exchange rate at a strong 45/46, I find it hard to believe the Thai economy is in any sort of trouble. The UK economy is the best it has been in years yet the baht is whopping its ass. Thailand has the cash reserves to prevent any sort of bubble occurring - like China did they will just build/pay their way out of it. Cash is always king, and the UK has zero reserves and huge debt, so I guess this is the reason for the strong Baht.

[ExpatOilWorker]

i know people who work at the bank of thailand. they do a pretty good job of regulating, auditing and checking the commercial banks here. the top guy is well respected.

Part of BoT's regulations are that banks can only hold a certain percentage of their loans in real-estate. The banks in general are much better regulated today then pre '97, so NO there is not a looming bank crises around the corner.

A real-estate correction, possible yes. The market does seem saturated and over supplied at the moment and still more supply is being added to the market.

[dinga]

Today in the paper. See the attachment. Banks are doing well and becoming more profitable. There is a little increase in bad loans. Let's not pretend we know so much about banking business. Like every business there is a lot of things we just don't know.

No problem - just guess.....

[CapFarmer]

I suspect that a lot of Thai owned property is bought/sold in order to launder money and a good portion of the property that is for sale is being sold because the owner is behind in payment and the property is overpriced to avoid sale.

[Suradit69]

The farang approach has been to lend nearly 100% (or more) of cost to buyers, dump the loans as packaged mortgage-backed-securities to clueless "investors," sell repossessed real estate at steep discounts & losses and then have the government bail them out ... as evidenced in the financial disaster 7 or 8 years ago.

In Asia they appear to prefer to sit on non-performing loans & unoccupied property and wait for buyers to come to their asking price rather than realize losses.

Farang seem to think their method is more logical, but there's little evidence to support that since dumping property on the market at fire sale prices not only ensures the bank will take a hit, but also depresses property values for everyone, including those who own their property outright or those who are making regular payments on houses, the value of which is often reduced to less than the loan they're making payments on,... leading to more people walking away from their homes and their bank loans.

The Tom Yum Goong crisis of 1997 was triggered as much by foreign debt, currency reserves and currency valuation issues as it was real estate issues.

[watcharacters]

Most of the property I have ever seen in Thailand has been way overpriced. I estimate that my own condo was overpriced by perhaps 25-30%, and I dont live in an expensive building.

I've also noticed that to make a condo sell in a normal time-frame (which for me would be within a few weeks of putting it on the market), it is often necessary to drop the asking price by 25-50% from the average for a similar unit.

But I've only ever looked at condos near Pattaya and with a nice sea view, such as farangs like me might want to buy. So what happens with houses or Bangkok condos that might be owned by Thai people, I have no idea.

The "time on market" is pretty severe here it seems to me. Unfortunately, there can't be any accurate information available about that as it doesn't jibe with the real estate market as we know it in Thailand. There are few independent RE companies and nothing even approaching an MLS program.

[Geoffsilverfox]

A few years ago, I encountered the same problem...........bank repossessions being sold at silly asking prices.

I decided to find out why, and the information that I was given, is that the bank rolls up all the debts from the same person, and sets them against the house. Probably because they see the house as an appreciating asset, whereas a car or personal loan is probably already lost.

[T_Dog]

You don't have to look far to see Thailand's time bombs, and they are numerous. At some point, those expensive land plots and houses will be much cheaper.

http://www.ft.com/cms/s/0/f7245dac-e513-11e4-bb4b-00144feab7de.html#axzz3Xw4zxtz0

[MacWalen]

You don't have to look far to see Thailand's time bombs, and they are numerous. At some point, those expensive land plots and houses will be much cheaper.

http://www.ft.com/cms/s/0/f7245dac-e513-11e4-bb4b-00144feab7de.html#axzz3Xw4zxtz0

But before then they are likely to appreciate in value. There is a lot of money out there and with ASEAN starting prices of real estate might go further up.