"Real Estate"

[swissie]

REAL ESTATE. The German word for it is "IMMOBILIE" = Something stationary, something you can't move, something you can't take with you.

Now, in a time when some "stiffening" toward Farangs is noticable ( in more than one way),
is it wise to invest in something that you can not move (take with you), when it should become advisable "to leave town"?
Just some food for thought, no more, no less.
Cheers.

[blackcab]

In formal English, it is referred to as immovable property. 

 

Same same but different. 

[trogers]

If you feel that insecure, invest in a home on wheels.

 

Gypsies have for generations...

[lkn]

How about perishables, services, and immaterial goods? Should we bypass “investing” in these as well?

 

And eventually we’re all going to die, so why even invest in yourself…

 

[Rancid]

Some groups of expats have been saying for 30 years about not putting any money into Thailand that you aren't happy to walk away from. As such they have been wrong for 30 years, but why let that ruin their mantra?

 

The future, who knows, but the changes required to confiscate foreign owned real estate would be of the extent to also wreck foreign investment and the economy, one needs to consider whether that is likely or not.

[mcfish]

The sqm price of the condo's in Bangkok just keeps skyrocketing and yet TV poster insist the market is over saturated. Apparently the Thais are going to confiscate our properties and March us to the border.. One day

Soon..

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[yaagjon]

Here is some food for thought.

 

Never invest more than you can afford to lose.

[blackcab]

10 hours ago, mcfish said:

The sqm price of the condo's in Bangkok just keeps skyrocketing and yet TV poster insist the market is over saturated.

 

 

You make a very good point. The problem with the condo market in Thailand is that it is very much developer driven, as opposed to being driven by supply and demand.

 

How can it be that the sqm price keeps going up while there are literally thousands of unsold condos in Bangkok? Excellent and amazing developments aside, it is because the developers price their units this way, not because there is strong demand that fuels rising prices.

 

When a market is not driven by supply and demand there is a potential for prices to become distorted. Inevitably there is a correction, which normally happens when people try and resell their unit.

 

In many cases the unit remains unsold or the unit is sold at a loss. If we talk about studio and one bedroom units, what percentage of vendors actually sell the unit for more than they purchased it for?

[trogers]

1 hour ago, blackcab said:

 

You make a very good point. The problem with the condo market in Thailand is that it is very much developer driven, as opposed to being driven by supply and demand.

 

How can it be that the sqm price keeps going up while there are literally thousands of unsold condos in Bangkok? Excellent and amazing developments aside, it is because the developers price their units this way, not because there is strong demand that fuels rising prices.

 

When a market is not driven by supply and demand there is a potential for prices to become distorted. Inevitably there is a correction, which normally happens when people try and resell their unit.

 

In many cases the unit remains unsold or the unit is sold at a loss. If we talk about studio and one bedroom units, what percentage of vendors actually sell the unit for more than they purchased it for?

 

I would use the actual sales prices in the secondary market as the barometer, rather than asking prices of developers.

 

The reason is obvious. If these asking prices are market prices, there would not be unsold and resales units.

 

In fact, I would use the actual percentage of units transferred in a completed project as a more accurate guide to their true market value - purchased price x percentage of total unit transferred.

 

Example

Unit was purchased and transferred at Bt100k per sqm.

True market value = 100k x 0.70 = Bt70k per sqm

should actual percentage of total unit transferred be only 70%

Edited October 15, 2016 by trogers

[KittenKong]

53 minutes ago, trogers said:

I would use the actual sales prices in the secondary market as the barometer ......

 

So would I, if full and accurate information was available like it is in, say, the UK.

 

But it isn't. All you can do here is guess, or maybe ask a real estate agent (who will only know a limited amount anyway and may be very biased).

 

In fact here there isnt even full information about the real sales prices of new builds: only the list prices. How many actually pay list price? And how many of those could have got a discount if they had tried harder?

[madmax2]

I you intend to make Thailand your permanent home and have a Thai partner it makes sense to buy your preferred form of residence if you can afford to, why pay rent i did not in my home country

Properties seem to increase in value here even in a buyers market, i have been waiting for the bust to come for years but it has not happened like in other countries, it may still happen but i am not holding my breath waiting for it to

If you buy bargain hard for their best price there is no shortage of similar properties on the market and most genuine sellers are quite happy to negotiate their price

I cannot see the government changing the ownership laws here anytime in the future 

For a single person , why buy there are properties everywhere for rent and a change of scene is as good as a holiday and if you are a good tenant owners will happily reduce their rent to keep you as a tenant once your rental agreement expires

 

[blackcab]

2 hours ago, madmax2 said:

Properties seem to increase in value here even in a buyers market...

 

That's not a buyers market. Most private sellers, however, would argue we are also not in a sellers market. 

 

So where does that leave us? As I said before, in a distorted market.

 

Well that's my theory, anyway.

[trogers]

5 minutes ago, blackcab said:

 

That's not a buyers market. Most private sellers, however, would argue we are also not in a sellers market. 

 

So where does that leave us? As I said before, in a distorted market.

 

Well that's my theory, anyway.

 

It's a market set by developers and their financing banks.

 

Until the man on the street sees through this cozy relationship that have started a decade ago, launch prices will keep climbing 10-12% a year, while total unit transferred of completed projects fall from 80 to 70 to 60%...

[Peterw42]

10 minutes ago, blackcab said:

 

That's not a buyers market. Most private sellers, however, would argue we are also not in a sellers market. 

 

So where does that leave us? As I said before, in a distorted market.

 

Well that's my theory, anyway.

 

Of course its a buyers market. just because developers ask stupid prices doesn't mean they are real prices. Developers keep stock out of the market, create their own supply and demand. They even buy their own stock to keep up the illusion. (Acme developments sells to Acme holdings) Actual sales are at a very low volume.

Real prices are resales, and unless you sold it or brought it, the price is often unknown. I recently brought a Condo for half the price of a developer owned new condo. And around 30% less than what most of the re sellers are asking.

 

[trogers]

34 minutes ago, Peterw42 said:

 

Of course its a buyers market. just because developers ask stupid prices doesn't mean they are real prices. Developers keep stock out of the market, create their own supply and demand. They even buy their own stock to keep up the illusion. (Acme developments sells to Acme holdings) Actual sales are at a very low volume.

Real prices are resales, and unless you sold it or brought it, the price is often unknown. I recently brought a Condo for half the price of a developer owned new condo. And around 30% less than what most of the re sellers are asking.

 

 

I would be wary in buying a unit from a project that a developer still hold 30% or more stock.

 

The temptation to pilfer from the sinking fund rather than pay maintenance fees for the stock would be too great.

[Peterw42]

22 minutes ago, trogers said:

 

I would be wary in buying a unit from a project that a developer still hold 30% or more stock.

 

The temptation to pilfer from the sinking fund rather than pay maintenance fees for the stock would be too great.

 

Yes, you are right but how would you know. All the smoke and mirrors with developers. I think people would be surprised to find out how much the developers still own. The only positive is the developers will hopefully want the block maintained etc.so they can sell in the future.

 

(I do have a little laugh when we post after each other in threads, old superman and young supergirl, lol)

Edited October 16, 2016 by Peterw42

[Anthony5]

1 hour ago, Peterw42 said:

 

Of course its a buyers market. just because developers ask stupid prices doesn't mean they are real prices. Developers keep stock out of the market, create their own supply and demand. They even buy their own stock to keep up the illusion. (Acme developments sells to Acme holdings) Actual sales are at a very low volume.

Real prices are resales, and unless you sold it or brought it, the price is often unknown. I recently brought a Condo for half the price of a developer owned new condo. And around 30% less than what most of the re sellers are asking.

 

 

42 minutes ago, trogers said:

 

I would be wary in buying a unit from a project that a developer still hold 30% or more stock.

 

The temptation to pilfer from the sinking fund rather than pay maintenance fees for the stock would be too great.

 

Where did Peterw mention that the developer still held 30%?

[trogers]

40 minutes ago, Anthony5 said:

 

 

Where did Peterw mention that the developer still held 30%?

 

My formula

 

True market value = price x percentage of total unit transferred

 

He got 50% off the asking price.

[mcfish]

 
It's a market set by developers and their financing banks.
 
Until the man on the street sees through this cozy relationship that have started a decade ago, launch prices will keep climbing 10-12% a year, while total unit transferred of completed projects fall from 80 to 70 to 60%...

That does come across as a bit of conspiracy theory unless you have a link or something. My opinion is far easier to confirm and that is the whole of Asia is booming, even true 3rd world are off the charts. Thailand and especially Bangkok are about right where it needs to be

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[trogers]

20 minutes ago, mcfish said:

That does come across as a bit of conspiracy theory unless you have a link or something. My opinion is far easier to confirm and that is the whole of Asia is booming, even true 3rd world are off the charts. Thailand and especially Bangkok are about right where it needs to be

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No need for any link. The differential financing terms offered to buyers of a development which the bank finances compared to those offered to buyers in the secondary market is sufficient evidence.

[mcfish]

 
No need for any link. The differential financing terms offered to buyers of a development which the bank finances compared to those offered to buyers in the secondary market is sufficient evidence.

Sounds normal to me. Why would they be the same?

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[lkn]

6 hours ago, trogers said:

True market value = price x percentage of total unit transferred

 

That formula does not give us any meaningful number, certainly not “true market value”, a simple example is a developer that sells 100% of their units, your formula would say they sold at the true market value, I’d think it likely that the developer priced the units too low.

 

Likewise, if a developer sell 10 out of 20 units in a low rise building, it does not mean that the true market value is half of what the units were sold for. Most likely the 10 units sold were the most attractive units and could even have been sold for more.

[trogers]

6 hours ago, mcfish said:

Sounds normal to me. Why would they be the same?

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Why would it be normal to give borrowers a 100% loan for a favoured project, when regulations stipulate an 80% limit, and offering only 60-70% in the secondary market?

[trogers]

2 hours ago, lkn said:

 

That formula does not give us any meaningful number, certainly not “true market value”, a simple example is a developer that sells 100% of their units, your formula would say they sold at the true market value, I’d think it likely that the developer priced the units too low.

 

Likewise, if a developer sell 10 out of 20 units in a low rise building, it does not mean that the true market value is half of what the units were sold for. Most likely the 10 units sold were the most attractive units and could even have been sold for more.

 

I haven't come across any low-rise (8 FL) with 10-20 units.

 

Fifty or more units on a land of 1 rai is the norm.

 

When 100% of the units are transferred in a project, the units are purely in the secondary market, with their initial purchased prices as the true market value at that point in time. How that value moves thereafter would be determined by supply and demand.

 

In the same way, a developer with substantial unsold stocks would be desperate enough to sell some at 50% discount, and progressively raise his selling price of his reducing stock. As long as there are unsold stock, initial buyers would face competition from the discounts being offered by the developer.

 

Thus, the true market value at that point in time would be at the discounted prices of the developer.

[mcfish]

 
Why would it be normal to give borrowers a 100% loan for a favoured project, when regulations stipulate an 80% limit, and offering only 60-70% in the secondary market?

60 to 70? No way. The GF is in the market and looking at both new and used and the terms are not what your claiming. Should be easy to provide a link if it were true..

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[digibum]

While I don't totally agree that 50% unsold = 50% discount, there would be zero inventory if the prices were as hot as building suggests.  

 

The other factor to keep in mind is that wealthy and middle class Thais view these condos as investments.  But more like gold than traditional RE investments.  

 

This theory (and without accurate market data it is all theory) explains why so many condos sit unoccupied.  

 

Wealthy Thai is convinced he needs to invest in land and has neither the time nor inclination to go buy raw farm land in the provences.  

 

Buys into a Bangkok condo development thinking the skyrocketing prices he sees in new developments will continue forever.  

 

Has as difficulty finding tenants willing to pay the rent he thinks the condo should go for but instead of dropping the price to meet demand, he sits on it thinking that he'll be okay with price appreciation.  

 

 

 

[trogers]

26 minutes ago, digibum said:

While I don't totally agree that 50% unsold = 50% discount, there would be zero inventory if the prices were as hot as building suggests.  

 

The other factor to keep in mind is that wealthy and middle class Thais view these condos as investments.  But more like gold than traditional RE investments.  

 

This theory (and without accurate market data it is all theory) explains why so many condos sit unoccupied.  

 

Wealthy Thai is convinced he needs to invest in land and has neither the time nor inclination to go buy raw farm land in the provences.  

 

Buys into a Bangkok condo development thinking the skyrocketing prices he sees in new developments will continue forever.  

 

Has as difficulty finding tenants willing to pay the rent he thinks the condo should go for but instead of dropping the price to meet demand, he sits on it thinking that he'll be okay with price appreciation.  

 

 

 

 

Unfortunately, price appreciation would not occur when a project still has unsold stock, and in a market of abundant oversupply.

 

I bought a 12 years old 1-bedroom unit at only 3% higher than the original price the buyer got from the developer. This was in 2008.

 

As a result, I managed to obtain almost 9% gross rental yield for almost seven years from the same tenant.

 

Their loss is my gain.

[digibum]

58 minutes ago, trogers said:

 

Unfortunately, price appreciation would not occur when a project still has unsold stock, and in a market of abundant oversupply.

 

I bought a 12 years old 1-bedroom unit at only 3% higher than the original price the buyer got from the developer. This was in 2008.

 

As a result, I managed to obtain almost 9% gross rental yield for almost seven years from the same tenant.

 

Their loss is my gain.

 

I'm not saying that Mr. Wealthy Thai is correct.  I'm saying that this seems to be the mentality.  

 

There are a lot of whacky little things with the way Thai RE works.  For instance, I just looked up the last two condos I rented when I lived in Thailand.  The same specific unit wasn't up for rent but similar units, sqm, floor, etc were available and the rent has gone almost unchanged (only about 5%) in 5 - 7 years.  

 

Everywhere else in the world, if there was so much demand out there to buy up all of these condo units it would put upward pressure on all rents.  

 

Also, all of this rapid development seems to have a depressing effect on RE in general.  Instead of property appreciating like it would in a market where demand exceeds supply, a new development coming online devalues the previous developments because something nicer and newer is available.  

 

If you showed these variables (slow rent growth, slow or negative appreciation in existing condo prices, etc) to anybody they would tell you that that market has a massive oversupply of inventory.  

 

Meanwhile people have been predicting the collapse of the Bangkok RE market for 20+ years now and it hasn't happened.  

 

My personal opinion is that Thailand's economic fundamentals are a house of cards.  At some point something will give and the reckoning will be swift and brutal.  

 

It reminds me of the book/movie The Big Short.  Just because they were wrong about the timing and the entire system was rigged doesn't mean that they were wrong about the fundamental flaw in the market.  

 

 

[blackcab]

I don't think there will be a real estate crash. In general, banks are cautious about lending - it's not especially easy to get a mortgage here.

 

On top of that, nobody is in a rush to sell if it means making a loss. Banks hold on to property until it sells for the right money. Thai people tend to do the same thing unless they are in debt and they have to cash out quickly.

 

Even the Legal Execution Department does the same thing. The LED have got property on the books that's been unsold for 15 years because there hasn't been a high enough bid.

 

I could easily be wrong though.

[trogers]

40 minutes ago, blackcab said:

I don't think there will be a real estate crash. In general, banks are cautious about lending - it's not especially easy to get a mortgage here.

 

On top of that, nobody is in a rush to sell if it means making a loss. Banks hold on to property until it sells for the right money. Thai people tend to do the same thing unless they are in debt and they have to cash out quickly.

 

Even the Legal Execution Department does the same thing. The LED have got property on the books that's been unsold for 15 years because there hasn't been a high enough bid.

 

I could easily be wrong though.

 

I got my 3-bedroom in an auction of the LED. It was a quick sales. My guess about those properties being unsold for 15 years would be due to either really bad locations or bad neighborhood.