this is what is also behind the facade of the Pattaya condominium market?

[Asiantravel]

46 minutes ago, Jingthing said:

Look, there is no doubt at all that the market here is radically different than the incredibly transparent USA market.

 

But as mentioned you could have bought a condo at the top of the last bubble there and legitimately bought it at "market" price.

 

Basically, as said before, you have to do a log of leg work yourself as a buyer to gain confidence that what you are offering is within the range of the current market price here. That doesn't mean it will turn out to be a "good deal" or "worth it" in the long run, but knowing that in advance isn't really possible. 

 

 

 

What macro economic conditions led to the last condominium bubble in USA and can you possibly see such conditions being replicated again in the short or even medium term-because I can’t  . That was a byproduct of QE and there doesn’t seem to be much sign of any more of that coming.

And you said in your first reply Pattaya and Miami are two different condominium markets which they are of course geographically but not in terms of the underlying problems in that they both face an oversupply of tens of thousands of vacant condominiums.

In fact I would submit that the Miami market has a much wider international appeal than Pattaya. Just as an one example I bet you it would be far easier to get a loan on a condominium in Miami than it would be anywhere in Thailand.

So the point I’m making is if Miami’s market can fall into the state it is now in as described in the original post article then the Pattaya market  must be much worse with  new Visa rules, military government, 50% Thai ownership requirement, not easy to get a loan on a Thai condo etc

[Jingthing]

Yes, I agree such considerations should translate in lower prices but again the current "market" still is whatever price levels most buyers are willing to buy at.  There will be always be outliers of people that obviously paid much higher or lower than typical current market levels, for various complex reasons. 

[pegman]

18 hours ago, Asiantravel said:

 

 

 

What macro economic conditions led to the last condominium bubble in USA and can you possibly see such conditions being replicated again in the short or even medium term-because I can’t  . That was a byproduct of QE and there doesn’t seem to be much sign of any more of that coming.

And you said in your first reply Pattaya and Miami are two different condominium markets which they are of course geographically but not in terms of the underlying problems in that they both face an oversupply of tens of thousands of vacant condominiums.

In fact I would submit that the Miami market has a much wider international appeal than Pattaya. Just as an one example I bet you it would be far easier to get a loan on a condominium in Miami than it would be anywhere in Thailand.

So the point I’m making is if Miami’s market can fall into the state it is now in as described in the original post article then the Pattaya market  must be much worse with  new Visa rules, military government, 50% Thai ownership requirement, not easy to get a loan on a Thai condo etc

Since the change in government  foreign investment has dropped 70%. What do these foreign companies know?  

[morrobay]

Just now, pegman said:

Since the change in government  foreign investment has dropped 70%. What do these foreign companies know?  

http://www.straitstimes.com/asia/se-asia/foreign-investment-plummets-78-in-junta-ruled-thailand

 

http://www.theglobaleconomy.com/Thailand/Foreign_Direct_Investment/

Edited November 18, 2016 by morrobay

[Asiantravel]

2 hours ago, morrobay said:

http://www.straitstimes.com/asia/se-asia/foreign-investment-plummets-78-in-junta-ruled-thailand

 

http://www.theglobaleconomy.com/Thailand/Foreign_Direct_Investment/

 

there you have it

 

[JSixpack]

1 hour ago, Asiantravel said:

 

there you have it

 

 

Irrelevance, that is. Now, let Pattaya Condo Glut programming resume . . . .

[Asiantravel]

9 minutes ago, JSixpack said:

 

Irrelevance, that is. Now, let Pattaya Condo Glut programming resume . . . .

 

 

it's not irrelevant  because it helps to explain the psyche of foreigners who have thought about putting their money here.

Think about it is quite daunting actually. 17,000 vacant units and I simply can't imagine a quick absorption from anyone - Thai's or foreigners

if they project 38 years to absorb the Miami oversupply I wonder how many years it will take in Thailand and don't forget it's not the only place. Just next door in Phnom Penh Cambodia the same thing is happening and that is a business city not a holiday resort.

.

http://www.emergingmarkets.asia/consulting/news/2016/05/24/bubble-phnom-penh-real-estate/

[JSixpack]

26 minutes ago, Asiantravel said:

it's not irrelevant  because it helps to explain the psyche of foreigners who have thought about putting their money here.

 

It suggest something the psyche of companies who must answer to shareholders, yes. Not private individuals interested in a buying a condo in Pattaya out of countless beach resorts throughout the world. It's easily explained by the global slowdown, the exchange rate, and most of all the continued frenetic pace of building. They'll build even in the face of admitted slow demand as noted here:

 

With the Pattaya property market being stagnant and tourism also experiencing a difficult set-back period, an SCB spokesperson noted that The Riviera’s 920m loan, was an indication that SCB still saw the Pattaya market as positive . . . .

     --http://pattaya-condos.com/new/the-riviera-group-signs-920-million-baht-construction-loan-with-scb/

 

The great Condo Glut has been a yearly recurring thread here on TV for decade or so, coup or no coup, and in each such thread condo prices are decried by our renters and a great downdraft firmly predicted. Despite all those predictions, it hasn't yet happened. As I noted to one of our ace economists recently, supply can outrun demand even when that demand is increasing. Nobody really knows the extent of demand here though it must be soft for the aforesaid reasons. We do have some idea of the extent of supply, however. Similarly oversaturation in the beer bar market. The number of traditional mongers decreased and those remaining spread thinner, making the slowdown appear worse than it is. And that started before the coup.

 

I don't predict what this means or doesn't mean, lacking the prescience so in abundance here. Maybe prices will fall; if so, good: I'll buy more. If not, then we'll be hearing more bewilderment as to why not and predictions that they must.

[Asiantravel]

26 minutes ago, JSixpack said:

 

It suggest something the psyche of companies who must answer to shareholders, yes. Not private individuals interested in a buying a condo in Pattaya out of countless beach resorts throughout the world. It's easily explained by the global slowdown, the exchange rate, and most of all the continued frenetic pace of building. They'll build even in the face of admitted slow demand as noted here:

 

With the Pattaya property market being stagnant and tourism also experiencing a difficult set-back period, an SCB spokesperson noted that The Riviera’s 920m loan, was an indication that SCB still saw the Pattaya market as positive . . . .

     --http://pattaya-condos.com/new/the-riviera-group-signs-920-million-baht-construction-loan-with-scb/

 

The great Condo Glut has been a yearly recurring thread here on TV for decade or so, coup or no coup, and in each such thread condo prices are decried by our renters and a great downdraft firmly predicted. Despite all those predictions, it hasn't yet happened. As I noted to one of our ace economists recently, supply can outrun demand even when that demand is increasing. Nobody really knows the extent of demand here though it must be soft for the aforesaid reasons. We do have some idea of the extent of supply, however. Similarly oversaturation in the beer bar market. The number of traditional mongers decreased and those remaining spread thinner, making the slowdown appear worse than it is. And that started before the coup.

 

I don't predict what this means or doesn't mean, lacking the prescience so in abundance here. Maybe prices will fall; if so, good: I'll buy more. If not, then we'll be hearing more bewilderment as to why not and predictions that they must.

 

" They'll build even in the face of admitted slow demand as noted here "

 

that means absolutely nothing? That kind of thing happened before 1997. The big difference is in 1997  the slow down was restricted to Asia but now it is totally global simultaneously with absolutely no prospects of meaningful salary increases and in fact quite the opposite - predictions that robots will take over more and more jobs in Southeast Asia.   spending power on overseas condominiums is looking bleak. 

 

Robots could take over millions of jobs in south-east Asia, warns United Nations

 

http://www.ibtimes.co.uk/millions-south-east-asian-jobs-could-be-taken-over-by-robots-within-two-decades-1569406

[smedly]

I have never researched what caused the crash in 1997 but now I think I might do a little reading

[JSixpack]

36 minutes ago, Asiantravel said:

 

" They'll build even in the face of admitted slow demand as noted here "

 

that means absolutely nothing? That kind of thing happened before 1997. The big difference is in 1997  the slow down was restricted to Asia but now it is totally global simultaneously with absolutely no prospects of meaningful salary increases and in fact quite the opposite - predictions that robots will take over more and more jobs in Southeast Asia.   spending power on overseas condominiums is looking bleak. 

 

Robots could take over millions of jobs in south-east Asia, warns United Nations

 

http://www.ibtimes.co.uk/millions-south-east-asian-jobs-could-be-taken-over-by-robots-within-two-decades-1569406

 

We need to get midas in here. :) Come in, midas!

 

Since you know, then I assume you'll be shorting the market. Should make quite a bundle.

 

Now, I've agreed with you on excess supply. And you've gone from questioning a price deflation to convincing yourself and insisting upon it. You've been heard and given attention. Is there anything more?

 

 

 

Edited November 18, 2016 by JSixpack

[Briggsy]

On 17/11/2016 at 2:39 PM, Peterw42 said:

 

 

Let me put it this way. A condo block has 100 condos for sale, some developer stock, some resale etc. The developer is doing all the smoke and mirrors and managing to sell a couple of condos at an artificial price of 15 million each, at the other end someone has managed to find a reseller who is about to go broke, and managed to buy a condo for 5 million. There is a price in the middle of say 10 million were buyers would be happy to buy and sellers happy to sell, but there are no sales. 

 

What is the price of a condo in that block ???

 

You cant say 5 million as that was a one off (limited supply), you cant say were supply meets demand at 10 million, as there are no sales (demand but no supply), if the only sales are developer sales at 15 million (limited demand, lots of supply), isnt that the price ? 

 

Yes its artificial but its still were buyer and seller are meeting. Albeit at a low volume.

 

I dont know how you would appraise that market.

 

I take all the pricing with a grain of salt, I'm usually the guy running around offering 5 million.

And there you have it. Market values (aka fair value) are only valid if the market is fully liquid and actively being traded.

 

In your scenario, the key point is that the developer is stuck with illiquid assets he can't shift. His finance costs keep ticking up because he is not receiving cash from sales. What does he do?

i) drop his selling price

ii) wait and wait and wait till the bitter end

iii) pull out all the cash and value from the business by surreptitious means and then turn to his creditors and say sorry, "no money, now it's your problem."

iv) try to raise further finance to try to cover the period of lower sales

 

[morrobay]

Sure there is relevant correlation on FDI decrease and supply. Less income less demand. Especially on Eastern seaboard.

 

 

[JSixpack]

17 minutes ago, morrobay said:

Sure there is relevant correlation on FDI decrease and supply. Less income less demand. Especially on Eastern seaboard.

 

Oh, same income, same demand. More/less income from domestic growth not dependent on more FDI, more/less domestic demand. Expanding population, commensurate income, more demand. Same demand from foreign tourist second home permanent expat retirees wanting Pattaya, uncorrelated with FDI (but correlated w/ other factors)--unless you have any numbers.

Edited November 18, 2016 by JSixpack

[smedly]

in the west where there is some semblance of a rational and properly priced market were developers markups and profits are more realistic and to an extent competitive there is more of an urgency to shift what they build as quickly as possible

 

But when you are dealing with a market were profits are huge (probably greater than 400%) then there is no particular urgency for them to sell, coupled that with price fixing to maintain the high prices and profits and you have a very skewed property market indeed that generally goes unregulated and the money stakes are high.  Not to mention the corruption

 

If there was a sudden event that required the developers to drop their prices and shift their vacant properties as a reasonable price then you would end up with an awful lot of bag holders 

[Peterw42]

24 minutes ago, Briggsy said:

And there you have it. Market values (aka fair value) are only valid if the market is fully liquid and actively being traded.

 

In your scenario, the key point is that the developer is stuck with illiquid assets he can't shift. His finance costs keep ticking up because he is not receiving cash from sales. What does he do?

i) drop his selling price

ii) wait and wait and wait till the bitter end

iii) pull out all the cash and value from the business by surreptitious means and then turn to his creditors and say sorry, "no money, now it's your problem."

iv) try to raise further finance to try to cover the period of lower sales

 

I agree with what you are saying, but I think developers are in a unique situation here as the construction and holding costs are very low. 30 Burmese workers and a cement truck and they build a block of condos. 

If they managed to sell 10-20% off the plan, they have probably covered construction cost before they start. They can then hold a big inventory and drip feed the market.

[LongTimeLurker]

1 hour ago, Briggsy said:

And there you have it. Market values (aka fair value) are only valid if the market is fully liquid and actively being traded.

 

In your scenario, the key point is that the developer is stuck with illiquid assets he can't shift. His finance costs keep ticking up because he is not receiving cash from sales. What does he do?

i) drop his selling price

ii) wait and wait and wait till the bitter end

iii) pull out all the cash and value from the business by surreptitious means and then turn to his creditors and say sorry, "no money, now it's your problem."

iv) try to raise further finance to try to cover the period of lower sales

 

 

iii) seems to be the most common result here.

[LongTimeLurker]

57 minutes ago, Peterw42 said:

I agree with what you are saying, but I think developers are in a unique situation here as the construction and holding costs are very low. 30 Burmese workers and a cement truck and they build a block of condos. 

If they managed to sell 10-20% off the plan, they have probably covered construction cost before they start. They can then hold a big inventory and drip feed the market.

 

The rule of thumb was generally 60% of the value is costs, 40% profit.

[LennyW]

The main driver of the condo market in Pattaya, Thailand and most of Asia is money laundering.

[morrobay]

Just now, JSixpack said:

 

Oh, same income, same demand. More/less income from domestic growth not dependent on more FDI, more/less domestic demand. Expanding population, commensurate income, more demand. Same demand from foreign tourist second home permanent expat retirees wanting Pattaya, uncorrelated with FDI (but correlated w/ other factors)--unless you have any numbers.

 

If I have interpreted the above word salad  correctly then that number ^ would be a  counterfactual. Ie - To determine how much foreign investment  http://investvine.com/thailands-eastern-seaboard-become-growth-engine/ on Eastern seaboard for expanding current manufacturing/start ups did not take place. Then determine how many Thais and foreigners did not get employed. Then determine how many of those  would have bought a condo had they been employed if there was not 78% decrease in FDI.  Of course this would not account for the total oversupply/empty units , but some un determined number ^. The point is FDI is related to domestic growth, expanding population , commensurate  income and demand. And this is so regardless of how many more paragraphs of mumbo jumbo you  post arbitrarily to contrary. 

Edited November 19, 2016 by morrobay
add

[JSixpack]

2 hours ago, morrobay said:

Then determine how many of those  would have bought a condo had they been employed if there was not 78% decrease in FDI.

 

Help us out here now. I can't stand more of this suspense, man. We're waitin' for your determinatin'. Then we just hammer that into an action plan. I'm excited.

 

We used to sell tons of condos those employed Thais linked to the FDI, right? But the decrease in the employment rate has been simply astonishing, as you know of course. Should be child's play for you to illustrate the correlation: merely make a little graph of the FDI vs. the employment rate recently. Then to the condo oversupply!

 

Could this be--THE END?

 

Quote

 Of course this would not account for the total oversupply/empty units , but some un determined number ^.

 

Uh--yeah. :) Will we then, like, shock! arrive at one of the yearly CONDO CRASH predictions? I've already agreed: could happen. Or not. :) If you know, then you're poised to make a bundle, as you did on the prediction of the failure of CentralFestival Pattaya Beach. Number crunching--nothing like it.

 

And then we could talk about the increase in the employment rate & GDP and also that in the FDI. Well, we could if we didn't need to follow the TVF Poster Absolute Spiral Downward rule.

 

I love how from a superficial comparison w/ Miami we've gotten all global. Inevitable I suppose. Helps elevate the portentousness of thread topics nicely and showcase impressive economic expertise.

 

Edited November 19, 2016 by JSixpack

[sandgroper2]

I bought one 12 years ago, just sold it for an extra 20%. So lived rent free for 12 years.(12 years rent, . just over one mill).  Plus a few pence for condo fees. Bad investment , you need some investment advice.

[SaintLouisBlues]

11 minutes ago, sandgroper2 said:

I bought one 12 years ago, just sold it for an extra 20%. So lived rent free for 12 years.(12 years rent, . just over one mill).  Plus a few pence for condo fees. Bad investment , you need some investment advice.

And the total rate of inflation in Thailand over those 12 years was only 20% too?

Edited November 19, 2016 by SaintLouisBlues

[Briggsy]

11 minutes ago, SaintLouisBlues said:

And the total rate of inflation in Thailand over those 12 years was only 20% too?

Yes, I was thinking the same thing too.

 

My passive, no need to manage, no condo fees, no furniture, unit trust investments in the UK more than doubled over the last 12 years. If I measured from the low point after 2008, they are up even more.

[JSixpack]

23 minutes ago, Briggsy said:

Yes, I was thinking the same thing too.

 

My passive, no need to manage, no condo fees, no furniture, unit trust investments in the UK more than doubled over the last 12 years. If I measured from the low point after 2008, they are up even more.

 

And more. Let's not forget how conveniently all the unit trust documents, reports, and tax documents fit compactly in a small garbage bag with your wardrobe and toothbrush in the shopping trolley. When some peacock seaview condo owner boasts of his decorating skills, you may point to the elaborate doodles you've made in the margins, too.

[impulse]

Those claiming that the market price is whatever someone is willing to pay seem to be forgetting the rest of that statement.  It's whatever a willing and knowledgeable buyer will pay and a willing and knowledgeable seller will take.

 

Even if I were to have cash in hand, I'd be loathe to spend more on a condo than the bank would be willing to lend.  Not the developer, or one of his crony organizations.  Not the value according to an appraiser or a real estate agent who has an agenda.  

 

Why?  Because banks have a lot more information about market values than I do, their judgement isn't clouded by the emotion of looking out the window at the view of the sea, and they don't fall for the sales pitch by the cutie in the short skirt.  

 

And though I may have cash in hand, the numbers say my chances of selling it on increase significantly if I can sell it to someone who will need financing.  Because the vast majority of potential buyers will need financing.  My pool of potential buyers shrinks dramatically if it has to be a cash sale.  (Truer in Miami, of the linked article, than a retirement resort like Pattaya, but still true in Patts)

 

 I may not know that market value number, but the bank will.  Ignore their expertise at your own peril.  Unless she's really cute.

[Briggsy]

52 minutes ago, JSixpack said:

 

And more. Let's not forget how conveniently all the unit trust documents, reports, and tax documents fit compactly in a small garbage bag with your wardrobe and toothbrush in the shopping trolley. When some peacock seaview condo owner boasts of his decorating skills, you may point to the elaborate doodles you've made in the margins, too.

I am sorry. I cannot follow your point.

[Jingthing]

Foreigners pay cash here.

Next ...

[impulse]

1 hour ago, Jingthing said:

Foreigners pay cash here.

Next ...

 

And that's actually part of my point.  The rules require me to buy into 49% of a project that's artificially price inflated, buy with cash money verified from offshore and sell only to the small portion of potential buyers (foreigners) who must do the same.  And that pool of potential buyers is (artificially) shrinking due to tightening immigration policies, while the supply of condos is still expanding.

 

That's a set of dynamics that makes leasing look pretty good right now. 

 

Unless I can buy at a price that would allow a Thai to purchase the unit- and the vast majority of them would require financing.  So I'd want to know what that value is.  I can't get a bank loan (wouldn't want to), but I'd certainly investigate the loan value of a unit before I'd invest millions of baht into it.  Or, I could go by the advertised price of the comparable units that are still on the market after months or years.  That's always a good indicator.

 

[Asiantravel]

2 hours ago, Jingthing said:

Foreigners pay cash here.

Next ...

 

Yeah and  that is the point.

As this stagnant world economy continues to struggle  ( and dont forget Japan's economy despite trillions of dollars in QE has been stagnant  since 1990 )  over the next decade with an increasing number of pension funds going broke your cash weilding foreigner who wants to buy in Pattaya will eventually  become rarer than a dodo bird

Edited November 19, 2016 by Asiantravel