Oversupply of condos in BKK yet ridiculous prices

[Barnabe]

Seriously, how long can this go on? If I search this forum, there are topics talking about a glut of condos back in 2017, impeding crash, etc, and I'm sure I can find earlier references.

 

I recently moved to a bigger condo (renting) and looked for condos which are a bit older as you usually get more sqm for your baht.

I saw massive discounts across the board, 3 beds that were listed for 50k going down to as much as 35k.  This is old stock, but well maintained and newly renovated, in central Sukhumvit (Asok to Onnut). This condo hunt really opened my eyes to the glut of high quality condos available on the market for rent - and also the ridiculous expectations of some owners that don't want to lower their rents and face the reality of the market...

 

At the same time I see some ridiculous advertisements for 40 sqm shoeboxes on sale for as much as 200k/sqm! Why would someone buy anything in this environment?
Near my old place in Onnut, there's this nice community called Habito, and they have some very nice 180sqm luxury condos, but they "start" at 45M baht... That money for a low rise condo in Onnut? Seriously?

 

I mean I don't have 45M baht at hand, but even if I had 450 I would I buy something like this? Are there that many people with so much money that they don't care if they are being totally ripped off (raped would be a better word)?

 

It all looks to me like a deck of cards, but again, since 2017 people have been talking about it and it keeps going and going...

[RichardColeman]

17 minutes ago, Barnabe said:

It all looks to me like a deck of cards, but again, since 2017 people have been talking about it and it keeps going and going...

I think Covid will be the Joker in the pack that makes the crash happen, I doubt buying a house or condo currently is the main priority over eating and keeping a job and with banks tightening....

[Airalee]

25 minutes ago, Barnabe said:

At the same time I see some ridiculous advertisements for 40 sqm shoeboxes on sale for as much as 200k/sqm!

200k?  You’re not looking hard enough.  
 

How about the ones pushing (and even going over) 400k/sqm?

 

https://www.hipflat.com/projects/khun-by-yoo-inspired-by-starck-ohscis

https://www.hipflat.com/projects/the-esse-sukhumvit-36-hdefer

 

https://www.hipflat.com/projects/the-xxxix-by-sansiri-fgpkzx

 

 

I can’t figure it out either.

[Barnabe]

9 minutes ago, Airalee said:

200k?  You’re not looking hard enough.  
 

How about the ones pushing (and even going over) 400k/sqm?

 

https://www.hipflat.com/projects/khun-by-yoo-inspired-by-starck-ohscis

https://www.hipflat.com/projects/the-esse-sukhumvit-36-hdefer

 

https://www.hipflat.com/projects/the-xxxix-by-sansiri-fgpkzx

 

 

I can’t figure it out either.

 

Briefly looking at your examples, I saw a few at 13M for 40sqm... 417k USD for a shoebox. 

The one I referred to in the first post is actually not 180sqm for 45M, but 280sqm for 45M:

https://www.hipflat.co.th/en/projects/park-court-sukhumvit-77-hwimtg

Still pushing 172k/sqm... 45M baht = 1.44 million USD. For a low rise condo in Onnut!

 

Mind boggling

[Airalee]

22 minutes ago, Barnabe said:

The one I referred to in the first post is actually not 180sqm for 45M, but 280sqm for 45M:

https://www.hipflat.co.th/en/projects/park-court-sukhumvit-77-hwimtg

Still pushing 172k/sqm... 45M baht = 1.44 million USD. For a low rise condo in Onnut!

 

Well....you do get that lovely waterfront ambiance and a nice view of lumpiniville.

[marc26]

And the fixtures in a lot of these places aren't even comparable to lower end fixtures in apartments in North America

[dddave]

In Thailand, even Bangkok, carrying costs for vacant condo units are almost nil.  Why would an owner/developer significantly drop the price of a unit in response to what is probably a relatively short term economic downturn.  Successful property investors are usually in it for the long haul and at some point, the market will heat up again.

For the entirety of my 18+ years here, skeptics have annually predicted the total collapse of the local condo market(overbuilt, shoddy construction, poor design, over-priced) and for the better part of those 18 years, it has chugged right along. 

[tlandtday]

These shoeboxes are not even well laid out or built inside and out.  You know there is something wrong when buyers showcase common area photos such as pool, gym etc. and a few standard room pics.  Why not just sleep in the common rooms lol.  

[userabcd]

This is why they want the Chinese to return, there is at least 400 million potential buyers for these condos who are investing their money in property here and then renting it out.

 

One thing for sure the prices are rising and they will continue to rise.

Edited August 11, 2020 by userabcd

[FinickyFarang]

7 hours ago, dddave said:

In Thailand, even Bangkok, carrying costs for vacant condo units are almost nil.  Why would an owner/developer significantly drop the price of a unit in response to what is probably a relatively short term economic downturn.  Successful property investors are usually in it for the long haul and at some point, the market will heat up again.

For the entirety of my 18+ years here, skeptics have annually predicted the total collapse of the local condo market(overbuilt, shoddy construction, poor design, over-priced) and for the better part of those 18 years, it has chugged right along. 

Yes, the annual, “The Bangkok real estate market is due for a crash based on my metrics” post.  

[cmarshall]

In my condo supply is up and rental prices are down around 30%.  I have never seen a drop like this.

[tonray]

7 hours ago, tlandtday said:

These shoeboxes are not even well laid out or built inside and out.  You know there is something wrong when buyers showcase common area photos such as pool, gym etc. and a few standard room pics.  Why not just sleep in the common rooms lol.  

Yeah...I love the glass walled in bedrooms and kitchens..usually in cerrtain parts of the year the kitchen is unusable after 11 AM as the sun beating down turns it into a hothouse.

[Logosone]

That's why Chiang Mai is so much better, you can get a 300 sqm house with pool. Land prices are sensible. You still have good massage, great malls, great restaurants, driving is better and less crowded. Okay, for 2 to 3 months terrible air like in Bangkok, but rest of the year is fine.

 

I definitely wouldn't buy a shoe-box in Bangkok or put down 45 million Baht for a normal apartment in a city that's set to drown. Sure the market will go on for a long time, but places like Chiang Mai are still developing and you get something for your money.

[Airalee]

1 hour ago, userabcd said:

This is why they want the Chinese to return, there is at least 400 million potential buyers for these condos who are investing their money in property here and then renting it out.

 

One thing for sure the prices are rising and they will continue to rise.

Supposedly, there are 1,580,000 millionaires in China as of 2019.  Usually, when net worth is calculated, it includes their real estate holdings so much of that “wealth” is illiquid.  I would guess that now, due to Covid-19, there are even fewer millionaires and I would think it’s fair to assume that even those don’t have the cash to scoop up all the vacant condos.  Even if they did, why were there still 100,000+ unsold new condos before Covid 19?

 

400 million potential buyers?  I don’t think so.

 

https://www.statista.com/statistics/702759/china-number-of-millionaires/

Edited August 11, 2020 by Airalee

[ezzra]

In this country a consumer research for possible markets for newly built condos and housing is a dirty word, when i developer decide to build they build, the motto is "If we build it it they will come" just look at Pattaya, the place is awashed with thousands of empty properties and the still build mammoth condos, for whom i ask?...

[Henryford]

I saw one advertised today 134 sqm 65 million baht, 300,000 a sq/m. Just a joke in a third world country where you will find it hard to even visit your condo.

[Airalee]

51 minutes ago, cmarshall said:

In my condo supply is up and rental prices are down around 30%.  I have never seen a drop like this.

In my condo, supply is definitely up too, but most owners are still asking over the top prices for sale and rent.  Those units just sit.  One potential reason for high sales prices could be that as prices quickly rose, people did cash out refinancing and now have mortgage balances that are above the true market price...so...they are stuck.  Or they originally took on a Negatively Amortizing mortgage at 110% LTV and once again, instead of the principal owed going down, it has been going up for years.  I suspect a lot of people have underwater loans.

Then there are the hard money loans that some of the foreign investors took out to buy real estate here.  With the strengthening of the baht in recent years, they have compounded issues.

 

On the flipside, there are people like my landlord who lost half of his renters, but by lowering his rents by 20% now has all his units filled again.

 

 

“People go mad in Herds, they come to their senses one at a time” 

 

-Dr Eugene Mallove

Edited August 11, 2020 by Airalee

[Airalee]

9 hours ago, dddave said:

In Thailand, even Bangkok, carrying costs for vacant condo units are almost nil.  Why would an owner/developer significantly drop the price of a unit in response to what is probably a relatively short term economic downturn.  Successful property investors are usually in it for the long haul and at some point, the market will heat up again.

For the entirety of my 18+ years here, skeptics have annually predicted the total collapse of the local condo market(overbuilt, shoddy construction, poor design, over-priced) and for the better part of those 18 years, it has chugged right along. 

Many developers are lowering their prices substantially and undercutting the resale market.  The developers have a much larger margin to work with so it’s quite easy for them to get rid of remaining stock and move on to the next development.   There are much better deals out there currently than there were 2-3 years ago,

[Barnabe]

9 hours ago, dddave said:

In Thailand, even Bangkok, carrying costs for vacant condo units are almost nil.  Why would an owner/developer significantly drop the price of a unit in response to what is probably a relatively short term economic downturn.  Successful property investors are usually in it for the long haul and at some point, the market will heat up again.

For the entirety of my 18+ years here, skeptics have annually predicted the total collapse of the local condo market(overbuilt, shoddy construction, poor design, over-priced) and for the better part of those 18 years, it has chugged right along. 

Fair point, hence why I said it has been predicted at least since 2017 here, but two remarks:

 

1) just because it hasn’t happened in 18 years doesn’t mean it won’t happen, these things take time to build up, and then need a spark to explode. I wasn’t around, but judging from other people’s tales it definitely happened in 1997.

 

2) in my condo hunt it was evident that most Thais don’t like living in older condos, and they degrade very quickly here, possibly due to weather and bad materials. This leads to massive price reductions for second hand buyers.

 

Following up on these, at some point in this chain someone has to lose money, either the developer, the buyer or the bank, and these losses accumulate over time across the market.

Of course it’s also possible there is no spark, the market deflates slowly, a lot of people lose money but there’s no widespread panic or losses rippling through the financial system.

 

I am not disagreeing with you. In the end the famous phrase “the market can remain irrational longer than you can remain solvent” applies, but I guess it’s more like “the market can remain irrational longer than you are prepared to wait for a crash and a subsequent good deal”.

[KarenBravo]

1 hour ago, Logosone said:

That's why Chiang Mai is so much better, you can get a 300 sqm house with pool. Land prices are sensible. You still have good massage, great malls, great restaurants, driving is better and less crowded. Okay, for 2 to 3 months terrible air like in Bangkok, but rest of the year is fine.

 

I definitely wouldn't buy a shoe-box in Bangkok or put down 45 million Baht for a normal apartment in a city that's set to drown. Sure the market will go on for a long time, but places like Chiang Mai are still developing and you get something for your money.

Yup. And they even throw in the air pollution for free....

[Barnabe]

Here is another data point. Until the start of 2015 prices for houses and condos were rising in tandem and appropriately when taking into account inflation.

But these have accelerated massively since then, and rents have not followed suit. The reason for this difference is obvious, foreigners can buy condos but not houses.
 

The big question is - Is this sustainable? 

  

Edited August 11, 2020 by Barnabe

[Airalee]

9 minutes ago, Barnabe said:

Fair point, hence why I said it has been predicted at least since 2017 here, but two remarks:

 

1) just because it hasn’t happened in 18 years doesn’t mean it won’t happen, these things take time to build up, and then need a spark to explode. I wasn’t around, but judging from other people’s tales it definitely happened in 1997.

 

2) in my condo hunt it was evident that most Thais don’t like living in older condos, and they degrade very quickly here, possibly due to weather and bad materials. This leads to massive price reductions for second hand buyers.

 

Following up on these, at some point in this chain someone has to lose money, either the developer, the buyer or the bank, and these losses accumulate over time across the market.

Of course it’s also possible there is no spark, the market deflates slowly, a lot of people lose money but there’s no widespread panic or losses rippling through the financial system.

 

I am not disagreeing with you. In the end the famous phrase “the market can remain irrational longer than you can remain solvent” applies, but I guess it’s more like “the market can remain irrational longer than you are prepared to wait for a crash and a subsequent good deal”.

When bubbles pop, there is no announcement nor is there an across the board reduction in prices.  It may appear to the casual condo shopper that nothing ever happened...especially here where all you get to see are the sky high asking prices and there is no MLS or sites such as Redfin (in the US) where you can see historical sales prices.  The deals are out there.  I just bought a condo and my landlord just scooped up his 13th unit.

 

The US$1000-2000/sf prices here are absurd.  I could show units in iconic buildings in Los Angeles that sell for less than that.  Of course, those buildings are forever out of my price range...and I assume most of the posters here on TV...but when even the most ardent housing bulls here on the forum can’t call bull**** on some of these prices, it shows that they are little more than shills for the RE market here.

[Airalee]

11 minutes ago, Barnabe said:

Here is another data point. Until the start of 2015 prices for houses and condos were rising in tandem and appropriately when taking into account inflation.

But these have accelerated massively since then, and rents have not followed suit. The reason for this difference is obvious, foreigners can buy condos but not houses.
 

The big question is - Is this sustainable? 

  

Remember.....those price indexes (similar to Case Shiller) are just aggregated values that don’t take into account the mix.  The condos selling at the peak are much nicer condos....meaning...you get a lot more for your money.

[Surelynot]

I think there is definitely a miss-match between the current economic events and the prices as advertised.

The key words are 'as advertised'.....there is still a desperation to hang on to the price the owners feel they should be getting, so they continue to advertise at that price.......dig a little deeper and maybe the stat's on actually selling price will show a different story. 

[Logosone]

34 minutes ago, Barnabe said:

Here is another data point. Until the start of 2015 prices for houses and condos were rising in tandem and appropriately when taking into account inflation.

But these have accelerated massively since then, and rents have not followed suit. The reason for this difference is obvious, foreigners can buy condos but not houses.
 

The big question is - Is this sustainable? 

  

Interesting graphic. However since foreigners could not buy houses before 2015 perhaps the divergence is caused by the massive oversupply of condos due to the building boom rather than ownership discrimination.

[Barnabe]

16 minutes ago, Logosone said:

Interesting graphic. However since foreigners could not buy houses before 2015 perhaps the divergence is caused by the massive oversupply of condos due to the building boom rather than ownership discrimination.

 

My theory is that it accelerated in 2015 because that's when the Chinese boom really started.

But what is going to happen when the Chinese buyers realise they'll be taking massive losses on their "investments"?

[Surelynot]

6 minutes ago, Barnabe said:

 

My theory is that it accelerated in 2015 because that's when the Chinese boom really started.

But what is going to happen when the Chinese buyers realise they'll be taking massive losses on their "investments"?

Agree....and on paper they must be looking at massive losses already. I cannot see them viewing Thailand as a good bet anymore.....there must be a great deal of anxiety and a desire to cut and run.....prices could collapse in six months time if they see international travel is going to be severely limited.

 

I just rented a very nice condo heart of Bangkok...advertised price 26k pm.....got it down to 17k pm......landlord also asked me to sign for two years.

 

14 rooms on our floor only two other rooms occupied. 

[cmarshall]

I generally think economic factors trump cultural ones, but culture remains a factor.  Traditionally, ordinary Thais did not especially value houses, as opposed to land, for instance, and spent much of their time outside, not in the house, which they thought of as more a shed for storage and sleeping.  For that reason Thais are seldom house-proud in the way that is typical for Americans, for example.  They don't maintain buildings, nor do they have high construction standards.  The apartments we have looked at are generally so badly furnished with ugly, mismatched, and inappropriate pieces that I would only consider renting them if I were planning a suicide.

 

In terms of investment, partly because of the culture, but also the low carrying cost, they view apartments as a store of value rather than a source of income, a point of view that would baffle American real estate investors.  For example, in my condo the top four or five floors are duplex apartments.  For the first five or six or more years, they were kept empty, producing no income at all, as I suppose the owners expected them to appreciate for years at which point they would sell them as new, never lived-in, units.  The particularly baffling point is that the building is a leasehold, not a freehold.  So, although I don't understand that practice, I am guessing that after thirty years the owner owns nothing and the owner of the property can raise the price of the leasehold at will or deny an extension outright at which point no one would own anything.  Very strange.

[Surelynot]

1 minute ago, cmarshall said:

Traditionally, ordinary Thais did not especially value houses

I have also been told they view second-hand houses like the West view second-hand cars......used and seriously devalued as a consequence.

[cmarshall]

1 hour ago, Barnabe said:

Here is another data point. Until the start of 2015 prices for houses and condos were rising in tandem and appropriately when taking into account inflation.

But these have accelerated massively since then, and rents have not followed suit. The reason for this difference is obvious, foreigners can buy condos but not houses.
 

The big question is - Is this sustainable? 

  

When prices for condos go up while rents for the same units do not, it's a bubble.  Reminds me of the US housing market from 2000 to 2007.