It's official - Thai real estate bubble pops.

[funandsuninbangkok]

8 hours ago, lkn said:

Yes, knowing that would be a good clue as to whether or not we have the basis for a bubble. Though I only quoted the tidbit from CBRE because funandsuninbangkok claimed them as a source for his data showing we are in a bubble.

 

I personally am less optimistic than the tidbit I quoted, though my basic point in this thread has simply been that I have not seen the data to suggests that we are in a bubble. I have lived through two bubbles, and both times, it was clear from the data, before the bubble burst, that the prices were inflated to an unsustainable level.

 

Unfortunately in Thailand, there is little data available, but the few things I can scrape together does not look alarming, e.g. in 2006 I could buy a condo in Bangkok for 60,000 baht/sq. m. and today I can still find a condo in Bangkok for that same price.

 

And a 40 sq. m. condo at this price with a mortgage rate of 6% would mean the monthly payments are 12,000 baht, which does not seem unrealistic for a working Thai, nor does it seem like an inflated price when you consider the cost of the land, materials, and labour involved to build the condo.

 

I’d be interesting to learn, from those who think we are in a bubble, what the prices should be.

I think its on on their web site. They did a presentation a few months ago so slides will also be on AMCHAM web site. 

 

CBRE data is new unit ASKING prices vs rents.  As we know, there is no central selling price database. 

 

So so it is more difficult to see bubbles here because property stays vacant long term rather than being auctioned off as in the west. Banks roll over debt or extend morgtgages to none payers. 

 

Real pain is felt by investors who bought to rent. On DDproperty now at 47,000 one BR units for rent. 47,000!  

 

If if your looking for a place new start with a phone call requesting 50% off

 

other tidbits:

 

85% of buyers are Thai - not Chinese or Western. Thais buy property and sit on it. Even in negative return environment. 

 

Only 5 instances last year of rentals going more than 150,000 baht !  Good luck to all these cowboy investors with huge new units looking for the billionaire renting in Bangkok. Ain't going to happen. 

 

Ave expatriate family needs two br for 50,000 and there are less and less expatriate families from West or Japan. More Chinese now RENTING by Chinese embassy. Cheap small units preferred

[chrisandsu]

6 minutes ago, funandsuninbangkok said:

I think its on on their web site. They did a presentation a few months ago so slides will also be on AMCHAM web site. 

 

CBRE data is new unit ASKING prices vs rents.  As we know, there is no central selling price database. 

 

So so it is more difficult to see bubbles here because property stays vacant long term rather than being auctioned off as in the west. Banks roll over debt or extend morgtgages to none payers. 

 

Real pain is felt by investors who bought to rent. On DDproperty now at 47,000 one BR units for rent. 47,000!  

 

If if your looking for a place new start with a phone call requesting 50% off

 

other tidbits:

 

85% of buyers are Thai - not Chinese or Western. Thais buy property and sit on it. Even in negative return environment. 

 

Only 5 instances last year of rentals going more than 150,000 baht !  Good luck to all these cowboy investors with huge new units looking for the billionaire renting in Bangkok. Ain't going to happen. 

 

Ave expatriate family needs two br for 50,000 and there are less and less expatriate families from West or Japan. More Chinese now RENTING by Chinese embassy. Cheap small units preferred

Very true . I know a fair few middle class bangkokians , they all own at least 3 properties plus land . It's quite handy as nearly all sit empty when I'm visiting so I get a pick of where I want to stay ! When I ask why they bought them I get the distinct sound of crickets .... even for Thais it's easy to buy but unbelievably hard to sell . The way to force up prices in Thailand would be to get rid of the cheap Burmese and Cambodian labour then pay the Thais a decent wage to do it (I know it's pie in the sky) that alone would increase the price of new builds to make a second hand place far more attractive . 

[trogers]

21 minutes ago, chrisandsu said:

Very true . I know a fair few middle class bangkokians , they all own at least 3 properties plus land . It's quite handy as nearly all sit empty when I'm visiting so I get a pick of where I want to stay ! When I ask why they bought them I get the distinct sound of crickets .... even for Thais it's easy to buy but unbelievably hard to sell . The way to force up prices in Thailand would be to get rid of the cheap Burmese and Cambodian labour then pay the Thais a decent wage to do it (I know it's pie in the sky) that alone would increase the price of new builds to make a second hand place far more attractive . 

I would think that 2nd hand properties are already far more attractive, at only 50-60% of new builds. And I have seen advertisements in Jomtien at a third of new builds.

[chrisandsu]

43 minutes ago, trogers said:

I would think that 2nd hand properties are already far more attractive, at only 50-60% of new builds. And I have seen advertisements in Jomtien at a third of new builds.

Depends if we are talking Thais or farang ? Thais tend to prefer new , they can Be very creative but for some unknown reason they don't see any value in buying second hand and remodelling .

[trogers]

7 minutes ago, chrisandsu said:

Depends if we are talking Thais or farang ? Thais tend to prefer new , they can Be very creative but for some unknown reason they don't see any value in buying second hand and remodelling .

This will gradually change (decades for some locations?) when they see foreign investors buying, refurbishing and renting them out at double their rates.

 

Happened to the building I bought into at Sukhumvit 24 in 2007. The co-owners have approved funds to upgrade the 30+ year old building for 5 consecutive years now.

[lkn]

 

4 hours ago, funandsuninbangkok said:

I think its on on their web site […]

 

Real pain is felt by investors who bought to rent. On DDproperty now at 47,000 one BR units for rent. 47,000! […]

It is on their website, but as I wrote, you have to pay for it.

 

But I found another report for free which says “One of the strangest features of the Bangkok condominium market for Western purchasers is that prices of older condominiums do not move upwards at the same rate as newly-launched projects; in some cases, they have not moved at all.”

 

So your claim that prices have tripled in 10 years seems to not be supported, unless you are doing a non apples-to-apples comparison, e.g. the most expensive build 10 years ago and the most expensive today, then yes, I am sure it will be triple of what it was 10 years ago.

 

As for the 47,000 condos available for rent, I have used a real estate site myself back when I was renting, and a lot of the listings were actually not available, so this number should be taken with a grain of salt.

 

Again, I feel I must stress that I do believe there is oversupply, what I react to here is the hyperbole and complete lack of credible data.

 

Do you agree that old buildings have not appreciated much, if at all, over the last decade? If so, the problem is with the new builds. Many of the developers are publicly traded, so we can look at the finances of these companies, for example Sansiri, the company is profitable, but with a P/E ratio of 8.57 the market seems to be rather pessimistic about this company, so that does not seem to support the BKK article about people pouring money into the stock/real estate market, on the contrary.

 

What about the banks? Are people defaulting on mortgages? etc.

 

Do some proper research if you want to convince us that a market crash is imminent!

[lkn]

7 hours ago, trogers said:

Only badly located condos have prices remain static after ten years. My old condo units have increased in value by 50% and 80% as indicated by sales of units in the same building. They were bought in 2007-8.

This is Hipflat’s historic asking price (per sq. m.) for Waterford Park, I picked that building because you previously recommended this as a decent candidate (in the “condos below one million” thread).

 

The graph has been smoothed out, there are two outliers, which is Q2 2016 and Q1 2017, not really sure what happened there, since adjacent quarters are closer to the trend. There are currently 40 units listed, so the average price seems to be somewhat representative.

 

 

[ExpatOilWorker]

13 hours ago, lkn said:

Yes, knowing that would be a good clue as to whether or not we have the basis for a bubble. Though I only quoted the tidbit from CBRE because funandsuninbangkok claimed them as a source for his data showing we are in a bubble.

 

I personally am less optimistic than the tidbit I quoted, though my basic point in this thread has simply been that I have not seen the data to suggests that we are in a bubble. I have lived through two bubbles, and both times, it was clear from the data, before the bubble burst, that the prices were inflated to an unsustainable level.

 

Unfortunately in Thailand, there is little data available, but the few things I can scrape together does not look alarming, e.g. in 2006 I could buy a condo in Bangkok for 60,000 baht/sq. m. and today I can still find a condo in Bangkok for that same price.

 

And a 40 sq. m. condo at this price with a mortgage rate of 6% would mean the monthly payments are 12,000 baht, which does not seem unrealistic for a working Thai, nor does it seem like an inflated price when you consider the cost of the land, materials, and labour involved to build the condo.

 

I’d be interesting to learn, from those who think we are in a bubble, what the prices should be.

I think you are right. Condo prices are for the best part still reasonable in Bangkok, however it is true that rental prices have been static the last 10-12 years and are decoupling from sales prices, but even that still makes sense in a ultra low interest market.

I feel it would take an outside event to trigger a price correction in the greater Thai real-estate market.

A collapse of the Chinese real-estate market could spill over or the FED increase interest rate to 3% dampen demand for low yield investments in Thailand. 

[trogers]

5 minutes ago, lkn said:

This is Hipflat’s historic asking price (per sq. m.) for Waterford Park, I picked that building because you previously recommended this as a decent candidate (in the “condos below one million” thread).

 

The graph has been smoothed out, there are two outliers, which is Q2 2016 and Q1 2017, not really sure what happened there, since adjacent quarters are closer to the trend. There are currently 40 units listed, so the average price seems to be somewhat representative.

 

 

The 50% for Waterford, and 80% for the building in Sukhumvit 24.

[theguyfromanotherforum]

I will say this as a priced out Bangkok resident. I own a condo in Canada and there are exactly the same arguments, accusations (pesky foreign investors) and let's face it jealousy going on.

I don't believe that property prices in Bangkok are overvalued much. Certainly I can see how it can appeal to certain foreign investor who has been priced out of major Western markets. Personally, I have a big problem with poor construction and even poorer maintenance of many condos here which makes me want to buy elsewhere. I think only one thing could truly crash the market in BKK and that's the introduction of property tax.

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[funandsuninbangkok]

1 hour ago, theguyfromanotherforum said:

I will say this as a priced out Bangkok resident. I own a condo in Canada and there are exactly the same arguments, accusations (pesky foreign investors) and let's face it jealousy going on.

I don't believe that property prices in Bangkok are overvalued much. Certainly I can see how it can appeal to certain foreign investor who has been priced out of major Western markets. Personally, I have a big problem with poor construction and even poorer maintenance of many condos here which makes me want to buy elsewhere. I think only one thing could truly crash the market in BKK and that's the introduction of property tax.

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Bad news then

 

http://www.cbre.co.th/propertynews/cabinet-approves-land-building-tax/

 

 

[theguyfromanotherforum]

How? Have you red the link you provided?

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[trogers]

1 hour ago, funandsuninbangkok said:

Bad news then

 

http://www.cbre.co.th/propertynews/cabinet-approves-land-building-tax/

 

 

0.5% of appraised value is chicken feed compared to property tax based on annual value.

 

Say a condo with market value of Bt10m and appraised value of Bt6m.

 

Annual tax is only Bt30,000 while you would be collecting almost Bt500k annual rent.

 

It's only a pain to those speculators leaving the condo unit vacant.

[chrisandsu]

11 hours ago, trogers said:

This will gradually change (decades for some locations?) when they see foreign investors buying, refurbishing and renting them out at double their rates.

 

Happened to the building I bought into at Sukhumvit 24 in 2007. The co-owners have approved funds to upgrade the 30+ year old building for 5 consecutive years now.

I think the Thais fear much the same as we do , the lack of maintenance on older buildings , owners not paying HOAs, much the same reason as why I won't buy a condo or a house on a moo ban . 

[funandsuninbangkok]

6 hours ago, trogers said:

0.5% of appraised value is chicken feed compared to property tax based on annual value.

 

Say a condo with market value of Bt10m and appraised value of Bt6m.

 

Annual tax is only Bt30,000 while you would be collecting almost Bt500k annual rent.

 

It's only a pain to those speculators leaving the condo unit vacant.

Agreed except there are tens of thousands of empty units now. As their teaser interest rates go from 1 % to 8 and they get billed for maintenance fees and now this tax, lots of people are going to be losing thousands of baht each month on thier empty rents condos. 

 

Aint going to help the market

[trogers]

6 hours ago, funandsuninbangkok said:

Agreed except there are tens of thousands of empty units now. As their teaser interest rates go from 1 % to 8 and they get billed for maintenance fees and now this tax, lots of people are going to be losing thousands of baht each month on thier empty rents condos. 

 

Aint going to help the market

Then they will wake up to the reality of property oversupply, and that buying a condo is not the same as buying gold from Chinatown.

[trogers]

9 hours ago, chrisandsu said:

I think the Thais fear much the same as we do , the lack of maintenance on older buildings , owners not paying HOAs, much the same reason as why I won't buy a condo or a house on a moo ban . 

I think the Thais should hold more fear on buying into brand new buildings with owners not paying HOAs. Depreciation would be much faster, like rolling down a steep slope, and from a higher starting cost.

[funandsuninbangkok]

On 5/20/2017 at 7:18 AM, trogers said:

I think the Thais should hold more fear on buying into brand new buildings with owners not paying HOAs. Depreciation would be much faster, like rolling down a steep slope, and from a higher starting cost.

I would suggest a long campaign of bombings would also not help values. Let's hope today's violence is not a harbinger of the political environment 

[Senechal]

The big question in my mind is whether or not there will be special farang-pricing when it comes to your real estate appraised value. 

 

Thais may own 51% of the juristic allotment of a building, but who wants to bet farangs will make up the bulk of the appraised value for tax purposes in most buildings.

 

 

[funandsuninbangkok]

Article in the BKK Pt today tries to make sense of the difference in prices between old condo units and new ones.  They claim its all about design and engineering improvements on the new units so they are more valuable. 

 

Perhaps the real reason is :

 

A - asking price of new units is WAY above market(Sunday night test - most have no lights on YEARS after building is done_

 

B - due to Thai condominium  laws and financing building in Thailand are not maintained, cannot be resold, and deteriorate. They depreciate unlike the West where their values increase normally. 

[luk AJ]

I bought my condo 5y ago and the only reason was just to have my own place. After 5y value is still more or less the same and renting out would really not yield great returns. Although prime location next to the Chao Phraya river.
It is very dangerous to compare HKK real estate market with Bangkok. The insane high price per m2 in HKK is because of the limited surface area of HKK while Bangkok has a very large surface area with potentially different centers. Sukhumvit area also has condos with quite high values per m2 but IMO has reached it's maximum. There are just too many other areas in the vincinity which offer the same conditions. There is maybe no real estate bubble yet but possibly one in the making.


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[thaifoodruns]

I don't understand when people say their apartment here in thailand is worth so and so much, but what's the point when you can't sell it.

 

[trogers]

22 minutes ago, thaifoodruns said:

I don't understand when people say their apartment here in thailand is worth so and so much, but what's the point when you can't sell it.

 

Follows the sticky price principle, min. selling price or no sales. But no property professionals are taking auction prices of foreclosed properties into consideration, because the truth is bad for their business.

 

We may thus see the start of a lost decade, like Japan did, and the widening gap between new launches and old condos...

 

https://market.subwiki.org/wiki/Price_stickiness

[thaifoodruns]

Follows the sticky price principle, min. selling price or no sales. But no property professionals are taking auction prices of foreclosed properties into consideration, because the truth is bad for their business.  

We may thus see the start of a lost decade, like Japan did, and the widening gap between new launches and old condos...

 

https://market.subwiki.org/wiki/Price_stickiness

 

 

 

So are we at a start or heading towards a downward rigidity or sticky downward in Bangkok?

 

[trogers]

Just now, thaifoodruns said:

 

 

So are we at a start or heading towards a downward rigidity or sticky downward?

 

 

It's downwards for foreclosed properties, but rigid for those bought with cash. But we may see some movement comes the new property tax.

[ExpatOilWorker]

1 hour ago, luk AJ said:

I bought my condo 5y ago and the only reason was just to have my own place. After 5y value is still more or less the same and renting out would really not yield great returns. Although prime location next to the Chao Phraya river.
It is very dangerous to compare HKK real estate market with Bangkok. The insane high price per m2 in HKK is because of the limited surface area of HKK while Bangkok has a very large surface area with potentially different centers. Sukhumvit area also has condos with quite high values per m2 but IMO has reached it's maximum. There are just too many other areas in the vincinity which offer the same conditions. There is maybe no real estate bubble yet but possibly one in the making.


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It is fair to argue that your condo have lost 2-3% p.a. since Thailand still have some inflation, but this is in a way also fair enough. It does cost to have a place to live. The old Western model of forever appreciating real-estate is just no longer viable, or perhaps never even applied for an emerging market like Bangkok.

[trogers]

31 minutes ago, ExpatOilWorker said:

It is fair to argue that your condo have lost 2-3% p.a. since Thailand still have some inflation, but this is in a way also fair enough. It does cost to have a place to live. The old Western model of forever appreciating real-estate is just no longer viable, or perhaps never even applied for an emerging market like Bangkok.

There is no Western model for forever appreciating real estate. Only prices that follows property cycles, though research do indicates a gradual long term median rise correlating to long term economic growth.

 

Thus, rental yield is an important consideration in property investment.

[trogers]

1 hour ago, luk AJ said:

I bought my condo 5y ago and the only reason was just to have my own place. After 5y value is still more or less the same and renting out would really not yield great returns. Although prime location next to the Chao Phraya river.
It is very dangerous to compare HKK real estate market with Bangkok. The insane high price per m2 in HKK is because of the limited surface area of HKK while Bangkok has a very large surface area with potentially different centers. Sukhumvit area also has condos with quite high values per m2 but IMO has reached it's maximum. There are just too many other areas in the vincinity which offer the same conditions. There is maybe no real estate bubble yet but possibly one in the making.


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You have stated clearly the reason why there is almost zero capital gain compared to HK.

 

The so-called 'prime location' next to the Chao Phraya river is a myth. There are over 30 more such locations on both sides of the river, stretching from Nonthaburi to Samut Prakan waiting to come into the supply pipe...

[luk AJ]

I live at The River condo opposite Shangrila access to Bts and walking distance to Siam Icon. So yes I consider this prime location...


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[theguyfromanotherforum]

I live at The River condo opposite Shangrila access to Bts and walking distance to Siam Icon. So yes I consider this prime location...

L
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Yes, it's a great place and you'll be getting a monorail soon, but I always chuckle when chaopraya living is considered hiso waterfront location. It's a giant garbage dump.