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  1. #1
    Thailand Expat tomcat's Avatar
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    If You Build It, They Will Come

    Thai Property Can Stay Hot in Chillier Times

    Chinese demand and a tourism boom will soften the impact of overbuilding and weakening global growth.
    By Ronald W. Chan (Bloomberg)
    January 27, 2019, 6:00 AM GMT+7




    Clouds are gathering, but the sun’s still shining. Photographer: Dario Pignatelli/Bloomberg

    Thailand’s booming property market is at risk of cooling this year as rampant construction threatens an oversupply of apartments amid increasing global economic headwinds.


    The country has been a relative bright spot in an otherwise lackluster Southeast Asian real estate market. Thai residential property has experienced substantial growth in recent years, much of it fueled by buyers from China, Japan and Singapore. The thriving hospitality sector has also drawn money from foreign and local investors to fund the building of many new hotels and resorts.

    Mainland Chinese have poured roughly $10 billion into condos in Thailand over the past three years, helping to drive annual price increases of 20 percent in major cities such as Bangkok. Japanese investors have spent $8 billion and Singaporean buyers $2 billion.

    At a time when Beijing and Washington are still locked in a trade dispute, affluent mainland residents consider Thai real estate a safe place to park their money. Rental yields in Bangkok can be more than 4 percent – far more appealing than socking money away in domestic savings accounts that offer less than 2 percent. Analysts estimate that one out of every five condos in Thailand is sold to a Chinese buyer. As mainland economic forecasts grow stormy, more people are likely to gravitate to a country known in tourist brochures as the “Land of Smiles.”

    With Thailand’s benchmark interest rate at 1.75 percent and inflation at about 0.4 percent, developers are able to obtain construction loans at a reasonable cost. As a result, they are flooding the market with projects. The Bank of Thailand expressed concern on Jan. 10 that a condo surplus amid a global downturn could adversely affect the Thai economy. The central bank has tightened mortgage lending rules to tame speculation and the government may take measures to clamp down on excessive construction if the situation worsens.

    Moreover, bank representatives are worried that foreign buyers who have already put down a deposit might get cold feet and pull out, leaving properties empty. However, as the Chinese middle class continues to grow and accumulate wealth, the volume of people purchasing should remain steady. Though
    developers may ease up on new construction projects, demand – especially at the high end – will stay strong among Chinese home buyers.

    Tourism, meanwhile, which represents almost one-fifth of Thailand’s economy, will remain robust. The Tourism Authority of Thailand has predicted 40 million international tourists will flock to the country in 2019. A sizable number are expected to celebrate Chinese New Year there on Feb. 5.

    The Thai government recently announced that it expanded its visa-free entry policy through April 30 to include visitors from China. That was partly a bid to entice visitors scared off by the deaths last summer of 47 Chinese tourists after their boats capsized in Phuket. Arrivals from the country dropped an estimated 20 percent after the accident, but the visa waiver alone is expected to boost tourism by 30 percent.

    While Thailand’s residential property market may cool slightly, it’s hardly likely to slump. The combination of buoyant tourism and Chinese demand should mean that the market will weather 2019’s dreary global economic forecasts.
    Majestically enthroned amid the vulgar herd

  2. #2
    Thailand Expat

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    Quote Originally Posted by tomcat View Post
    Mainland Chinese have poured roughly $10 billion into condos in Thailand over the past three years,
    Quote Originally Posted by tomcat View Post
    Analysts estimate that one out of every five condos in Thailand is sold to a Chinese buyer.
    So, $50 billion worth of condos sold over the last 3 years.
    Does that sound a bit high to anyone in the know?

  3. #3
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    Quote Originally Posted by Maanaam View Post
    So, $50 billion worth of condos sold over the last 3 years.
    Does that sound a bit high to anyone in the know?
    Where does it say $50bn?

  4. #4
    Thailand Expat

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    Duh.
    Right there in the two quotes I posted. If Chinese poured $10b into condos, and that was 1/5 of all sales....

  5. #5
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    No one from HK bought a condo in Thailand over the last 3 years?

  6. #6
    ความรู้ลึกลับ HuangLao's Avatar
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    Quote Originally Posted by foobar View Post
    No one from HK bought a condo in Thailand over the last 3 years?
    Not the best of investments, is it?

  7. #7
    Thailand Expat
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    Quote Originally Posted by Maanaam View Post
    So, $50 billion worth of condos sold over the last 3 years.
    Does that sound a bit high to anyone in the know?
    There seems to be a massive oversupply of existing units, and that figure looks pie-in-the-sky to me.

    Wonder how much shonky business dealing has been done with the Chinese whilst the Election keeps getting postponed?

  8. #8
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    Quote Originally Posted by kmart View Post
    There seems to be a massive oversupply of existing units, and that figure looks pie-in-the-sky to me.

    Wonder how much shonky business dealing has been done with the Chinese whilst the Election keeps getting postponed?
    You're probably right about oversupply if Hatyai is anything to go by. But to the point, the figures quoted are actual units sold. Yes, seems to be pie-in-the-sky.
    In the case of Hatyai, it's local old generational Thai Chinese money doing the buildings which remain empty for years, or get built just short of completion and cease construction. It has been suggested it's to do with money laundering. Personally, I have a slight suspicion it's to do with a longer game plan wrt non-local Chinese, maybe.

  9. #9
    Thailand Expat
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    Thai will use condos as savings vehicle, just like gold

    selling them is easy, it's renting them that is very challenging

  10. #10
    Pit Boss Ribs
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  11. #11
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    Quote Originally Posted by Dragonfly View Post
    Thai will use condos as savings vehicle, just like gold

    selling them is easy, it's renting them that is very challenging
    I'm not sure I agree with the "selling is easy". Just going by what I have observed over years in Hatyai. Places with for sale signs sit there for year after year.
    Maybe Hatyai has different trends than the rest of Thailand.

    And you have to ask, does a condo that is not rented bring a better return when sold years later, than money invested in gold or bank long term deposits? Is property inflation better than gold inflation?
    20 years ago, property was a good investment. For the last ten years, prices, although inflated, have stagnated.
    I'm picking a bubble bursting in Hatyai (unless there is the suspected long game at play).
    Last edited by Maanaam; 30-01-2019 at 02:36 PM.

  12. #12
    Thailand Expat
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    Quote Originally Posted by Maanaam View Post
    I'm not sure I agree with the "selling is easy". Just going by what I have observed over years in Hatyai. Places with for sale signs sit there for year after year.
    Maybe Hatyai has different trends than the rest of Thailand.

    And you have to ask, does a condo that is not rented bring a better return when sold years later, than money invested in gold or bank long term deposits? Is property inflation better than gold inflation?
    20 years ago, property was a good investment. For the last ten years, prices, although inflated, have stagnated.
    I'm picking a bubble bursting in Hatyai (unless there is the suspected long game at play).
    the Thai promoters are very good at selling those projects when they are built. The poor fookers that end up with them and want to re-sell them as an investment face a big surprise, and yes it's hard as "second hand" sell even though they are new

    as for rents, don't factor logic and economic principles into the decision process for investing. Thai buy purely on emotions (we all do in some ways) and status, so having the pretty condos is more important than the returns you could get from them

  13. #13
    disturbance in the Turnip baldrick's Avatar
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    Quote Originally Posted by Maanaam View Post
    Right there in the two quotes I posted. If Chinese poured $10b into condos, and that was 1/5 of all sales....
    no

    if there were 5 condos and 1 was priced at 10 billion and the other 4 were 50 satang .........

  14. #14
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    I really don't think a condo is a good investment anymore. A friend of mine from the UK and I have just spent the last three weeks in Hua Hin looking at condos for sale along with several new projects off plan. What struck me as interesting is the 100,000 baht/sq meter plus price tags for many of the off plan condos when there is already a big surplus of existing condos in the area. A large number of older condo complexes were in disrepair due to the lack of maintainance. If you walk along the beaches of Hua Hin, you will see many empty condos with AC units that are beginning to rot out due to nobody maintaining them. The only condos that seem to be even halfway maintained are the larger complexes that have now started to present themselves as hotels because they are unable to sell all of their units. It would be interesting to know at what point and how much profit must be taken before the complexes stop doing maintainance.

    Bangkok and Pattaya have even larger surpluses of unsold condos. The government should have stepped in long ago to curb construction, but they seem to be greedy and thinking all condos will be sold. Why would developers continue to build huge condo complexes just to have them sit empty or unfinished? Personally, I stopped thinking about purchasing a condo about 5 years ago. Land seems to be a much better investment since it does not really ever go down in Thailand. A 1 rai plot of land I purchased on a main road near Udon Thani 12 years ago for 250,000 baht is now worth over a million baht when compared to other comps near by. My advice to anyone thinking about buying a condo now is don't do it, just rent.
    Last edited by rickschoppers; 30-01-2019 at 04:01 PM.

  15. #15
    The Fool on the Hill
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    "However, as the Chinese middle class continues to grow and accumulate wealth, the volume of people purchasing should remain steady."

    hmm... ya really ought to manage your expectations...

    https://www.cnbc.com/2018/12/31/china-markets-2018-performance-was-worst-in-a-decade.html
    Chinese markets' 2018 performance was their worst in a decade

    • 2018 has been unkind to China's stock markets.
    • Major indexes in Shanghai and Shenzhen both saw annual losses of more than 24 percent in 2018.






    Now, if I was Chinese middle-class and just lost a quarter of my accumulated "nest egg" I may well consider putting off my foreign property purchases - ya know, just sayin'

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