Buying a house . My thoughts....

[whosyourdaddy]

 

by night visitors I believe he is talking about Ghosts

 

BTW I live in a gated community with 24hour guards. They are useless!

[Guest HonoluluJimmy]

Ghosts, no problem....Thanks to to the Viet Cong I experienced facing death, wounded and thoght I was dying so Ghosts are no problem. I had a regular whom would not get up in the morning untill I cleared that area by waking around the room and into the Hong Nam etc. No, whty don't gated communities provide better safety?

[whosyourdaddy]

Guards get paid about 3000B per month from the company. Pay peanuts get monkeys.

[CondomKing]

whosyourdaddy said:

 

by night visitors I believe he is talking about Ghosts

 

BTW I live in a gated community with 24hour guards. They are useless!

 

I actually meant burglars who might think it's a good idea to scale a wall and see what there is to steal. Almost any good sized dog will keep them away.

 

As I told my wife's family it doesn't matter that our new dogs are friendly creatures who probably wouldn't bite any stranger entering the property night or day. As long as they will bark at strangers and, more importantly, look ferocious, that will keep away those with larceny in their hearts and unwanted visitors as well. Our dogs are really big mixed breeds, one's half Doberman and the other's half Rottweiler, who look nasty as hell.

 

We have a recently announced local policy put into effect by the village chief. If you enter someone's property after 9 PM and his dog bites you, you have no recourse to damages because friend or foe should not be there unannounced after that time of night, which really points out that most burglaries in the village are the work of neighbors and friends, sometimes relatives also.

[Guest lazyphil]

The Mrs and me have a 6 (4 years 9 months left ) year loan from a British bank to buy/build our beautiful house near Bangkok, a gated community, I have found the guard asleep a few times when I went for an evening stroll to the store outside the gate, her mum is a pretty fearsome custodian though, but at work throughout the day !...as for ghosts, well, this house has a wonderful balcony, very spacious looking out over fields (and incoming/out going planes from the airport!) and unless we are there nobody uses it at night for fear of ghosts (I think they need time to adjust as before they lived in back to back shacks in a bkk slum, this place is very quiet), I cant wait to be there for a month soon, wild horses wont get me off that balcony!

[rickfarang]

The security dudes in my condo are pretty friendly and helpful guys. Since they changed security companies about a year ago, the security dudes are generally older men -in their 30's through 50's and now I don't find them asleep as often when I come back in the wee hours.

 

I love dogs in general, but not other people's when they bark into the night. CondomKing, don't get a false sense of security from your dogs - yeah, they will keep some people out, especially the casual prowler, but please recall a case inside Thailand a few years ago, when a farang's dogs were mysteriously poisoned, then a day later, a couple of thugs broke into his hose and killed him.

[CondomKing]

RF - I know that the dogs are only a deterrant to the amateur burglars and that professionals will poison them.

 

Since I am the only Farang around and I have "nice things" some of the local riff raff once thought they could take my stuff. :: We had an ongoing problem with a local burglar who would wait until we left for Bangkok and my mother-in-law and step daughter were the only ones in the house at night, then he would climb over the wall and prowl around looking for stuff to steal. I lined the inside of the walls with boards with 3 inch nails through them (great family project for a weekend afternoon) and one night he came down on one of those boards let out a howl and that was the last time we had a problem like that.

[..]

I was just discussing this with some friends. Here is what I believe, articulated much better than I could by the magazine The Economist

 

Cheers,

SD

 

+++++++++++++++

 

 

From the Economist.

Global house prices

 

Still want to buy?

 

Mar 3rd 2005

From The Economist print edition

 

According to our latest house-price indicators, it is now much cheaper to rent than to buy a house in many countries

 

WHEN The Economist launched its global house-price indicators in 2002, residential-property markets were merely warming up. Today they are red hot in many of the 20 countries we cover: in half of them, prices have risen by around 10% or more in the past year. But for the first time since we started to track them, housing markets in several countries have slowed sharply.

 

The most dramatic slowdown has been in Australia where, according to official figures, the 12-month rate of increase in house prices fell to only 2.7% in the fourth quarter of last year, down from nearly 19% at the end of 2003. Another index, calculated by the Commonwealth Bank of Australia, which is based on prices when contracts are signed rather than at settlement, shows that average house prices fell by 7% in the year to December; prices in Sydney plunged by 16%. The Reserve Bank of Australia's quarter-point increase in interest rates this week is likely to give prices another downward nudge.

 

Britain's housing market has also cooled since last summer. The Nationwide index, which we use, was still up by 10% in the year to February, down from 20% growth in July. Other anecdotal evidence suggests that prices have fallen since last summer in many parts of the country.

 

In contrast, America's housing bubble continues to inflate. Although the rate of increase slowed in the fourth quarter, prices were still up by 11.2% over the year. In California and Washington, DC, housing prices rose by more than 20%. Alan Greenspan, the Fed's chairman, recently admitted in congressional testimony that there may be property bubbles in "certain areas" and a risk that prices could decline. There is certainly evidence that prices are being driven by speculative demand: a new study by the National Association of Realtors shows that one-quarter of all houses bought in 2004 were for investment, not owner-occupation.

 

Nationwide tracks house prices in Britain. In America, a study by the National Association of Realtors showed that one-quarter of all houses bought in 2004 were for investment, not owner-occupation.

 

Economics A-Z

House prices are still rising rapidly in continental Europe. French house-price inflation has accelerated to 16%, its fastest on record in real terms and only a whisker behind Spain's 17%. Prices in Italy, Sweden and Belgium are also rising at close to 10%. Excluding Germany, where prices fell again in 2004, average home prices in the euro area have risen by 12.5% over the past year, causing some concern at the European Central Bank.

 

Punishing prices, puny yields

The main reason why housing markets have cooled in Australia and Britain is that first-time buyers have been priced out and demand from buy-to-let investors has slumped. While house prices have soared, rents have risen modestly or even fallen in some cities. In America, Britain, Spain New Zealand and Australia, average net rental yields (allowing for management fees, maintenance and empty periods) have fallen to 3.5% or less, well below mortgage rates. Shane Oliver, the chief economist at AMP Capital Investors, estimates that net rental yields on houses in Sydney are only 1%. Landlords are nowhere near covering their true costs, but many still hope to make their profit from capital gains. That sounds ominously similar to the days of the dotcom bubble, when it was argued that the link between share prices and profits no longer mattered.

 

According to calculations by The Economist (with the help of Julian Callow of Barclays Capital), house prices are at record levels in relation to rents (ie, yields are at record lows) in America, Britain, Australia, New Zealand, France, Spain, the Netherlands, Ireland and Belgium. America's ratio of prices to rents is 32% above its average level during 1975-2000. By the same gauge, property is "overvalued" by 60% or more in Britain, Australia and Spain, and by 46% in France.

 

The ratio of prices to rents is a sort of price/earnings ratio for the housing market. Just as the price of a share should equal the discounted present value of future dividends, so the price of a house should reflect the future benefits of ownership, either as rental income for an investor or the rent saved by an owner-occupier. To bring the ratio of prices to rents back to equilibrium, either rents must rise sharply or prices must fall. Yet central banks cannot allow rents to surge as this would feed into inflation. Rents directly or indirectly account for 29% of America's consumer-price index, so rising inflation would force the Fed to raise interest rates more swiftly, which could trigger a fall in house prices. Alternatively, if rents continue to rise at their current annual pace of 2.5%, house prices would need to remain flat for over ten years to bring America's ratio of house prices to rents back to its long-term norm. There is a clear risk prices might fall.

 

Lower real interest rates might justify a higher p/e ratio. For example, real interest rates in Ireland and Spain were reduced significantly when these countries joined Europe's single currency, though not by enough to explain the whole rise in house prices. In Britain, where tax relief on interest payments has been scrapped, real after-tax rates are close to their average over the past 30 years, and so do not justify a higher price/rent ratio. In America, too, real post-tax interest rates are not historically low, in part because mortgage-interest tax relief is worth less at lower rates of inflation. For instance, if interest rates are 10%, tax relief is 30% and inflation is 7%, the real after-tax interest rate is 0%. If interest rates are 6% and inflation is 3% (ie, the same gap as before), and tax rates stays the same, the real interest rate is 1.2%.

 

The unusual divergence between house prices and rents does not just affect investors; it also undermines the conventional wisdom that it is always better to buy a house, because "rent is money down the drain". Today in many countries it is much cheaper to rent than to buy.

 

Rent asunder

Take a two-bedroom flat in London, which you could buy for £450,000 ($865,000). To rent the same flat would currently cost £1,700 a month. In addition to a 6% mortgage rate, a buyer would face annual maintenance and insurance costs of, say, 1.25%. In the first year, the rent of £20,400 compares with total mortgage interest and maintenance payments of £33,000, a saving of £12,600. Interest payments would be less if a large deposit were paid, but in that case the income lost from not investing that money elsewhere has to be taken into account.

 

Assume that rents rise by 3% a year, in line with wages, while house prices from now on rise in line with inflation of 2%. At the end of seven years (the average time before the typical homeowner moves), you would be almost £35,000 better off renting, taking account of the capital appreciation and buying and selling costs. In other words, even without a fall in real house prices?which many believe to be likely?buying a house in Britain today seems a poor investment.

 

The figures look even more striking in the San Francisco Bay Area, where it is possible to rent an $800,000 house for $2,000 a month. Making the same assumptions about rents and house prices, but also deducting tax relief on a fixed-rate mortgage and adding property taxes, a buyer would pay $120,000 more over seven years than if he had rented. House prices in San Francisco would need to rise by at least 4% a year (2% in real terms) for it to prove cheaper to buy a house. Since 1950 American house prices in real terms have risen by an annual average of just over 1%. To expect them to rise faster from their current dizzy heights smacks of irrational exuberance, to say the least.

[khunsanuk]

Hi,

 

Interesting article. Anybody have any figures / predictions on the Thai market?

 

Sanuk!

[legover]

Waning boom.

 

for my part i'd be extremely cautious going into the property market at this late stage in the cycle. interest rates are tightening worldwide & thanks to Greenspan's 2000-2001 reflation plan 'liquidity' is sloshing through the system. the recession that never was 4 years ago has been held in abeyance. the American economy is running on fiat paper & debt which purchases near-slave labour from Asia (US electricians are paid $600 a day against their $20 a day Asian counterparts). in effect Asians are trading labour for paper whose value is in long term decline, a bargain with a limited life. today's euphemism: leverage based upon soaring asset prices is "liquidity".

 

speculation in financial markets is massive, ie stocks/real estate/commodities leveraged on margin, all this while savings have been run down to zero. as & when the multi trillion dollar New York "carry trade" loses its glitter & yields narrow further, the repatriation of Western funds from emerging markets will gather momentum with some pretty catastrophic results as US dollars come home to roost causing further rate rises in a self-perpetuating spiral.

 

reversing interest rates isn't as simple as selecting reverse gear in your car. the margin for error is razor thin after years of outsourcing, tiny real incomes increases, large debts taken on at low rates & lots of domestic equity withdrawal. one destination for equity withdrawal is second homes in Thai, Spanish, Florida etc. resorts. with FED Funds rates up from 1% to 2.75% in 12 months i'd say the next period will be a very different game from the last four years. when it comes the next recession will be a humdinger. (did anyone mention the derivatives time bomb yet)?