Invasion of the Real Estate Agents

[Mekong]

Gaddy,

 

When you started this topic last Sunday I took a quick peek from my west balcony and could see six new high rise condo blocks going up in a 120 degree field of vision. On the waterfront at Rama III there are 2 towers going up very close to where the 3 empty shells have stood since 97, on Naratiwat midway between Sathorn and Rama III is a Tower (which blocks my view of K-Bank Building), there are the twin towers which appear close to Silom / Naratiwat corner and a tower on Sathorn next to the Monster office block going up on Sathorn opposite the end of Soi Convent.

 

Recently completed includes "The Lofts" on Yenakart and also in the same area a few 6-7 Storey 12-14 unit condos in the sub soi's of my neighborhood. From my, some may say selfish, point of view this has driven the prices of existing condos up in the same area as far as bank valuations are concerned (to actualy sell is another matter) and the local TOPS Supermarket which was a bit of a dive with limited selection has beem totaly refurbished and is on par with the Gourmet Supermarket at Siam Paragon on certain lines.

 

As far as developers financing these new developments, from what I have learned it is not only the relationship between the Banks and the developers but also (as we would say back in the UK) the "Olde School Tie" or should that be Thai. Younger family members of the developers, the thirty something hi-so's who always have money but never seem to work, I am sure you recognise the type, arranging social gathering of fellow university alumni and half way through dinner offer the opportunity to invest in a development, 3 or 4 people can finance one unit in a development whilst it is still on the drawing board and once the development is completed and the the units are sold as new take their share of the profits, this is probably one of the reasons developments are advertised as "Sold Out" and then upon completion some become available.

 

Over the past 5 years through my wifes contacts we have done quite well out of this, from an initial 'Gamble" of 1 Millo back in 2003 and reinvesting into other developments we are now sitting on 6 millo from our returns from "The Lofts" but with todays current climate and my own gut feelings about the Thai property market it will be sat earning 2.5% for the foreseeable future rather than being reinvested / wasted in an oversubscribed market where the bubble is due to burst.

 

This is just my experiences and current gut feeling, not for one minute do I proclaim to be a property magnet or a financial guru. As I have often said, Thailand is like a casino only play with what you can afford to loose.

 

[Gadfly]

Younger family members of the developers, the thirty something hi-so's who always have money but never seem to work, I am sure you recognise the type, arranging social gathering of fellow university alumni and half way through dinner offer the opportunity to invest in a development, 3 or 4 people can finance one unit in a development whilst it is still on the drawing board

 

This helps explains who purchases the individual units, and I want to highlight something about the phenemoa you described: the speculators are Thais, specifically young hi-so's who are speculating on individual units.

 

In my experience, when foreigners buy condos in Thailand, they are more likely to do so for purposes of buying a place to live. (Or maybe a second place to meet BGs Because it so difficult for foreigners to get mortgages to buy condos or anything else in Thailand, if they do speculate, they do so with their own money, which is going to act as serious check on speculation.

 

Foreigners are only permitted to own up to 49% of the space in a condominium building. When asked to explain this restriction, the authorities often say it is to prevent speculation by foreigners that would drive up prices and make property unaffordable to Thais. Makes no sense.

 

Buying off the drawing board and then flipping the property to a second buyer is common. It is also very dangerous. You are basically buying some space in the air that may or may not be occupied by a condo one day.

 

In 1995, a few years before 1997 financial meltdown and about a year after I arrived here, the Thai property market went bust. The newly arrived middle class, who didn't have the connections to get inside information about the pending bust, lost their shirts on projects (housing and condos) that were never finished. There was tremendous anger and talk of reform. In practice, little has changed.

 

I also don't make any predictions, but I do get a bit quesy when I look down from the balcony of my condo at all of the new projects going up.