THAILAND HOUSING SITUATION DECEMBER 2008

8BUSINESS SECTORS ASSESS PROSPECTS
Political stability crucial for property market source: Bkk Post

Political stability is key for the country to reinvigorate the overall economy and regain local and foreign confidence to attract investment, say executives in the property industry. Phanom Kanjanathiemthao, managing director of the property agency Knight Frank Chartered (Thailand), said political stability would likely be a lingering issue no matter whether the People Power Party (PPP).

''It's up to PPP ''. Problems may escalate, he said, if PPP forms the government and tries to keep some of its more contentious campaign pledges, including amnesty for banned Thai Rak Thai executives, Thaksin Shinawatra's return to Thailand and amendments to the Constitution. So far in 2008 the PP Party realize they need to stimulate foreign investment and plan to abolish the proposed foreign Business Act amendments preventing foreigners from certain avenues. Bank Bank is now also lending in 200b Jan.

Executives want to see if all sides will accept the new government no matter which party leads the coalition. The political situation should be clearer within three months, and if it improves, sentiment should improve by the end of 2008. During the past two years, property demand from foreigners has dropped by 50% in Pattaya and 30-40% in Phuket and Hua Hin. Meanwhile, the Samui property market was very quiet due in part to a land-title scandal. The International Herald Tribune led yesterday's editions with a report on the outcome of the Thai election.

''Foreign buyers and investors in property sector are ready to invest in Thailand as the country's fundamental factors are still attractive,'' Mr Phanom said. ''But now they are sitting on the fence to see the Thai political situation.'' After political stability, foreign investors are most concerned about the Foreign Business Act (FBA) and capital controls. The new government should clear up these issues, he said, as many investors say that both PPP and the Democrats have economic policies that are more friendly to foreign investors than the economic nationalism of the military-appointed government.

''To reduce and prevent any violence, the country's leader for this time should be a negotiator. He should not be talkative or make destructive comments,'' said Mr Phanom. Teerachon Manomaiphibul, the deputy managing director of Property Perfect Plc, said PPP should be able to set up a new government due to its strong showing, while a coalition of many small parties would be too risky. The stability of PPP-led government will depend on its focus, he said. If PPP focuses on economic policy, the political situation will be stable. But stability will be threatened if PPP's focus is on political issues. ''Political stability is the major factor. If it is stable, foreigners are ready to come back for investment,'' said Mr Teerachon. Government spending on megaprojects and infrastructure will be the key factor to revive growth in the property sector as they generate higher employment, investor confidence and economic expansion, he added.

WHAT HAS BEEN HAPPENING IN THE WEST :

Thailand has laid excellent ground rules down to help their people whereas the Western countries have reached the point of no return. In the West good economies in the past has spurred low mortgage rates & sent the property prices escalating to the point where they are far over the safety factor of 3:1 median for salaries to payments ratio. This has meant today first home buyers are forced to borrow 100% or 45 year mortgages which in effect offers them another landlord or bank to pay money into for the rest of their lives thinking they own the house they are buying but in fact is not a reality. It will never assist them to reach their goal of actually owning a house as their children will inherit their debt. But how can it? Heres what one must do: when you borrow $100,000 this is what you pay back immaterial of interest rates; inflation,money fluctuations etc = $250,000. Rule of thumb, bouble the borrowing then halve it again and thats what you pay the Bank or finance companies back. In Australia, NZ, UK, USA etc most houses start at $250,000 for just an average 2 bedroom home. So this you have to pay back $625,000 & remember although 60% of borrowers have floating mortages 40% per year must remortgage on fixed rates. This is the norm in Western countries. If you think you can pay it back in your lifetime don't kid yourself as bet your life you will have changes you never even realized or considered..

A Thai ruling 2 years ago when a motorcycle gang speculated in Samui saw the Thai Government change the rules for foreigners owning property. Foreigners have forever speculated in countries like Thailand for self gain only, so the Thai governent put a stop to this by making companies have a business but not use a company to own a house in ones name solely. Many foreigners used the loophoole they thought was secure. This has always been the norm and our company for one always explained this to home buyers who came via us. ( We were one of the first on the Internet). A lolly scramble ensured which mean't foreigners had to lease their houses and put the house under a Thai name for 30+ years. Gone then was having a company as a holding front to hold their homes. In countries like Thailand this is the best option to ensure against foreign speculators and we applaud the move. Why, because it allows the Thai people some respite from climbing prices eg. building costs, labour costs etc and allows Thais to be able to purchase houses and property at a realistic sum.

Look in every Western country and see what you now pay for houses and then ask yourself what is the wood content of building this house & how does one justify $50-$70 an hour for a builder to hammer in nails or look at your utilities, user pays systems, expensive foods, restaurants, hotels, whatever then look at Thailand and see the reverse. Warren Buffet the billionaire sold a house for $US13m but the house was worth $3m which put the land price he said for 1 acre where the house was @ $US60m. Then he said is this land worth $60m ----of course not but this is how nutty the west has got. Ask yourself what your land is worth or supposedly worth if you bought 15 years ago then say to yourself is it really worth that much in reality --- of course not. Now see what is happening to the boom in the west --it is dissolving but all the other prices remain the same until the crash starts. Utilities remain and keep rising as do property maintenance like plumbers and building materials & labour etc so all costs keep on increasing as man wants more.

Democracy is slowly losing to the advent of fresh new rules in the west allowing for a more authoritative Police state in many countries ie. NZ as politicians wish to leave a legacy by passing another law. The rights of citizens are slowly being taken away whereas in Thailand this is not the case. The Thailand Government look after their people thanks to having the longest reigning King in the world by their side who looks after the wellbeing of his people. Thailand is relatively stable. It has allowed the Thai people to enjoy a relatively good life without speculators from the west trying to change them and again we applaud this. Just think about it. What would happen if Thailand followed places like the UK, USA & Australia and NZ --- Thais would never ever afford to buy a house in their own country. Protection is essential to sustain a democracy as in Thailands case and it is working.

WHY CHOOSE THAILAND :

Thailand is relatively safe and has all the amenities that a pensioner or foreigner could want. It has many hospitals and clinics within easy reach and maid service to look after you. For instance Chiangmai has 22 hospitals and over 400 clinics, the most advanced Dental hospital and Bangkok has the worlds top Hospital Bumrungrad so what more does one need. It has excellent food fresh as can be, a beautiful climate year round that changes little and the transport services will not break your bank account and are excellent, whatever one wishes to travel on. Just think about it you can hire or buy a vehicle and a small house will cost only 1m baht above -- now is this a lot of money. Remember the Chinese saying "have only what you need and leave the rest at home". I bet know you say that big house back home did we really need it? You will find many foreigners who buy and build big in Thailand actually regret it 5 years down the track and wish they bought a modest house.

Thailand has lovely people, no attitudes and a well organised cultural system that we can only envy. The Thais look after their people which is a far cry from many westerners who put their old folk in homes to spend their last days so they can make more money and be oblivious as to what their mums and Dads struggled to raise them to teenages. Well the Thai like the NZ Maoris do not do this. The choice is yours but even with websites you visit, remember this, we have been around on the web now for 10 years and we also own excellent real websites: www.bangkokrealty.biz & www.chiangmairealty.com are part owned by Kiwis and Thais & we work great as a team.

HOUSES AND BORROWING:

Thailand, housing loans make slightly above 50% of total household debt. Thailand after suffering from political crises, have not yet recouped the confidence of investors. This resulted in a drop of 5.09% in 2007 in Thailand’s house prices, down from an 8.03% increase in 2006. Housing in Thailand is a buyers market if you have the cash. The only problem is foreigners can only really buy into condos but these are bargains in the right places and locations. Thailand has gone the opposite way from NZ where salaries are not up with the rise of housing prices making it not even worth considering to buy unless you have cash. Although foreigners are unable to borrow in Thailand (can if they own a factory ) if they have cash it’s a good market. Don’t look at the Thailand situation as a rental investment as the rental incomes are not great and there are certain requirement like squatters rights so one may not get the rents if the renter refuses to pay and has nowhere else to go. But as a long term capital investment one should be able to recoup a small profit by adding features like a swimming pool which is always in demand here or a waterfall, landscaping etc. In this respect Thailand is still on a building boom.

We say the best buys for foreigners who wish outright ownership is the condo. You can close the door and go on holiday whenever you want knowing the condo is safe but on the other hand make sure your condo has good security grill door. Theres many condos out there especially in Bangkok and Pattaya, Phuket & lesser in Chiangmai so one can choose what they want. However be careful and follow our Property guide to buying found on both of our websites: www.chiangmairealty.com or www.bangkokrealty.biz which will guyide you to buying here in Thailand. Feel free to ask us questions if youre not sure and if you want to bring your personal belongings to Thailand we also own a Shipping and Freight Clearance Business here in Thailand.

INCENTIVES BY THE THAI GOVERNMENT

The Thai Government has also created incentives to the commercial banks to provide more home loans. The vast network of the commercial banks permit unrestrictive access to borrowers nationwide. The Government allows market forces to determine the mortgage-loan conditions. There are no arbitrary interest rate directives (ostensibly to help low-income borrowers, but usually yielding opposite results). The housing finance system is an integral part of the whole financial system. There are no special channels or conduits that force resources into housing finance. Should the financial system become unfavourable to home mortgage lending, the Government Housing Bank will absorb any spill-over demand. Surging oil prices and higher interest rates are to blame for the slowdown. Rising inflation would hit Thai households, the majority of which keep large amounts of their savings in cash rather than investing it.  

THAILANDS BEST INVESTMENTS FOR FOREIGNERS:

1/. Undoubtedly if you have over and above put into Gold & Condos. Do not keep money in the Bank here as the rates are next to nothing 2%?? and only bring what you need when you need.

2/. Condos are the best choice not for rental purposes but perhaps long term these will be OK. With the political situation somewhat still unstable these can be held by foreigners and your safest bet as long as the complex owners are OK and do the required maintenance & theres a Jurassic Management Committee in place as the maintenance in some condos is terrible. Also watch to make sure you are not buying over the 49% limit of condo ownership.

3/.Unless your marriage is stable and you have Thai kids then a house is OK but see a lawyer to make sure you cover yourself and children in the event something may happen to your Thai wife or Thai husband. We emphasis this as the will system here works on an heirarchy system so if your young Thai wife should pass away suddenly you may find the grandmother will now own the house and land not the children. So use a lawyer to make sure the foreign partner has power and remember a freigner can own outright the house? If you are single this is not an option but again draw up contract with lawyer first before you buy anything here.

4/. Stocks and shares -- be careful and never trust a finance company that has no bank backing?? so better to bring just what you need to Thailand and invest the rest back home as safer and better interest rates on your money. Finance companies are going bust in the west due to shodder Govt controls & willy nilly investing by the finance companies themselves so property assets is Ok if you have the cash. Internet banking is getting better by the day as well to assist your transactions but watch out for the sharks you meet in Thailand who know all the ways to spend your money.

THAILANDS HOTSPOTS FOR FOREIGNERS

1/. The islands like Samui are still the best places for foreigners although the costs are expensive in Thailand terms. Up to and over the 85,000baht per sq for condos

2/. Then comes Phuket and the bar scene of Pattaya for the single guys and gay scene. Many condos to choose from and good prices

3/. Hua Hin is the next favourite and prices are the same as Phuket and higher than Pattaya.

4/. Yes 4th place is Chiangmai. Most who come and buy here are retirees who like a cooler and not so fast city which Chiangmai is.

CONDOS BANGKOK, PHUKET AND PATTAYA; around 65000-85,000baht per sq metre.

CHINAGMAI ALTHOUGH AROUND 65,000BAHT you can get from 35,000-45,000baht but theres not a lot one can choose from in Chiangmai

WHY USE OUR SERVICES: 

• We work for you (Both Thai & foreign consultants ) & have excellent accountants in NZ
• No hidden charges-everything is up front.
• Guaranteed conveyancy help &  Company, work permit & land  setup for foreigners
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• Because you have the benefit of foreign help with our Thai lawyers and expat consultants
• We offer: Full house onsite appraisals. Cost is 3000 baht for a house under 2 years old & 6000 baht for older houses ( plus travel if out of town ). This 5-6 page report is a must if you want to know what your house is really like which includes pics of repair work needed and we even do a air con survey (extra).
• Need help in Investments if going to NZ to live: See SPICER & ASSOCIATES in Levin. NZ. Mrs Natalie Martin: for all investment information. She helps Asia Trading Post as well and advised against Bridgecorp to investors. Just write to: natalie@sal.net.nz

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[ Thailand Property Update 2008 ] [ Thailand Property Situation Dec 2007 ] [ Thailand Property Vs the West ] [ Read Thailand Property Hedge funds ] [ Thailand Property Investing ] [ Kiwis warned of Property Investing ] [ Bangkok Bank lends to foreigners ]

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