Keeping an Eye on the Condo Market!

By Clayton Wade

Managing Director

Premier Homes Real Estate Co., Ltd.

clayton@premierinternational.com

Yes, I wrote 'What's Up with the Condo Market' in March of 2012 and as stated that not many in the real estate industry want truth and/or consumer awareness. It's just not welcome here in Pattaya! Pointing out the pitfalls in our industry is perceived as a threat to advertising sales in the minds of most publishers, and even brokers and developers avoid it like the plague.

Admittedly, one must have pure intentions and not be merely seeking attention and/or grand standing when discussing the financial hazards in real estate from time to time. That is precisely why I am writing this particular column now not even a year since I wrote 'What's Up with the Condo Market'.

I have always been and continue to be very bullish about real estate in Pattaya and throughout the Eastern Seaboard. I am sure I will continue to be so for many years, but I feel it is my journalistic duty to draw attention to market indicators.

Having said that, and after a good year and a half of upbeat and positive columns about our local real estate industry, I am starting to see some, let's say, interesting warning signs or at least cautionary signals in the market.

On the one hand, we are seeing an unprecedented amount of condominium construction going on all over Pattaya and the Eastern Seaboard, and it appears as if there is no end in sight, but I am starting to wonder about a few things not only locally but throughout the Asia Pacific region.

As far away as Vancouver, British Columbia, the headlines read Hong Kong Reins in Property Bubble. The article goes on to say that Non-local buyers will be hit with 15-per-cent levy to cool down the market

Now that's a government stepping in to avoid a property crash as Hong Kong is obviously going to great lengths to save the local property market from a sudden and devastating devaluation.

A survey conducted after the new 15 percent levy against foreign purchasers was made public showed 62 percent of the 229 mainland Chinese asked, said they will delay buying property in Hong Kong for the next six months, while three percent said they won't buy in the city any more, which shows just how drastic this levy is against foreign purchasers.

Now that's Hong Kong, but how about a little closer to home…like Phuket?

Results of a Phuket Gazette real estate poll last July indicate that most people foresee a downward trend in real estate prices on the island over the next five years due to oversupply.

A total of 1,868 readers were asked:

Tanan Tanpaiboon, former head of the Phuket Real Estate Association, recently warned that over-development in the Phuket real estate sector risks creating a bubble that could see real estate prices fall due to oversupply. What do you think will be the overall trend in real estate prices on Phuket over the next five years?

Overall, nearly two-thirds of those taking part (62.5 percent) thought that real estate prices would fall. Of these, most thought the fall would be large (32.7 percent), slightly more than those who predicted a moderate decrease (29.8 percent). In contrast, just under a third of voters (29.4 percent) thought prices would rise. Of these, 23.8 percent predicted only a moderate rise, while just 5.6 percent thought the rise would be large. The remainder of those taking part, 8.1 percent, predicted real estate prices would hold steady.

In a demographic breakdown, Thais were the most pessimistic, with 71 percent thinking prices would fall. Of these, more thought the drop would be large (40 percent) than moderate (32 percent).

The trend in voting among those identifying themselves as "foreign local residents" or "tourists or visitors" was almost identical, with more than 60 percent in each group predicting a fall in asset prices. Now that's 60 percent of the foreigners' polled and 71 percent of the Thais polled all seeing Phuket real estate prices falling in the near future.

So where does that leave Pattaya and the Eastern Seaboard as concerns the future of this incredible condominium boom we have been experiencing?

Is Pattaya facing a pricing bubble?

Well, the notion of a bubble has been around since as far back as 2005.

Yes, for more than seven years local industry leaders have been wondering if local real estate is experiencing a pricing bubble and there has been talk that the condo market in Bangkok is reaching bubble proportions as well.

According to market analysis and its long established conventions, real estate markets in general are assumed to be rational and to follow certain market formulas.

In a completely normal real estate market, property bubbles which, by definition, are not normal or rational price inflation incidences, should not exist.

It is true that in normal situations, real estate prices can most often be assumed to reflect the actual value of properties.

However, markets do not always respond as we think they should and pricing bubbles, which are created when varied perceptions by consumers drive prices of a commodity far out of their real value range.

So, do Bangkok, Pattaya and the Eastern Seaboard face an impending real estate bubble?

Well, we would all love to have a crystal ball, but that's not going to happen. We are left with our own take on what is ahead in real estate.

We have had a tremendous run on the construction and sales of condominiums, but top developers are still selling very well. In Bangkok, the Sansiri Public Co., Ltd., has just announced the construction and development of a new luxury condominium that is slated to have apartment units selling at over 400,000 baht per square meter!

With more than 200 construction projects currently planned for the Eastern Seaboard and Pattaya– and most all selling well, it does make a person ask, "Are our local condominium prices appropriate enough to avoid a pricing bubble?"

Many say prices are still very attractive and not over inflated, and with our new emerging markets (Russia, India, China, Arab nations, etc.), the area just might be able to maintain a healthy supply of properties and avoid an oversupply.

Yes, so far so good is about all one can say about our real estate sector at this time, and the designs, layouts and quality of the area's condominium developments just keep getting better and better!

Our very special thanks to Clayton Wade, managing director of Pattaya's Premier Homes Real Estate Co., Ltd., for preparing this Pattaya Today report.

Clayton Wade has been running the Premier Homes Real Estate Co., Ltd. with his wife, Khun Supap for more than 16 years.

Clayton Wade has been in the real estate industry going on 25 years. Having started his real estate career in the United States, he was licensed and practiced both real estate sales and property management in Seattle.

He was personally responsible for bringing in the first 53 General Motors executives for the start up phase of Thailand's General Motors manufacturing facility and had a three- year exclusive with the company. Following that experience he placed most all of the start up executives for the Eastern Seaboard's BMW manufacturing facility.

Clayton Wade is a council member with the Gerson Lehrman Group, the New York based international research and consulting firm, and has been a national panel judge with the Thailand Property Awards for many years.

Clayton Wade is known throughout the Asia-Pacific region for his writing, public speaking and television presentations. His many accomplishments in promoting Thailand's Eastern Seaboard real estate industry include having been a guest speaker with several of Thailand's top political and business figures on CNBC's Managing Asia program.

Premier Homes is Pattaya's leader in exclusive property sales and rentals, which may be seen by visiting their website at: www.premierinternational.com.

Clayton Wade may be contacted by telephone at +(66) (81) 634-2915 or by email at: clayton@premierinternational.com.