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Emerging Trends Advisors Co., Ltd.
306/82 Moo.10, Nongprue, Banglamung,
Chonburi 20150 Thailand

THE WORST IS YET TO COME | PATTAYA PROPERTY REPORT

If you are one of the thousands of property owners that have been patiently or possibly more realistically, frustratingly, trying to find a buyer willing to pay anywhere near the amount you originally paid for your property then you are not going to like what’s coming next – the worst is yet to come.

I think what we have in Pattaya is a freak situation right now where we are simultaneously experiencing an occupancy rate of less than 30%, and yet new developments are still attracting new buyers and selling out well before they are completed.

The Property sector in Pattaya, due to so many different nationalities visiting, settling and investing here is in a very peculiar predicament whereby there can be a condo on the market in a well managed, well-built development but it is not attracting attention with a price tag of 30,000 THB per sqm, and in the same area, thousands of units priced at 150,000 THB per sqm are being sold off plan.

The Europeans were replaced by the Russians, who almost overnight gave way to the Chinese, while the Thais have quietly gained pace and have now become a significant player.

Right now the market is straightforward; there are 3 active markets: 

THAI BUYERS

Some genuine but many parts of a corrupt scam.

CHINESE BUYERS

Foreign name, under 3,000,000 THB, ideally sea view.

OVERSEAS INVESTORS

Making investments solely for the return being offered in guaranteed returns promotions by the developers.

We see properties sit on the market for 12 months without interest at a price 20-30% lower than what ‘like for like’ units sell at every week. Today’s property market is more about convenience than logic, and it is a select few people who are undeservedly making money.

The following people are making money:

  • Thai Mortgage Market
  • Large developers
  • Developers offering a rental guarantee
  • Chinese agent
  • The Renters

The ones losing are:

  • The banks
  • The new individual Buyers
  • The previous individual buyers

But, to get a reasonable price you need:

  • To be a Chinese agent
  • Offer a Rental Guarantee

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Below is a typical scenario of what we see today:

A project that was launched in 2013 and due to complete in 2016 was finally completed in 2018 and is today selling studios in Thai quota to locals who are buying through a bank mortgage. The same project is also seeing the different name studios being snapped by Chinese investors.

An average sale price is approx 2,000,000 THB which is similar to what they were initially sold for 5-7 years ago. Unfortunately, the original buyer is the one feeling the pain, European’s and Russians make up a large part of the sellers, and the stats of their investment looks something like this:

Pay 2,000,000 THB over five years and if they are one of the lucky 30% who has a tenant they will be receiving NET returns of around 3%. That’s not the worst of it either, to sell they would be looking at taking a 25% capital loss.

It is just that the buyer will be Thai or Chinese, depending on the ownership status and the amount of money the Chinese agent or the line of people that need paying to get a mortgage passed, means that there is a considerable difference between the price a seller receives for a property compared to what the new buyer pays.

The Chinese investors have got all the power right now, and it is in their nature to take no prisoners so they are squeezing every baht they can from the situation. The bank managers are making sure they get paid even if it is ultimately at the expense of their employers.

The smart ones are the developers that are catering their projects to the Chinese and increasing the price they sell it, to factor in paying higher commissions.

The Rental Guarantee developers are a law onto their own, and because they guarantee a return, which is the main selling point and attraction for the buyer, the price of the unit securing the investment goes somewhat under the radar. This fact is, this is now becoming abused as the costs of the units are just becoming more and more expensive and are far removed from the actual value.

These circumstances, whether right or wrong are happening. I think that the current situation of continued development in a city that has less than 30% occupancy with properties being purchased in volume for prices that are 40%-100% higher than others in the same area or some cases the same development could well continue for quite some time.

As peculiar as it may be and going against the traditional trends, supply and demand is fundamentally the main factor. This governs the price of everything however in Pattaya the elements at play mean that even in an apparent state of oversupply with condominiums, new projects are still being launched, so it looks like the worst is yet to come.

Article Author: David Simpson (CEO)