Realestate bubble
- armchairlawyer
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Re: Realestate bubble
I know that land prices in PP have increased in recent years, but have condo prices gone up? I would argue that land and condo markets are two different things for the following reasons.
The law enabling foreign ownership of condos was passed in 2009 and only applied to units built after the law was passed, so initially there was a shortage of supply. Prices therefore were very high compared to an equivalent unit that was not covered by the new law, and high compared to equivalent units in Bangkok (which has a more longstanding foreign ownership of condos law).
Developers in PP saw that they could make big profits by constructing the condos. As the market is allowed to function with a minimum of state interference in PP, there was a surge in supply. Demand fell as buyers could see that prices are starting to slip. It only takes a minor fall in prices to deter a rational buyer as he can see that he will be able to buy at a cheaper price next year. The law on foreign ownership of non-condos was tightened up in 2016(?) to try to stimulate foreigner demand for condos but the effect has been limited. Basically, a buyer of a condo is paying an enormous premium over the price of a non-condo unit in order to get the benefit of the 2009 ownership law. This would help explain why Khmers do not like to buy condos.
For a while developers were offering rental yield guarantees to attract buyers but they have had to give up on that as the real rental yields are so low (taking voids into account). As sellers are reluctant to sell at a loss, this has led to a lot of empty condos and declining rental levels.
Eventually, supply and demand will balance out. Developers have stopped new building, population growth and wealth will stimulate demand generally and when the condo premium disappears, Khmers will start buying. This adjustment could take a long time. Meanwhile it's a great time to be renting.
The law enabling foreign ownership of condos was passed in 2009 and only applied to units built after the law was passed, so initially there was a shortage of supply. Prices therefore were very high compared to an equivalent unit that was not covered by the new law, and high compared to equivalent units in Bangkok (which has a more longstanding foreign ownership of condos law).
Developers in PP saw that they could make big profits by constructing the condos. As the market is allowed to function with a minimum of state interference in PP, there was a surge in supply. Demand fell as buyers could see that prices are starting to slip. It only takes a minor fall in prices to deter a rational buyer as he can see that he will be able to buy at a cheaper price next year. The law on foreign ownership of non-condos was tightened up in 2016(?) to try to stimulate foreigner demand for condos but the effect has been limited. Basically, a buyer of a condo is paying an enormous premium over the price of a non-condo unit in order to get the benefit of the 2009 ownership law. This would help explain why Khmers do not like to buy condos.
For a while developers were offering rental yield guarantees to attract buyers but they have had to give up on that as the real rental yields are so low (taking voids into account). As sellers are reluctant to sell at a loss, this has led to a lot of empty condos and declining rental levels.
Eventually, supply and demand will balance out. Developers have stopped new building, population growth and wealth will stimulate demand generally and when the condo premium disappears, Khmers will start buying. This adjustment could take a long time. Meanwhile it's a great time to be renting.
- armchairlawyer
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Re: Realestate bubble
Yes, macrovoices.com had a podcast on this on Jan 11. The speaker (Josh Steiner) looked at the housing markets in Canada, Australia and the USA. He concluded two of them were due for a big fall and the other one was sound. You can guess which. Something called "negative gearing" was a big factor in Oz.
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Re: Realestate bubble
For Australian Housing, probably not much of a drop in AUD terms, but the AUD and possibly bank stocks will get hit.armchairlawyer wrote: ↑Sun May 13, 2018 1:21 pmYes, macrovoices.com had a podcast on this on Jan 11. The speaker (Josh Steiner) looked at the housing markets in Canada, Australia and the USA. He concluded two of them were due for a big fall and the other one was sound. You can guess which. Something called "negative gearing" was a big factor in Oz.
Speaking of MV, Townsend has been sooo wrong on the oil price this year.
I do enjoy their weekly interviews though. Dollar bear up next week which is a contrarian view atm.
- armchairlawyer
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Re: Realestate bubble
I just read in the Bangkok Post that condo owners in Hua Hin have been fined 30,000 baht for doing short-term lets of their units. It's fascinating how the markets work, condo owners seek to diversify into short-term lets and that upsets the hotel industry etc.
- armchairlawyer
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Re: Realestate bubble
Possibly, or it could go the other direction. The RBA raises rates, the property market goes down but the AUD goes up. David Bloom (currency analyst at HSBC) was saying this around year end. Either way, as a property owner in Oz you are probably nicely hedged, if the property market goes down, the AUD goes up - and vice versa.offroadscholar wrote: ↑Sun May 13, 2018 1:31 pm
For Australian Housing, probably not much of a drop in AUD terms, but the AUD and possibly bank stocks will get hit.
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Re: Realestate bubble
Another factor is a lot of interest only loans converting to interest+principle payments.armchairlawyer wrote: ↑Sun May 13, 2018 1:45 pmPossibly, or it could go the other direction. The RBA raises rates, the property market goes down but the AUD goes up. David Bloom (currency analyst at HSBC) was saying this around year end. Either way, as a property owner in Oz you are probably nicely hedged, if the property market goes down, the AUD goes up - and vice versa.offroadscholar wrote: ↑Sun May 13, 2018 1:31 pm
For Australian Housing, probably not much of a drop in AUD terms, but the AUD and possibly bank stocks will get hit.
- that genius
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Re: Realestate bubble
armchairlawyer, you seem to understand the mechanics at work in the property game.
Why do you think Cambodia is so expensive compared to Thailand...I mean rentals and land/ m2?
The infrastructure/demand certainly don't warrant the high prices, right?
It seems, to me, that the whole thing is built on a dream which is very much divorced from reality, yet it persists and grows.
Why do you think Cambodia is so expensive compared to Thailand...I mean rentals and land/ m2?
The infrastructure/demand certainly don't warrant the high prices, right?
It seems, to me, that the whole thing is built on a dream which is very much divorced from reality, yet it persists and grows.
Re: Realestate bubble
Thailand is quite a bit more per sq than Cambodia.
http://www.globalpropertyguide.com/Asia ... ter-prices
Thailand $3952
Cambodia $2193
The reason Cambodia is a good place for investors is because the return on investment in higher or they simply want to broaden their portfolios. They don’t care if it sits empty.
Plus the ease of doing business compared to its neighbors is much easier.
This is the reason Sihanoukville is the next boom town after PP, in fact investors are now choosing SHN over PP.
I work in this sector and I can tell you there will not be any bubble or crash for at least the next five years.
http://www.globalpropertyguide.com/Asia ... ter-prices
Thailand $3952
Cambodia $2193
The reason Cambodia is a good place for investors is because the return on investment in higher or they simply want to broaden their portfolios. They don’t care if it sits empty.
Plus the ease of doing business compared to its neighbors is much easier.
This is the reason Sihanoukville is the next boom town after PP, in fact investors are now choosing SHN over PP.
I work in this sector and I can tell you there will not be any bubble or crash for at least the next five years.
- armchairlawyer
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Re: Realestate bubble
I'm happy to discuss but I don't know much about the Thai market, or even any property market. I am more of a macro man. Are Bangkok land sale prices higher than PP? I certainly cannot see a case for that. A casual glance at both cities tells one that disposable income and business activity is much higher in Bangkok.that genius wrote: ↑Sun May 13, 2018 2:52 pm armchairlawyer, you seem to understand the mechanics at work in the property game.
Why do you think Cambodia is so expensive compared to Thailand...I mean rentals and land/ m2?
The infrastructure/demand certainly don't warrant the high prices, right?
It seems, to me, that the whole thing is built on a dream which is very much divorced from reality, yet it persists and grows.
Possible explanations - weaker AML in Cambodia leading to more foreign investment, lesser regulation leading to bigger booms and busts, domestic capital being repatriated from abroad to PP due to tightening AML in other countries, lack of alternatives for capital investment in Cambodia (eg local bonds and equities).
Also, are Bangkok rental prices lower than PP? They seem low to me in PP, excluding the condo rental market which as I have said is a special case.
The main thing that interests me is the likely impact on Cambodia when the next financial crisis hits, and the impact from China's OBOR and dedollarisation policies. Cambodia is different from other Asian countries in being so dollarised. That should mean less impact from the former and more impact from the latter.
- Duncan
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Re: Realestate bubble
armchairlawyer wrote: ↑Sun May 13, 2018 4:08 pmI'm happy to discuss but I don't know much about the Thai market, or even any property market. I am more of a macro man. Are Bangkok land sale prices higher than PP? I certainly cannot see a case for that. A casual glance at both cities tells one that disposable income and business activity is much higher in Bangkok.that genius wrote: ↑Sun May 13, 2018 2:52 pm armchairlawyer, you seem to understand the mechanics at work in the property game.
Why do you think Cambodia is so expensive compared to Thailand...I mean rentals and land/ m2?
The infrastructure/demand certainly don't warrant the high prices, right?
It seems, to me, that the whole thing is built on a dream which is very much divorced from reality, yet it persists and grows.
Possible explanations - weaker AML in Cambodia leading to more foreign investment, lesser regulation leading to bigger booms and busts, domestic capital being repatriated from abroad to PP due to tightening AML in other countries, lack of alternatives for capital investment in Cambodia (eg local bonds and equities).
Also, are Bangkok rental prices lower than PP? They seem low to me in PP, excluding the condo rental market which as I have said is a special case.
The main thing that interests me is the likely impact on Cambodia when the next financial crisis hits, and the impact from China's OBOR and dedollarisation policies. Cambodia is different from other Asian countries in being so dollarised. That should mean less impact from the former and more impact from the latter.
But for how much longer will the dollar be king. China is pushing in other countries for the Chinese currency to be the worlds reserve currency and with Cambodia having such a close relationship with China, I can see the day where Cambodia joins the club.
Cambodia,,,, Don't fall in love with her.
Like the spoilt child she is, she will not be happy till she destroys herself from within and breaks your heart.
Like the spoilt child she is, she will not be happy till she destroys herself from within and breaks your heart.
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