Latest news from the boiler room : “Thai real estate insulated from crisis”

Here we go again !

We are “insulated” ! It’s the magic word, and actually the last one the boiler room is able to pronounce when the shit starts to hit the fan.

It’s absolutly not a thai exclusivity. They did it all over the world, over and over and for all kind of issues. 20 years ago, France ridiculed itself by saying that the radioactive cloud coming from the russian nuclear reactor Chernobyl would stop at french borders. Insulated. Insulated.

More recently, Europe was supposed to be “insulated” from the US crisis. Thailand is supposed to be “insulated” from the financial crisis. The US were supposed to be “insulated” from the real estate meltown…

Thailand’s property market is well insulated from the global financial crisis as it is far less dependent on debt than most property markets, said real estate firm CB Richard Ellis Thailand.

Chairman David Simister, as a longstanding player in Thai real estate and resort property, said Thai politics had been troubled for over three years so real estate investors have been cautious.

Purchases have been made for use or investment rather than short-term speculation, he said. Also, outside Phuket and Koh Samui, the bedrock of commercial success has been sales to Thai nationals.

“In my opinion, Thai market caution has resulted in the following: muted demand; a low level of speculation, despite rising prices; low borrowings to value; and possibly as low as 50% debt to current valuations, with buyers acting well within their financial capacity,” he said.

Unlike in most western markets, Thai property is not propelled by the availability of debt finance. Nor are maximum mortgages the norm. Thai banks also have a strict approval policy, he said. (Bangkok Post)

That’s true. But it’s only one side of the issue.

Simister forgets of course that a market is linked to a demand. How convenient !

Yes we didn’t have in Thailand the excesses that the US have experienced (exotic mortages, insane leverages etc.)… But again, what about the demand ?

When the economy stops, when credit dries up all over the world… the party is over. You can have a very good balance sheet, nobody will come anymore to buy your condos, your “prime office spaces”, your beach villas, your “boutique resorts”, your 5 stars hotels etc… at XX millions.

Less demand = market down = prices down = less construction = crisis for any business models based on growth.

It’s a basic rule, always true, there is no way that Thaiwonderland can escape from it, even though we all agree such rule is deeply annoying. 😉

2 Responses to “Latest news from the boiler room : “Thai real estate insulated from crisis””

  1. 1 Bedwyr 16 October 2008 at 3:13 pm

    It seems to me that someone like Simister will have several motivations for a ridiculous statement like this. Some of them are:

    1. Wishful thinking
    2. Talking up the market
    3. Saying what he believes the Thai government will like (ingratiating himself)
    4. Advertising his company
    5. Associating his company with academic analysis
    6. Associating his company with good news.

    Probably all these (and perhaps some others) are at work. if he is wrong he can always say the impact was due to ‘unforseen’ factors. So where can he lose?

    When in Rome do as the Romans do. When in Thailand, talk a good game.


  2. 2 chinesethai 17 October 2008 at 2:47 am

    You know what, considering Thais average income, I still don’t have any idea who the hell could or why I should afford to buy those expensive condos and luxury real estates that have sprung up all over Bangkok in the last 5 years. Thailand is not as populous as China. Unlike the Chinese, the Thais can own a piece of land. So why do we need to pay millions of Baht just for the air 70-90 meters above ground and share that tiny title deed with the other hundred families?

    It is not surprise why CBR and other real estate agents always come out optimistic in the media like that.

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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