Chart, new condo registrations, per quarter : oversupply

The buzz around town is “condos oversupply“.

People who live in Bangkok can witness a construction frenzy in some areas.

I’ve expressed before my views about it.

But let’s have a look on a good old chart about this famous supply.

(Source Bank Of Thailand, table EC_EI_009)

“Condominium registration nationwide (in number of units)”, per quarter.

Official definition :

“this is the requests for condominium registration by the developers when the construction of condominium and facilities is 100% complete (without room decoration/furnishing). In the event of change in the owner of the condominium building prior to sale of condominium units, cancellation of the existing registration is required before the new registration can be issued.”

Spot on : this is supply indeed. When a developper finishes his project, he goes for registration. So those figures are not sales.

condoregiq

We can see clearly see 3 phases… First one, after the 97 crisis. Then from 2003 to 2006, growth. Since then, super growth.

In exactly 2 years (Q2 2006 to Q2 2008), 34 445 new units were registered in Bangkok (57 298 total nationwide).

But registrations are in a way a view on the past. The problem with real estate is lag effect… To build a condo tower takes time… Seeing the euphoria since 2006, the developpers have launched a lot of new projects.

A taxi ride in the city can prove it.

Therefore, in the coming quarters… the supply will continue to increase. Relentlessly. Right when a recession is about to hit… Right when the demand is falling (people are afraid, banks are afraid, economic growth is going south, welcome to the age of frugality.).

Perfect cisor effect.

And let’s not forget that those figures are for condos only. To get the total supply in real estate, we have to add housing (houses + town houses, a much, much larger market) ! πŸ˜‰

8 Responses to “Chart, new condo registrations, per quarter : oversupply”


  1. 1 paperback 16 November 2008 at 1:38 am

    Looks good to me. So we should see a considerable drop in real estate prices soon. Ok, only good for buyers though.

  2. 2 Bob 16 November 2008 at 1:43 am

    Any kind of oversupply will surely upset the Thai/Bangkok property market. I do agree we are heading into situation of oversupply in Bangkok, but not so much because developers are building to much, but simply because nobody are buying at the moment.
    TC, to get a better historical perspective, you should public the graph all the way back to 1996/97.
    In March 1996 a total of 19,573 units were registered, so 5,000 a quarter in 2007/08 is really not that much.
    Bob

  3. 3 James 16 November 2008 at 3:27 am

    And soon the Asian domino will fall. I wonder if the G20 reps are discussing this emerging crisis, I have a feeling it will be much more severe than those in the West… Think about the degree of speculation in the Asian property markets in terms of price and earnings of buyers.

  4. 4 ThaiCrisis 16 November 2008 at 8:09 am

    ->Bob, you do have -partially- a point with the pre 97 period.

    Put it this way (19 573 units in a month, against 5 000 a quarter now) it helps to put things into perspective.

    But :
    -watch out with the long time scales… They can be deceptive.

    -condos are not like tulip bulbs or stocks of internet companies : they stay. Even if you want them anymore : they stay. πŸ˜‰

    -condos built in 1996 are still there today, and therefore are a component of today’s supply…

    -that leads to the accumulation effect. Any unit added today could have a much bigger effect (related to oversupply) than an unit added in 1996.

    -or to rephrase : the base effect : before 97 they were starting from low levels, hence huge % of growth. More than 10 years later I think it’s meaningless to compare those % of growth.

    -last point : the “same same but different” effect. πŸ˜‰ A condo in 1995 is certainly not the same than a condo in 2008.

    The condo market is “multiple”. Today we have clearly an oversupply in the high end segment for instance. And even the medium range (3 millions THB).

    -i was not in bangkok in the pre 97 period. What were the prices of condos at that time ? What was the bulk of the market from a segment point of view (cheap buildings to house large number of workers coming from upcountry ? Towers for rich farangs and thais ?) Unfortunatly I can’t find datas.

    To summarize :
    -supply is relative. Oversupply too. πŸ˜‰
    -you’re right in absolute numbers. But not totally right and probably even wrong when we take in account the relativity of this very special market that is real estate.

  5. 5 ray 16 November 2008 at 11:23 am

    i know there is oversupply but when you talk to developers the prices are still very expensive ( for condos). during tough times its good to invest in real estate ( conventional wosdom). this time though i dont think so. with the local political scene and the crimbling markets around us what do you guys think of gold as medium term investment? ( 2-4 years)

  6. 6 ThaiCrisis 16 November 2008 at 11:43 am

    -> Ray.
    I think you are going too fast.

    Real estate cycles are long, very long. We are just at the begining. The imbalances of the market (and the whole economy) start to be seen now.
    So how can you expect a fall of prices right now ? It will takes time. But it’s impossible to forecast the amplitude.

    A real estate crisis, an economic crisis need time to be properly savoured.
    πŸ˜‰

    Because, let’s not forget that a crisis is always a… future opportunity.

    As for the gold, i’m neutral. I don’t have an opinion very clear. For one very simple reason : the crisis is totally unseen in scale. So i’m always a little bit afraid to apply text and history books, eventhough they can be helpful and people often forget precious history’s lessons.

    Okay, on one hand the principles and engines of the crisis are always the same through history (basic human behavior : euphoria, greed, despair.)…

    But folks what we start to experience is totally unprecedented (at world level).

    So, maybe we should back off from all our certainties.

  7. 7 Bob 16 November 2008 at 1:37 pm

    Ray,
    Real-estate prices don’t drop like stocks, so it will be a slow and painful decline over then next 2-3 years. No need to rush in, just watch, keep cash on the side and wait until some desperate owner is giving up hope. I think 50-60,000 baht/m2 will eventually be the going rate for the new projects that developers have been promoting for 80-120,000 baht/m2.
    Just my 2 cent,

  8. 8 John 9 December 2008 at 10:59 pm

    Pork Cycle

    In economics, the term pork cycle, hog cycle, or cattle cycle describes the phenomenon of cyclical fluctuations of supply and prices in livestock markets.

    This phenomenon is also known for real estate markets.

    As research of the IMF shows historical fluctuations of real estate prices are just as big as fluctuations of stock prices.
    A drop in real estate prices can come very sudden (and fast indeed).


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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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