Boiler Room Bulletin : “we can’t reduce our prices, because… it would hurt us”


What are the latest news from the Boiler Room ?

Well, they are quite… silent since a few weeks… like fleeing cockroaches, running away to take cover… They eventually understood that something was going on in the world, and something rather weird and of course totally unexpected : a recession.

Goddamnit ! It came so fast. Without warning. ๐Ÿ˜‰

It’s time to adjust speeches and marketing pitches I guess… But as you will see, it’s a difficult exercise.

Take Songkran Issara, managing director of Charn Issara Development, for instance.

Thailand’s political upheaval and the international financial meltdown will lower land prices and the appraisal values of built structures but they are unlikely to bring discounts on ongoing projects, said Songkran Issara, managing director of Charn Issara Development Plc.

Prices of condominiums already under construction are unlikely to drop because developers generally lock in substantial sales before starting work, he said.

Although protests and confrontations have affected the country for months, prices of good new property had remained steady until demonstrators closed Bangkok’s airports in late November. (Bangkok Post)

Again, we see the famous thai rethoric at work. Let me translate it for you : “I can’t reduce my prices because… I would loose money if I do so !”

It’s a master piece. ๐Ÿ˜‰

The bottom line is : if a developper is under the water with an on going project, and if he has no other solution (banks on his back, and customers behind), he will reduce his prices, eventhough it hurts. This is what we call a fire sale. And it happens particularily in hard times…

Anyway, we shall praise the courage of Issara : now the Boiler Room admits that the prices will go down… but for future projects only. ๐Ÿ˜‰ It’s a big step forward. Must have been painful…

Let’s remember… 2 months ago, some were adamant :

Thailandโ€™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.

Between “The Terminator” and “The Insulator” I can’t make up my mind…

Anyway. 2009 is going to be an interesting and insulating year… I can feel it. ๐Ÿ˜‰

Your insulated commentator.

4 Responses to “Boiler Room Bulletin : “we can’t reduce our prices, because… it would hurt us””

  1. 1 Fonzi 17 December 2008 at 7:37 am


    I normally agree with you most of the time, but I know something about the construction and real estate business. No, I am not part of the infamous Boiler Room, hahaha, but from a non-involved, semi-expert’s perspective, I would say that it is not unusual for a Thai developer to sell/lease his properties before starting major construction. In a way, this is a good way to do business, because the developer can estimate his construction costs, overhead and profit, and not worry that the building will lay vacant(rather, units unsold) after its built. The group that may be screwed are those investors who bought wholesale now trying to sell retail. Since there is a lag between the time the project is developed, the units sold, and the movement of the economy, some of these developers are actually doing well, because they already sold their units before the apparent collapse. Why would they lower prices when they sold their units at 2006 prices?

    If the building is sold out already, and the contracts already signed, there is no need to lower prices.

    If current buyers are defaulting on their contracts for future projects and losing their deposits because they can’t afford to buy, then there should be concern, because that means the developers can’t leverage those contracts for construction loans in the future.

    This is just my perspective. Not all projects are financed the same way. It depends on the company.

  2. 2 ThaiCrisis 17 December 2008 at 10:08 am

    I agree. This is why I wrote “if he has no choice”.

    But speaking about financing, and “sold out” condos… It’s important to remember that for newly launched projects, a unit is considered sold when someone sign and put a down payment of a few dozen thousands THB… This is why many projects can claim “sold out”, even in just one day, after the opening of the sales office…

    Many flippers come into those deals… and plan to resale (with a profit) their “condo” (a paper). Fair enough. Free market. But what happens if there is a turn around in the market, and those people can’t resale ?

  3. 3 James 17 December 2008 at 6:36 pm

    That comment by CBRE was hilarious when I first read it. Thai property market isn’t dependent on debt, please, over 50% of purchased condos are by speculators who only pay down payments and the banks finance the rest. I have a friend who makes a fraction of what these condos cost and she doesn’t plan on every paying it off, just wants to “flip” it before the contract comes due. So, just as those arms are readjusted in America, so will those loans come calling in Thailand and many other countries. Property is an ugly bet right now, gonna get uglier in the U.S..

  4. 4 ThaiCrisis 17 December 2008 at 7:15 pm

    Oh you can trust me : I will use over and over and over again this famous “insulated” statement. CBRE will eat it for a long time I believe…
    I mean for me… it deserves the Hall Of Fame… along with “our banking system is sound” and “our economy is resilient” said in july, august and september (McCain) by the clowns Paulson, Bernanke, Bush…
    Those of course deserve the Gold Medal. But I like very much the “insulated” stuff though.

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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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