Thailand's Bubble Economy Is Heading For A 1997-Style Crash

[hhfarang]

http://www.forbes.com/sites/jessecolomb ... yle-crash/

[PeteC]

Yes, it's not the first time this warning has gone up, and all associated pieces of it explained and charted. All I ever read coming from the Finance Minister is "mai pen rai", and ongoing details of his open feud with the Bank of Thailand governor who I think sees the handwriting on the wall better than the Minister does. But, the bank's view is not popular so the Minister squashes it continuously. I think he's even tried to get the Governor replaced. Pete

[Spitfire]

Well, if I was being selfish, then........whoooooohooo!

About time, maybe I can be rich again....sooner the better, hope it goes south big time. If I'm lucky then the baht will collapse and the pound will rise to former levels and I can live beyond my means again.

Party time again.......

[StevePIraq]

The building boom here is something akin to Spain and look at what has happened there, no place can keep building the way this place is. Of course this is no problem if you have paid for your place, it only really impacts if you want to sell when the bubble bursts.

My thoughts are at least the building bubble has to burst, as to the rest of the economy I think Thailand is still pretty strong and will get stronger.

Ford Australia are moving most of their production to Thailand and by 2016 it will be all gone from Australia, a few bike manufacturers are now making their big bikes in Thailand for export, Thailand is still a huge electronics exporter. Thailand just needs to keep the political conflicts in check to keep the economy ticking along.

[Korkenzieher]

IMO, one of the problems Thailand has, is that it has tried to push itself up the value chain with really very little internal reform - by which I mean questionable education standards, infrastructure, governance and the like. The net effect of that is that there is very little cost to competitive relocation of almost any industry or sector - including tourism - to the neighboring economies Laos, Vietnam, Myanmar and Cambodia as they loosen the strings. There are only so many 'false steps' Thailand can make, or will be allowed to get away with.

[PET]

The building boom here is something akin to Spain and look at what has happened there, no place can keep building the way this place is. Of course this is no problem if you have paid for your place, it only really impacts if you want to sell when the bubble bursts.

My thoughts are at least the building bubble has to burst, as to the rest of the economy I think Thailand is still pretty strong and will get stronger.

Ford Australia are moving most of their production to Thailand and by 2016 it will be all gone from Australia, a few bike manufacturers are now making their big bikes in Thailand for export, Thailand is still a huge electronics exporter. Thailand just needs to keep the political conflicts in check to keep the economy ticking along.

I do not think Thailand compares to Spain.

The purchasers in the Spain property bubble were generally foreigners, whereas here it is predominently Thais.

[StevePIraq]

Foreigners buy predominantly with cash with the exception of condos which can be purchased on terms. Thais purchase with finance which is often finance they cannot afford. The Thai govt has already expressed concern about the growing debt that Thais are living with and remember the vast majority of Thais are not wealthy or even middle class.

The property bubble is not caused by buyers it is by developers. In HH there are plenty of developments where which are not fully sold and yet they continue to developed.

This is exactly what happened in Spain more property than buyers

[PeteC]

^ Related thread from this morning: viewtopic.php?f=20&t=25187&p=323860#p323860

[Korkenzieher]

This is exactly what happened in Spain more property than buyers

My ex's family had a place in Javea since the mid 70's. Right through until about 1997 or 1998, the market there was horribly depressed. It was always cheaper to buy new-build than 'pre-owned' because the local developers could shift the price of land around at a whim. In effect, it was land which had no other use, and therefore no real value, except to build holiday homes on. Notwithstanding location, if the buyers didn't come, the easiest place to cut the price was through the notional value of the land.

1998 all that changed. Massive amounts of money from all over Europe needed to be disposed of. Francs, Guilders and Marks which had been carefully stuffed into mattresses against a rainy day suddenly had to be disposed of because of the impending Euro - and in a way which would not come to the attention of the local taxman. Spanish (and to a lesser extend Bulgarian, French and Portuguese) properties were an easy place to hide and in my opinion this hidden cash was the bedrock of the property booms there, and in Spain in particular.

You could argue with me - and I am sure some will. But I see the Thai property boom in particular as little more than hot Chinese and some Russian money looking for a home. It will dry up eventually, but it could take a long time. Does that mean it is a good idea to buy, or that property prices are realistic - of course not, but overpaying for a house for some member of the extended family, or to rent out or whatever is still going to be cheaper than paying the dues, or losing the money. Assets such as property are a lot less easy to liquidate if things go wrong - and for some people, that is just fine.

[loverboy44]

This is exactly what happened in Spain more property than buyers

My ex's family had a place in Javea since the mid 70's. Right through until about 1997 or 1998, the market there was horribly depressed. It was always cheaper to buy new-build than 'pre-owned' because the local developers could shift the price of land around at a whim. In effect, it was land which had no other use, and therefore no real value, except to build holiday homes on. Notwithstanding location, if the buyers didn't come, the easiest place to cut the price was through the notional value of the land.

1998 all that changed. Massive amounts of money from all over Europe needed to be disposed of. Francs, Guilders and Marks which had been carefully stuffed into mattresses against a rainy day suddenly had to be disposed of because of the impending Euro - and in a way which would not come to the attention of the local taxman. Spanish (and to a lesser extend Bulgarian, French and Portuguese) properties were an easy place to hide and in my opinion this hidden cash was the bedrock of the property booms there, and in Spain in particular.

You could argue with me - and I am sure some will. But I see the Thai property boom in particular as little more than hot Chinese and some Russian money looking for a home. It will dry up eventually, but it could take a long time. Does that mean it is a good idea to buy, or that property prices are realistic - of course not, but overpaying for a house for some member of the extended family, or to rent out or whatever is still going to be cheaper than paying the dues, or losing the money. Assets such as property are a lot less easy to liquidate if things go wrong - and for some people, that is just fine.

This is all alright but one thing is different. We can all own land in Spain but we can not own land in Thailand. A Thai can own land in Spain by the way.

[blue05]

The building boom here is something akin to Spain and look at what has happened there, no place can keep building the way this place is. Of course this is no problem if you have paid for your place, it only really impacts if you want to sell when the bubble bursts.

My thoughts are at least the building bubble has to burst, as to the rest of the economy I think Thailand is still pretty strong and will get stronger.

Ford Australia are moving most of their production to Thailand and by 2016 it will be all gone from Australia, a few bike manufacturers are now making their big bikes in Thailand for export, Thailand is still a huge electronics exporter. Thailand just needs to keep the political conflicts in check to keep the economy ticking along.

if you believe the rest of the Thai economy is strong you could not have read the OPs link or you choose to disbelieve the content of the report

[StevePIraq]

The ops origin al post was for Forbes magazine not exactly where government institutions go for insight.

Try looking at the following link for a different view

http://www.bangkokpost.com/business/new ... and-rating

The Thai economy has problems of course but I still believe generally firm with the exception of the housing market which has to burst. And the biggest risk to the Thai economy has to be the political infighting that goes on here

[Spitfire]

Household/personal debt is very high and should be a major concern of government. Where else on earth do they let so many unsuitable borrowers borrow up to 90% of their income in many cases?

What makes me laugh is when you go to the small towns and villages and you can buy a toaster on credit (full price 1000 baht) on a two year hire-purchase agreement and pay like 60 baht a month or you see a pickup with a scooter on the back advertising a 1 baht down deposit for it doing the rounds in the impoverished villages........... ........completely irresponsible lending imo.

And that's not even without mentioning the amounts borrowed on the informal borrowing business with loan sharks who charge like 10-25% or whatever. Almost no-one actually owns anything apart from an older, corrupt or elite section of society.

Crazy really when you think about it!

[zeitgeist]

with the exception of the housing market which has to burst.

I understand why people are saying that there is current a property bubble but what happens to the market should it burst? How would it effect the Thai economy as a whole? I assume the easily available credit for home purchasing can't be good for the future!

[StevePIraq]

My neighbor is a Thai government employ and not high level. They obtained a government sponsored mortgage at 0.5% and this is not just for the value of the house but also a large sum so they can modify the house and buy furniture etc.
Not so long ago the government had the first time car buyer incentive were you could buy a car up to 1.5L and the government would pay the tax thereby enticing people who cannot afford a car or loan to purchase
So is it any wonder Thais are getting into debt when they have all of this thrown at them.

If the property market crashes companies all around will go bust, right across the economy just as in Spain. It is not the individual who suffers unless the developer has not finished the house then you loose it all as the property is not transferred to you but you have already made substantial payments on the property.

Lets just home this doesn't happen and the rest of the economy keeps stays stable.