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Some speculators are making big money but developers rule out a repeat of the 1997 crisis
In any property boom, the element of speculation cannot be avoided despite all the efforts made by developers to keep a check on who's buying and for what purpose.
''I have been doing this for more than two years now but right now what we're waiting for is the clearing of the political environment after the election as sales of the units are slowing,'' says Ton, who goes by his nickname and declines to give his real name for fear that he and his group of five friends will wind up on a developer's blacklist.
Mr Ton and his friends from a university in the United States have been speculating on condominiums across Bangkok and have built a good profile of units, focusing on where demand lies, currently close to mass-transit stations.
''Any unit that is within 500 metres walking distance from the station is still sellable but the pace has gone down,'' he says, as a visit to his free university-based site reveals a list of nearly 80 condominium units up for sale with half having been sold.
The trick, he says, is to go in early and book the condominiums the day the developers open for booking and then as they increase the price you start to increase it accordingly. This way you can make money. The money is tax-free as he has not even registered his partnership with his friends as a company.
But developers are trying to put brakes on this kind of activity and have come up with various schemes although most have been unsuccessful.
''You cannot deny a customer the right to buy the unit if it is available and if they have the funds to buy,'' says Srettha Thavasin, the president of Sansiri Plc.
''The only thing we can do is to say we give you a steeper discount if you pay upfront and you will get the first right to choose the units.''
But despite Mr Srettha's efforts, some of his latest condominium projects have already come up for sale.
Other developers are not as bothered about speculators, saying that as long as they are able to afford it and the price is right, people will be willing to buy your product.
''It is all a matter of location and the price, we have managed to do a good job with one project and are looking to launch a new one after the elections,'' said James Duan, the developer of Prime 11 a project located in Sukhumvit Soi 11. He plans to launch a new project at the intersection of Nana and Phetchaburi road in early 2008.
Some developers have a high transfer fees attached to the clause as part of their effort to discourage speculation, but this is gradually being lifted as the market sees slowdown. Asian Property Development Plc is the first to announce that a transfer fee would now be waived in case an existing customer was willing to sell their unit out, something that others may follow.
But real-estate analysts are cautious about the speculative elements saying that ways should be devised to curb this kind of activity. ''Although most people claim that speculation in the projects are around 5-6%, there is a feeling that it could be as high as 25% as there are both short-term speculators and long-term ones,'' said Wasan Kongchan, the managing director of the property consultancy Agency for Real Estate Affairs.
''Speculators come and go with the trend,'' he says. ''Today the trend is for condominiums that are near mass transit but with the mass-transit system now set to reach the suburban areas as well, the trend of owning a piece of land and not just a unit in a large building may return and condominium speculators may be left high and dry.''
He says the gradual slowdown that is taking place in the market is an indication of how things are changing, and investors who believe they could get higher returns from owning a unit that they could from renting it out or selling in the future should rethink their strategy.
Anuphong Asavabhokin, the chief executive officer of Asian Property Development Plc, admitted there was an element of speculation in the condominium market but it was still at a very minimal level and nothing near the levels seen before the 1997 financial crisis, which was blamed in large part on irrational exuberance in the property sector.
''There's a difference in the current speculation, however. The fact that we are asking buyers to pay 5-10% of the down payment upfront is increasing the risk for speculators, and I think that's why we are able to attract mostly genuine buyers,'' he said.
He said there were some scary traces of pre-1997 habits such as zero or very low down payment and pricing that some projects are offering which could put pressure on the industry. He added that without any demand there was no way that speculators would be able to sustain an entire project themselves.
''The key here is to have a good location. If you have the location then some speculation is not harmful, although to avoid speculators we at all our projects do not allow anyone to buy more than two or three units, and never bulk sales, as this is for sure a sign of speculators in action.''
Source : Bangkok Post (15 October 2007) |
