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Monday, 8 November 2010

Ko Samui Properties Newsletter - November 2010

Well at last caught up to date and I will try and maintain this as before on a monthly basis!

If you are a regular reader of this Newsletter you will have noted that each month I report on the change in asking prices as sellers respond to the correction in the market that has taken place over the last couple of years. We have over 600 properties on our web site in all categories and of these some 75 have reduced their asking prices and as a consequence some have sold. Since I started reporting on these changes we have seen prices fall by between 14% and 50% with an average of 25%. The immediate reaction by some people is that someone must be losing money – but that is not necessarily the case although inevitably there are some that do.

As finance is not available to foreign purchasers in Thailand, all purchases are in cash and with funds transferred from overseas. At the top of the market in 2005/2006, taking the Pound Sterling as an example, the exchange rate was around 70Baht to the GBP. Today it is 47Baht to the GBP which is a 33% change. So if you bought a Baht 10 million house in 2005 it would have cost you £143,000. You could sell that house at Baht 6,720,000 and get your money back. So whilst Baht prices have fallen, people have not necessarily lost money. There will always be exceptions and these tend to be where too much was paid in the first place and reductions greater that 33% are needed to get to present values.

Reduced asking prices are of course only part of the story as there is also considerably reduced demand and any prospective buyers in the market are well aware of their bargaining position. Basic economics tells us that value is determined by supply and demand. Supply here is created by an increasing number of people who wish to or need to sell. Demand is created by people who wish to and have the ability to buy. There are lots of the former and few of the latter.

The rainy season has well and truly arrived and we will now see just how well all the new drainage that has been put in place over the last year copes. Anyone following the Thai news will have seen that Bangkok and some of the northern provinces have been badly affected by flooding. So far Samui seems to have escaped, but a lot more rain is forecast so we must wait and see.