The sun is shining again and we are getting no more than the usual isolated brief tropical shower. Samui is getting back on its feet but it will take time to recover fully, particularly the tourist industry which has been hard hit. The storms and their effects were widely reported and pictures of crumbling seaside bungalows were all over the internet. Many hotels suffered damage and the island infrastructure has taken a pounding with damaged and washed away roads, collapsed electric poles, fallen rocks (see last months newsletter) etc. Samui is simply not set up to cope with these disasters and it is all very well for Dr Prasert to be wise after the event (see report below) but maybe he could see his way clear to making the island more accessible with realistic air fares and service that justifies the title “boutique”.
As a general rule we do not get involved with the sale of businesses but I do keep an eye out on what is going on in that market. One of the reasons is that I have yet to find a business owner on Samui who has a realistic idea of the value of his business and consequently the whole exercise is a waste of time. I have been presented with figures which do not even justify the price they paid for the business when they bought it and now they want to sell at a higher figure still. The usual comment is “Well if the buyer did this or that, they would make a lot of money” and they seem to think that justifies their
price tag. I have to bite my tongue and not ask why they do not do “this and that” to make the profits they believe are there. There is a learning curve to any business and it takes time for a business to become established – the general rule is three years. A good well run business, with a steady track record and not dependent on the personality of the seller can make sense at the right price and provided there is sufficient time left on the lease to regain the invested capital. However, so often small businesses are dependent on an individual, their personality and expertise and that does not carry over when the business is sold. Buying an existing business is no guarantee of success and you really have to work out why the present owner is selling – because if the business is as successful as he makes out – then why is he selling?
There is no international standard for the star rating system for hotels and star ratings are frequently approved in accordance with the local practice and at the discretion of whichever national body is responsible for tourism and the hospitality industry in that country. So a 5-Star hotel in one country may well not reach that category in another. There is then the quandary of “Boutique” hotels. Quite an interesting article can be found here at Wikipedia. One definition I found states “Small but exclusive property that caters to the affluent clientele with an exceptional level of service at premium prices”. Bangkok Airways claims to be a “Boutique Airline” then one would transpose the words “property’ and “airline”. The only issue I have with that is “exceptional level of service”. I do not travel on Bangkok Airways very often but I have to say that the last few times I have the service has been less than exceptional in the extreme and on a par with the low cost carriers operating in Thailand. This is a shame as when I started travelling between Samui and Bangkok several years ago, the flight was something to enjoy and you could appreciate the service provided. That has all sadly gone. Fares have gone through the roof and service through the floor. Whilst they were rightly complemented on the help they gave to the island during the recent floods, the complaints from tourists about the way they were treated was a reflection of what a monopolistic enterprise can get away with. Tourism is the life blood of the island and, as I have stated in previous newsletters, this came about as a consequence of Bangkok Airways investment in the airport. There are many reasons for the decline in tourism here but I just hope that Bangkok Airways understand that they have played more than their fair part in this and return to the original standards of service we were once used to.
If you wish to receive the full monthly Newsletter please send an email to hbonning@kosamuiproperties.com
Friday, 6 May 2011
Tuesday, 5 April 2011
Ko Samui Properties Blog April 2011
The main topic of conversation recently has been the unseasonable spell of extremely wet weather to hit Samui and Southern Thailand. It has been more like the Autumnal rainy season with roads flooded and impassable in places. Bangkok has also suffered and there have been complaints of extremely cold (for Thailand) weather there as well.
The Samui Gazette (hard copy) had an interesting article written by a source at NASA Meteorological Dept explaining why this has happened. Apparently it is due to a High forming over central China at the same time as a Low formed over India. This created a steep pressure ridge over northern Thailand. Then another Low formed over Bangladesh followed by a further Low off the coast of Malaysia. Put together this combination of weather systems created strong easterly winds and lots of rain.
There are some extremely good sources for weather information available on the web. The main one is the Thai Met Office and they can be found here . There are links to weather maps, weather radar and forecasts here. Another useful link is to WindGuru which gives a while range of predictions for a few days ahead in 3 hourly segments.
Infrastructure has taken a severe pounding and the ring road has been damaged in many places – not the least of which was the rock fall on the section between Chaweng and Lamai just short of the Cliff Restaurant as these photographs show.
The airport has been closed for two days and the ferries have not been running so there are many stranded tourists here and in Koh Tai and Koh Phangan. The British Embassy sent down a small team to assist UK nationals where they could and the Thai Navy sent their Aircraft Carrier into the area to evacuate people by helicopter although I hear there were times when that operation had to be suspended due to high wind speeds.
Hard wired internet connections have been down since Tuesday with only the Air Cards having a connection if you live in an area with a good signal. Mobile phone networks have been badly affected but are gradually getting back to normal.
As I write this Newsletter reports are coming in of collapsed Villas in North Chaweng.
As of Thursday morning the rain had almost stopped and the flood waters are receding very quickly. Central Government have promised Baht 50 million to help with immediate repairs As of today, Friday things are gradually getting back to normal – albeit slowly
Of course Songkran starts on the 13th April – maybe this year we will not need water pistols!
For a copy of the full Newsletter please send an email to hbonning@kosamuiproperties.com
The Samui Gazette (hard copy) had an interesting article written by a source at NASA Meteorological Dept explaining why this has happened. Apparently it is due to a High forming over central China at the same time as a Low formed over India. This created a steep pressure ridge over northern Thailand. Then another Low formed over Bangladesh followed by a further Low off the coast of Malaysia. Put together this combination of weather systems created strong easterly winds and lots of rain.
There are some extremely good sources for weather information available on the web. The main one is the Thai Met Office and they can be found here . There are links to weather maps, weather radar and forecasts here. Another useful link is to WindGuru which gives a while range of predictions for a few days ahead in 3 hourly segments.
Infrastructure has taken a severe pounding and the ring road has been damaged in many places – not the least of which was the rock fall on the section between Chaweng and Lamai just short of the Cliff Restaurant as these photographs show.
The airport has been closed for two days and the ferries have not been running so there are many stranded tourists here and in Koh Tai and Koh Phangan. The British Embassy sent down a small team to assist UK nationals where they could and the Thai Navy sent their Aircraft Carrier into the area to evacuate people by helicopter although I hear there were times when that operation had to be suspended due to high wind speeds.
Hard wired internet connections have been down since Tuesday with only the Air Cards having a connection if you live in an area with a good signal. Mobile phone networks have been badly affected but are gradually getting back to normal.
As I write this Newsletter reports are coming in of collapsed Villas in North Chaweng.
As of Thursday morning the rain had almost stopped and the flood waters are receding very quickly. Central Government have promised Baht 50 million to help with immediate repairs As of today, Friday things are gradually getting back to normal – albeit slowly
Of course Songkran starts on the 13th April – maybe this year we will not need water pistols!
For a copy of the full Newsletter please send an email to hbonning@kosamuiproperties.com
Thursday, 10 March 2011
Koh Samui Properties March Blog
Last month I discussed how air travel had made the world that much smaller and the impact it has had on Koh Samui. There is little doubt in my mind that the creation of Samui Airport by Bangkok Airways was the catalyst for the development that has taken place here over the last ten years in particular. Without the airport it is inconceivable to me that the plethora of new villas and hotels would have been built.
Now many people dislike the changes that have occurred and would like to see Koh Samui stay as it was 20 years ago. Whilst there is an attraction in that, is that really fair to the indigenous people of the island? Development has brought its problems, that cannot be denied, but it has also brought many benefits and indeed wealth to the islanders. For many reasons the infrastructure has failed to keep up with the pace of development but that is gradually being addressed. People quickly forget what it was like that long ago and I can only speak for the last ten years here.
- We complain about the electric supply but ten years ago we only had for the most part single phase supply and blackouts were far more common than they are now. The second under sea cable and new transformer station in Maenam are all part of addressing the present issues.
- Broadband internet was unheard of. Slow dial-up connections were all you could get if you could get a telephone line at all!
- Water was from a well. The desalination plant and city water did not exist.
- Many roads were sand and gravel including, not too long previously, Chaweng Beach Road. Access to the hills was difficult and only possible by 4-wheel drive. Now most of those hillside tracks are concreted roads.
- Supermarkets were poorly stocked and many products out of date and more than once I found bread full of mould when I got it home. Now we have a choice of supermarkets and convenience stores by the dozen with fresh produce available 24 hours a day.
Some people will continue to argue that all these developments are a bad thing and perhaps they have a point in the way they have expanded in a seemingly uncontrolled way, but there is also an element of selfishness in that view. Why should the people of Samui be denied these facilities to retain an idealized vision of what Samui once was – or perhaps never was. It is the “old hands” that complain. People coming to Samui today for the first time see it as it is. It remains a beautiful island despite the problems common to any developing vacation destination.
Over the last year hotels have seen reduced occupancy and lower room rates. This is for a multitude of reasons not the least of which has been the political instability and demonstrations in the country. The worldwide economic slump and devaluation of most currencies against the Thai Baht have made it more expensive to come to Thailand. As you will see from reports below, Bangkok Airways are also being cited as part of the problem with the high air fares and lack of capacity. So Bangkok Airways who were the catalyst for the development of Samui are now being held partly responsible for declining tourism on the island. Once again there is a clamor for a second airport but that is unrealistic. Who is going to build it? Not the government to be sure (it is hard enough to get funding for essential infrastructure) and why would a private operator take the risk?
The economics of supply and demand will no doubt sort much of this out. One major international hotel chain has just announced it is pulling out of Samui after only a short period here. No reason has been given and whether the decision is based on economics or other factors is not known, but I doubt they will be last. Others though are still coming!
If you wish to receive a full copy of this Newsletter, which includes details of latest listings and price reductions as well as local news, please email hbonning@kosamuiproperties.com
Wednesday, 16 February 2011
Koh Samui and the impact of air travel - February 2011
Air travel has its benefits but also its downside. In fact the advent of long haul flights had a huge impact on everything we do. Forty years ago if you wanted to travel from Europe to “Far Away Places with Strange Sounding Names”, you had little choice but to get on an Ocean Liner in Southampton or Tilbury and spend five weeks at sea if you were lucky enough to travel before the Suez Canal was closed or six weeks if not, to get to Australia and longer to the Far East. The big white liners of the P&O – Orient Line (as it then was) together with Shaw Savill, Union Castle and many others plied their trade between these foreign destinations. Passengers were varied, from Diplomats taking up or returning from foreign postings, to assisted passage immigrants to Australia. Cruising was in its infancy and these ships spent more than three quarters of their time carrying people from one port to another. You could of course fly, but it still took a few days and several legs with stop overs in the Middle East, India and Asia.
What changed all of that was the introduction of the Boeing 747 in the mid 1960’s with its ability to carry large numbers of passengers great distances quickly and relatively cheaply. Almost over night this killed the Liners. Most had been built just after the Second World War with reparations from the British government for ships they had lost. Without a doubt they were in any case approaching the end of their useful life and only a few new ships such as the Oriana and Canberra had been built since.
Air travel changed the world and made it smaller. No longer were foreign vacations confined to Teneriffe or Majorca and these “Far Away Places” suddenly became accessible to far more people. Television also had its place in opening peoples eyes to what was over the horizon, and the Brits in particular, always ready to conquer new lands, set off to explore this expanding world. The Far East, Thailand, Malaysia, Singapore, Hong Kong, could all be reached in a day. The tourist markets in these countries opened up and as wealth increased with age, the possibility of owning your own piece of Paradise became a reality for many people.
The world became more accessible to back-packers on limited budgets and eventually they found Koh Samui. Undeveloped, with few roads and very basic infrastructure. Travel here was by road or rail and ferry. Nothing much changed until in 1989 Bangkok Airways opened Koh Samui Airport. Once again air travel was the catalyst of huge change. It took a few years, but gradually word spread of this idyllic island and of course Alex Garland’s book “The Beach” was another influence. With the airport came people with money although it was not until about ten years ago that the influx of wealth started to have an effect on land prices and developers came to the island. Would they have come without an Airport? Almost certainly not. So air travel and in this case Bangkok Airways have a lot to answer for. Whether this is good or bad depends on your point of view. A subject for future discussion perhaps.
What changed all of that was the introduction of the Boeing 747 in the mid 1960’s with its ability to carry large numbers of passengers great distances quickly and relatively cheaply. Almost over night this killed the Liners. Most had been built just after the Second World War with reparations from the British government for ships they had lost. Without a doubt they were in any case approaching the end of their useful life and only a few new ships such as the Oriana and Canberra had been built since.
Air travel changed the world and made it smaller. No longer were foreign vacations confined to Teneriffe or Majorca and these “Far Away Places” suddenly became accessible to far more people. Television also had its place in opening peoples eyes to what was over the horizon, and the Brits in particular, always ready to conquer new lands, set off to explore this expanding world. The Far East, Thailand, Malaysia, Singapore, Hong Kong, could all be reached in a day. The tourist markets in these countries opened up and as wealth increased with age, the possibility of owning your own piece of Paradise became a reality for many people.
The world became more accessible to back-packers on limited budgets and eventually they found Koh Samui. Undeveloped, with few roads and very basic infrastructure. Travel here was by road or rail and ferry. Nothing much changed until in 1989 Bangkok Airways opened Koh Samui Airport. Once again air travel was the catalyst of huge change. It took a few years, but gradually word spread of this idyllic island and of course Alex Garland’s book “The Beach” was another influence. With the airport came people with money although it was not until about ten years ago that the influx of wealth started to have an effect on land prices and developers came to the island. Would they have come without an Airport? Almost certainly not. So air travel and in this case Bangkok Airways have a lot to answer for. Whether this is good or bad depends on your point of view. A subject for future discussion perhaps.
Koh Samui January Blog and Review of 2010
Still catching up on my posts but getting there. This is from January 2011
Let me start by wishing everyone a Very Happy and (hopefully) Prosperous New Year. Looking back over the last 12 months here on Samui I would say that the real estate market has been pretty static. As reported during the year there have been sales but almost exclusively in the price range below Baht 10 million. The Red Shirt protest in Bangkok earlier in the year clearly had a negative affect on tourism and combined with the strong Baht this has continued throughout the year so that even over the Christmas period hotels were reporting poor occupancy. The problem for the Thai Government is that the strength of the Baht is due to outside factors beyond their control so do not expect any changes there. The number of hotel rooms in Samui continues to increase in particular in the 5-star category with the opening of W in Maenam, Banyan Tree and Langham Place in Lamai, Hansar Samui in Bophut and soon Conrad followed by Vana Belle due next December. Infinity will also start operating as a hotel in the spring and I am aware of other hotels in the planning stage.
Earlier in the year I reported on the ring road having a layer of tarmac applied between Bophut and as far as the Law Courts in Hua Thanon. Whilst a great improvement it was always in doubt as to how long this would last as it was laid directly on to the concrete. Come the heavy rain of the monsoon and two areas not far from our office were quickly washed away but I was pleasantly surprised that this was the only real damage that occurred and for the most part the road held up pretty well. Back in May we were talking about the possibility of water rationing – certainly not needed now!
In July we had the mass protest against the proposed drilling for oil of the coast. Hundreds of people joined hands around the ring road in a mass peaceful demonstration. The proposal has since been put on ice for at least a year while further environmental studies take place.
September hosted the Samui International Jazz Music Festival which was a great success attracting hundreds of people to the lakeside venue in Chaweng. A mix of Dutch and Thai jazz musicians provided great entertainment for a full week and plans are already in hand for a follow up this year.
We have also seen at last the approval of the new electricity line from Taling Ngam to the new sub-station in Maenam which when complete will solve many of the power issues in the north of the island. The Municipality have approved the 22 metre steel poles which have caused controversy as being unsightly, but all other solutions were too expensive.
The exceptionally wet monsoon season has continued through December.
To see some of the damage go to these You Tube pages
http://www.youtube.com/watch?v=bT-RuPGWF44&feature=player_embedded for the fallen tree in Hua Thanon
http://www.youtube.com/watch?v=9nteH4xBa1s&feature=related for flooding in Lamai
http://www.youtube.com/watch?v=nrCPdMjNMvk&feature=related many views and more links.
Let me start by wishing everyone a Very Happy and (hopefully) Prosperous New Year. Looking back over the last 12 months here on Samui I would say that the real estate market has been pretty static. As reported during the year there have been sales but almost exclusively in the price range below Baht 10 million. The Red Shirt protest in Bangkok earlier in the year clearly had a negative affect on tourism and combined with the strong Baht this has continued throughout the year so that even over the Christmas period hotels were reporting poor occupancy. The problem for the Thai Government is that the strength of the Baht is due to outside factors beyond their control so do not expect any changes there. The number of hotel rooms in Samui continues to increase in particular in the 5-star category with the opening of W in Maenam, Banyan Tree and Langham Place in Lamai, Hansar Samui in Bophut and soon Conrad followed by Vana Belle due next December. Infinity will also start operating as a hotel in the spring and I am aware of other hotels in the planning stage.
Earlier in the year I reported on the ring road having a layer of tarmac applied between Bophut and as far as the Law Courts in Hua Thanon. Whilst a great improvement it was always in doubt as to how long this would last as it was laid directly on to the concrete. Come the heavy rain of the monsoon and two areas not far from our office were quickly washed away but I was pleasantly surprised that this was the only real damage that occurred and for the most part the road held up pretty well. Back in May we were talking about the possibility of water rationing – certainly not needed now!
In July we had the mass protest against the proposed drilling for oil of the coast. Hundreds of people joined hands around the ring road in a mass peaceful demonstration. The proposal has since been put on ice for at least a year while further environmental studies take place.
September hosted the Samui International Jazz Music Festival which was a great success attracting hundreds of people to the lakeside venue in Chaweng. A mix of Dutch and Thai jazz musicians provided great entertainment for a full week and plans are already in hand for a follow up this year.
We have also seen at last the approval of the new electricity line from Taling Ngam to the new sub-station in Maenam which when complete will solve many of the power issues in the north of the island. The Municipality have approved the 22 metre steel poles which have caused controversy as being unsightly, but all other solutions were too expensive.
The exceptionally wet monsoon season has continued through December.
To see some of the damage go to these You Tube pages
http://www.youtube.com/watch?v=bT-RuPGWF44&feature=player_embedded for the fallen tree in Hua Thanon
http://www.youtube.com/watch?v=9nteH4xBa1s&feature=related for flooding in Lamai
http://www.youtube.com/watch?v=nrCPdMjNMvk&feature=related many views and more links.
Koh Samui Weather, documents and DHL!
Once again I find myself behind with my posts for which I apologise! This is from December 2010.
The main issue over the past month has of course been the exceptionally wet monsoon season this year. As previously reported the Municipality has been working on improving the drainage at various points around the island but the weight of rain falling is still too much for them to cope with and the result is massive flooding in all the usual places – the link road between the Ring Road and Fisherman’s Village; the Ring Road by Bandara Hotel, Samui Town Centre and between the police box and Caltex Filling station; Laem Din and Dao Markets and the Beach road. However, the good news is that once the rain stops the drains do take the water away pretty quickly. Then you can see the damage that has occurred. It is not at all surprising that the tarmac road has been affected as laying tarmac directly onto the old concrete road was never going to be a long term solution.
As usual with severe weather there has been a lot of other damage including a large tree behind the 7-11 at the sharp turn in Hua Thanon which fell onto the adjoining building. You can see the damage in this photo taken a couple of days later when the weather had briefly improved. As far as I am aware no one was hurt. We had our own share of problems with a couple of broken roof tiles and a collapsed ceiling and of course finding someone to repair this when everyone was shouting for roofers and builders was not easy.
A word of advice. If you own your property through a Thai company. Do you know where all your original documentation is? The original incorporation documents and share certificates being the most important but also your Tax ID Card, Tabien Ban (House Book), audited accounts and tax receipts? You will need all of these if and when you decide to sell either by a share transfer or sale out of the company. If you do not have them, then it will delay the whole process by some considerable time.
If you are intending to use a Courier Service to send anything to Koh Samui, another word of advice. Avoid DHL. They do not know where Koh Samui is. A client sent us three packages from Hong Kong correctly addressed to our offices with my contact details. This was on Friday 12th November. The same day I was given the tracking number which showed the destination as Phuket. DHL Hong Kong was immediately informed of the error. This is the route the packages took. Hong Kong – Cincinnati – Hong Kong – Bangkok – Phuket – Bangkok – Hong Kong – Bangkok – Phuket – Bangkok. At this point they gave up and sent it from Bangkok by Thai Post EMS. The first two packages arrived on Monday 22nd and I had to collect them from the Post Office – hardly the door to door service they advertise. The third package was missing. I contacted DHL in Bangkok on Tuesday morning and they confirmed they had sent it separately by post and gave me the tracking number. I went to the Post Office and they found the package but informed me they were about the return it to the sender (DHL) as it was incorrectly addressed. I was able to assure them it was for me, so eventually I had all three packages. DHL have an office on Koh Samui, but DHL Bangkok “think” they must just be an agent. Contact with DHL Headquarters in Germany just elicited the usual “We will look into your comments” and nothing further since.
If you wish to received a copy of the full Newsletter please email me at hbonning@kosamuiproperties.com
The main issue over the past month has of course been the exceptionally wet monsoon season this year. As previously reported the Municipality has been working on improving the drainage at various points around the island but the weight of rain falling is still too much for them to cope with and the result is massive flooding in all the usual places – the link road between the Ring Road and Fisherman’s Village; the Ring Road by Bandara Hotel, Samui Town Centre and between the police box and Caltex Filling station; Laem Din and Dao Markets and the Beach road. However, the good news is that once the rain stops the drains do take the water away pretty quickly. Then you can see the damage that has occurred. It is not at all surprising that the tarmac road has been affected as laying tarmac directly onto the old concrete road was never going to be a long term solution.
A word of advice. If you own your property through a Thai company. Do you know where all your original documentation is? The original incorporation documents and share certificates being the most important but also your Tax ID Card, Tabien Ban (House Book), audited accounts and tax receipts? You will need all of these if and when you decide to sell either by a share transfer or sale out of the company. If you do not have them, then it will delay the whole process by some considerable time.
If you are intending to use a Courier Service to send anything to Koh Samui, another word of advice. Avoid DHL. They do not know where Koh Samui is. A client sent us three packages from Hong Kong correctly addressed to our offices with my contact details. This was on Friday 12th November. The same day I was given the tracking number which showed the destination as Phuket. DHL Hong Kong was immediately informed of the error. This is the route the packages took. Hong Kong – Cincinnati – Hong Kong – Bangkok – Phuket – Bangkok – Hong Kong – Bangkok – Phuket – Bangkok. At this point they gave up and sent it from Bangkok by Thai Post EMS. The first two packages arrived on Monday 22nd and I had to collect them from the Post Office – hardly the door to door service they advertise. The third package was missing. I contacted DHL in Bangkok on Tuesday morning and they confirmed they had sent it separately by post and gave me the tracking number. I went to the Post Office and they found the package but informed me they were about the return it to the sender (DHL) as it was incorrectly addressed. I was able to assure them it was for me, so eventually I had all three packages. DHL have an office on Koh Samui, but DHL Bangkok “think” they must just be an agent. Contact with DHL Headquarters in Germany just elicited the usual “We will look into your comments” and nothing further since.
If you wish to received a copy of the full Newsletter please email me at hbonning@kosamuiproperties.com
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.
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.
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