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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.

Ko Samui Properties Newsletter - October 2010

What is happening in the Koh Samui property market? Well it has been so quiet for such a long time that any movement almost seems like an earthquake. Sales are happening albeit at low levels and only in respect of properties the owners of which have accepted the market correction that has occurred over the last two years. There are clearly people out there who are trying to talk the market up which in the end only makes them look foolish and the last thing I want to do is give the impression that all is fine. There are still a tremendous number of properties, both new and re-sales, available and it is going to take some considerable time for then to sell. Nevertheless it is encouraging to see sales taking place.

The infrastructure of Koh Samui has lagged behind development and there are constant complaints about water shortages and erratic electricity supply. The difficulty the Municipality faces in both regards is a combination of lack of funds and time. Major infrastructure items are costly and expensive. They need time to plan and obtain funding. Driving round the island you can see the new lengths of black water pipes being laid which according to officials will alleviate the current unpredictable water supply. Also in an article below there is news of the long planned extension to the electrical distribution system which will bring a supply to a new sub-station in Meanam. We have already seen some road improvements and the road by Bandon Hospital is in the process of being widened and re-laid. Slowly, slowly the island is getting what is required – not fast enough for many, but at least it is happening.

Driving back from Tong Krut on a regular basis I pass “The Garden of the Fool” Puppet and Art Shop. The owner, Barrabas, has a large number of puppets available and it is worth a visit just to see the craftsmanship. “The Garden of the Fool” can be found by turning left after Hua Thanon (coming from Chaweng) onto the lower ring road (4170) and it is about one kilometer on the right hand side.

Last month I promoted the Samui International Jazz Music Festival. This has just finished as was a great success. Look out for more of the same next year!

For the full version of the Newsletter please send an email to hbonning@kosamuiproperties.com

Ko Samui Properties Newsletter - September 2010

When sending funds to Thailand I have always found it better to convert to Thai Baht here. For large sums of money it can make a big difference but even on relatively small sums every penny saved is worth it. Just recently I received a transfer for a rental payment. The Baht amount required was 72,000. The client had his bank in the UK convert to Baht and gave him a rate of 49.7916 which cost GBP 1,446.02. If he had transferred GBP the cost would have been GBP 1,419.98 as the rate here was 50.705 a saving of GBP 26.04. Now you say, how do I know how much to send? Every bank here has a web site and on that site it shows currency exchange rates. We use Bangkok Bank and you can find their currency rates at http://www.bangkokbank.com/bangkok%20bank/web%20services/rates/pages/fx_rates.aspx
Look at the Buying Rates TT Column and you will see the rate in real time for whichever currency you are sending. Obviously you need to allow for charges – inward transfers to Bangkok Bank are usually Baht 200 but can be higher for larger amounts – but you will get those anyway. Rates change from day to day and my experience is that transfers from the UK sent standard rate take 2-3 days although they will always quote 3-5 days. In the nine years I have been here and receiving client’s funds, I have never known anyone get a better rate offshore.

Everyone has different ideas about street food. Some love it some hate it. Many people regard it as unhygienic but I have to say in the ten years I have been in Thailand, so far (touch wood) I have never had a problem and have sampled the delights in Bangkok and many places in between and of course here in Samui. One place I call at regularly is in Hua Thanon, usually mid afternoon on my way back to the office following a site visit.

Every week day afternoon between 3pm and 6pm, Em sets up her stall and makes these delicious sweets. Made from a combination of rice flour and sugar, topped with coconut milk they are cooked fresh in a baking tray. Five for ten Baht served in a banana leaf basket, you must let them cool down a little before eating as they are really hot! You can find Em as you enter Hua Thanon from the direction of Nathon, on the left hand side. Look for the cardboard cut out boy with the red shirt!

Koh Samui Newsletter - August 2010

When writing about Koh Samui it would be easy to extract just the negative and many people do only seem to see the down side. I have always tried to keep a balance in reporting both the good and the bad. There is no point in hiding the blemishes but there is also every reason to promote the highlights. I read many articles published on the internet about Samui, many are bland repetitions of much that has gone before but a couple recently caught my eye as being totally absurd. I will not reprint them here but you can follow this link to one which is dated July 2010 but must have been written by someone who has never been here. http://www.ihrthailand.net/samui-thailand/property-trends-in-koh-samui . Let me look at some of the statements.
“demand is already greater than supply when it comes to the residential market, and shortfalls are already being felt in some sectors” .
Just look at our web site and you will see there is no shortage of supply in any sector.
“There is currently no real secondary property market on Samui as most of the properties are brand new.”
Where on earth does that statement come from?
“without any stock to fall back on, agents are literally having to tell people to wait for more houses to arrive”
What!
“Despite rapid residential growth, some raw land is still available on Samui,”
Unbelievable! How much do you want?

One of the glossy real estate magazines, which is also published on line, recently carried an article by a local real estate agent which discussed buying land in this area. The information given was simply wrong. Unfortunately many people will read this nonsense and believe it. I have no problem with being positive, but anything that is published must reflect reality.

House addresses in Thailand do not seem to have any logic. Take our office address – 52/5 Moo 3, Bophut. The best you can elicit from that is that we are in Chaweng - Moo 3. 52/5 has no relevance to location. Even the Post Office needs a location map for a new address! However, even having the correct address does not always help as I found out in my very early days in the UK doing Building Society valuations. Victorian terraced houses, of which there are hundreds if not thousands in Leicester, look very much alike. One road looks very much like another. So with the confidence of youth I knocked on the door and was greeted by a very charming Indian gentleman to whom I introduced myself as The Surveyor, and he had obviously been expecting me. So tape and damp meter in hand I proceeded to prod and poke, jump up and down on floor boards (an old and tested method of identifying wet and dry rot in floor joists) and generally give the place a good going over. When I got to the Kitchen at the rear of the house he had laid out a set of plans which he proudly showed me of the new bathroom extension he was going to build. It was at this point that the first seeds of doubt were sown. Why would he build a bathroom if he was selling the house? Did I think he would get the grant, he asked me? Time to take a closer look at the plans – and more specifically the address on the plans! Right house number – wrong road! I assured him that I thought everything would be OK and beat a hasty retreat to find the right house. I do hope he got the grant!

Building Society valuations were really just that. They were never intended as structural surveys and the main purpose was to ascertain that there was sufficient value in the property for the intended loan. Obviously condition comes into this and the main things we looked for were wet and dry rot, rising damp, wood worm, ancient electrics and plumbing and of course glaring structural defects, generally evidenced by cracks in the walls. The skill was in deciding if the crack was a result of natural settlement, shrinkage or something more serious which required further investigation. Here in Koh Samui the vast majority of residential buildings are based on reinforced concrete columns and beams which form the main structure and everything else is just infill. Cracks in the infill are not structural and usually the consequence of shrinkage as the mortar in the wall and the plaster rendering dry out. This is a particular problem in hot weather when evaporation occurs too quickly but is in no way serious and is soon taken care of with decoration. That is of course something of a sweeping statement as there can be occasions when the vertical alignment of the infill can be out of line but this is unusual. Nevertheless we have had instances here where so called “experts” have advised against purchasing a property due to serious structural defects which when I looked at them, turned out to be no more than a single hairline crack in some concrete block infill which did not even reach the concrete frame.

Old buildings, and I mean very old buildings, always presented a problem. Technically many of them should not have been standing but when you are talking about a timber frame cottage that has been there for the last 300 or more years how do you justify stating the building is unsound! It has evidence of wood worm and Death Watch Beetle although it is clear the infestation is old and no longer active, but what hidden damage was caused when it was? Yet this old house is a solid as a rock. Modern buildings are not built to last hundreds of years and due to advances in technology and changing social requirements many are out of date within 20 – 30 years – more so perhaps with commercial and industrial buildings than residential, but I doubt we will see many of the houses we have around us today in a couple of hundred years time. Yet I bet that old timber frame, wattle and daub cottage will still be there and there will be another Surveyor standing there scratching his head and wondering how?

Ko Samui Properties Newsletter - July 2010

Better late than never!

The question I am continually asked is “How is the market and what is going on?” and sometimes that can be a difficult one to answer. There is no real consistency. The market is not dead but then it is not bubbling with life either. We continue to receive enquiries from interested buyers but their expectations have changed. I have been beating the drum over recent months in this Newsletter about how prices have fallen to the extent that most people are bored with it, but it is a fact that must be accepted if anyone wants to sell in this market. Buyers in particular are very aware of this fact and only looking at what can now be considered as “good value”. And that is an interesting point. In order to sell within a short period of time over the last few months, it has really been about “what is the lowest figure you can afford to accept” rather than “what is the value of my property”. There does now seem to be at least a plateau at which “values” have stabilized which suggests we may be at the bottom with regard to the change in prices. However, please note “maybe”. How long that will last and which way it will go is of course the million dollar question. The two factors relevant to that are of course the political situation in Thailand and the world economic situation.

Whilst on the surface all seems quiet here I do not think we have heard the last of the red shirt protestors but what form their next action will take is unclear. How the Prime Minister handles the situation over the next few months and if Thailand can get to the next General Election without further damaging demonstrations and violence remains open to question. This uncertainty alone I believe will delay any recovery in the real estate market even if by some miracle the international economy sorts itself out.

The last weekend in June brought another speedboat accident carrying people to the Full Moon Party on Koh Phangan. At the time of writing there were no fatalities reported although about 40 people were injured, some quite seriously. It was a very stormy night, but as is often the case here, rain and storms can be very localized and it would seem this particular squall came through quite quickly. As usual there are conflicting reports as to what happened but even in good weather the seas between the islands, once you get clear of the headland, can get very rough. I have a fairly good back ground in sailing over the last forty or so years, and I have sailed down the east coast of Koh Phangan at dusk and into Big Buddha Bay as it became dark and there is clearly a need for better navigation lights in that area, particularly with buoys – of course of which there are none. Local knowledge is one thing, but in the dark, with rain and heavy seas, anyone can become disorientated. It would also appear that whilst the Marine Police had things under control at the Samui end, there was no one overseeing the Koh Phangan end and who could perhaps have prevented the boat leaving until the squall had passed. Health and Safety in Thailand is sadly lacking in every aspect of life. I see it every day on the roads and there is not a construction site in Thailand that would not be closed down by a UK Factory Inspector before he had even walked on site. I know from personal experience that trying to police these issues here is virtually impossible. We have managed to get construction staff to wear safety helmets but safety footwear – forget it. Equally we do not want the extremes of ‘elfinsafety prevalent in the UK in particular where jobsworth H&E Inspectors tell people they cannot climb a ladder to change a light bulb without a risk assessment analysis. There are many more ludicrous examples but some where there needs to be a reasonable compromise. I suspect that may be found in Thailand way before the UK. Or perhaps not.

For a full copy of this Newsletter please send an email to hbonning@kosamuiproperties.com