Bangkok Post: Condo-mania strikes Bangkok again
Posted: Sat Sep 04, 2010 10:05 pm
Condo-mania strikes Bangkok again
Buyers lost billions in the 1997 crash, now warnings of another bubble burst are causing people concern
A towering cement skeleton on Phahon Yothin Road, one of Bangkok's notorious "ghost" buildings abandoned after the 1997 financial crisis, still haunts Nichapat Tulsakchuentana. Her parents paid over one million baht for a condominium in the unfinished high rise. The fallout from the 1997 crisis, which devalued the baht and caused businesses to crumble, did not spare this project. Almost 15 years later, her family has yet to get a single baht back from the developer.
"I learnt a costly lesson. I've been very afraid to buy any property," said Ms Nichapat, 29. "We have no money to buy a place now because all our hard-earned savings were put into that condominium."
Since the 1997 crisis and the subsequent collapse of several property projects, the Office of the Consumer Protection Board (OCPB) has received numerous complaints from homebuyers. The office has recommended that 20,294 of them take developers to court to seek a total of 4.6 billion baht in compensation.
Ms Nichapat and her family were among 42 buyers who purchased units in "The Natural Place Phahon Yothin" condominium project and who have spent the last decade in courts fighting for the return of their payments.
The courts have found in their favour, but the developer has declared bankruptcy and only two buyers have had their money returned to them.
While for Ms Nichapat and her family, the battle for compensation continues, the property itself is getting a new lease on life by a developer who is continuing the project with a different name, embracing Bangkok's rapid condominium growth and increasing interest from buyers.
Bangkok's latest property boom has brought with it a flood of new complaints to the OCPB. Even though developers are said to be regulated more strictly and consumer protection laws have been passed, prospective condominium buyers are told to avoid complacency. Last month, outgoing Bank of Thailand governor Tarisa Watanagase warned that buyers should be prepared for a hiccup in the rapidly-growing condominium market to avoid a similar experience to the 1997 bubble. Other analysts said there are no signs of a bubble yet, but warned the condominium market must be closely monitored. "It is necessary that consumers spend a great deal of time studying property projects they want to buy," said Nirote Charoenprakob, OCPB secretary-general.
Buyers are encouraged to thoroughly investigate whether high-rise projects have received a construction permit and environmental impact assessment approval from government agencies, as well as loan approval from banks for their projects, he said. Purchasing units sight unseen also exposes buyers to potential problems.
"In most cases, it's safer for them to buy finished projects rather than those with no construction in place," he said.
However, consumers have long criticised the OCPB for failing to offer sufficient and timely protection. The agency cites a lack of staff for its slow response time. PM's Office Minister Ong-art Klampaibul, who oversees the agency, promised on Monday he would work to track down "bad operators" and keep buyers better informed.
"Within a month, we will get information from banks and financial institutions on which property projects have had rejected loans and related permits," he said. The data will be available and updated regularly on the agency's website, http://www.ocpb.go.th , along with lists of approved and troubled projects.
"This will keep them informed about which projects they shouldn't buy," he said, adding financial institutions will be asked to reject loans for projects that are still waiting for construction permits.
In recent years, numerous legislation has been introduced to protect homebuyers from meeting a fate similar to those affected by the 1997 crisis. The Condominium Act of 2008 protects consumers against misleading advertisements. This means developers must fully deliver on what they promise in advertisements as part of a legal agreement with buyers or face a maximum 100,000 baht fine.
The Escrow Agreement Management Act 2008 enables a third party to hold a downpayment on a project until the delivery of ownership or project completion. "Consumers may not know that they can negotiate for an escrow account since this is not legally mandatory but voluntary," said Mr Nirote.
However, banks have been reluctant to act as escrow agents, citing a need to review the law and related regulations, said Ladavan Tanatanit, an adviser to the Thai Condominium Association, a group of 197 developers. Financial institutions are also concerned that they wouldn't earn enough from the venture, as the service fee is set at 0.3% of downpayment, she said. "I am confident the escrow management plan can practically begin by late next year," she said. "By then consumers will be better protected. If any problem occurs, they will get either the piece of property they bought or their money back," she said.
Mrs Ladavan, a former executive vice president for property development at Bangkok Bank, played down the central bank's warning of a potential property bubble. Current developers have better cash flow and better management than those during the 1997 crisis, while financial institutions are stricter with their lending measures, she said. During the next few years, condominium development will continue to grow steadily, with about 70,000 units offered to buyers every year, she said. "Competition will be fierce. But consumers will be better-served with quality property," she said.
(Source: Bangkok Post, 4/09/2010)
I'd say the same can be said about Pattaya ... many condominiums are definitely overpriced, and too many projects permitted without sufficient demand.
I feel pain whenever I see them slashing another square of lushly green here on Pratumnak. 
Buyers lost billions in the 1997 crash, now warnings of another bubble burst are causing people concern
A towering cement skeleton on Phahon Yothin Road, one of Bangkok's notorious "ghost" buildings abandoned after the 1997 financial crisis, still haunts Nichapat Tulsakchuentana. Her parents paid over one million baht for a condominium in the unfinished high rise. The fallout from the 1997 crisis, which devalued the baht and caused businesses to crumble, did not spare this project. Almost 15 years later, her family has yet to get a single baht back from the developer.
"I learnt a costly lesson. I've been very afraid to buy any property," said Ms Nichapat, 29. "We have no money to buy a place now because all our hard-earned savings were put into that condominium."
Since the 1997 crisis and the subsequent collapse of several property projects, the Office of the Consumer Protection Board (OCPB) has received numerous complaints from homebuyers. The office has recommended that 20,294 of them take developers to court to seek a total of 4.6 billion baht in compensation.
Ms Nichapat and her family were among 42 buyers who purchased units in "The Natural Place Phahon Yothin" condominium project and who have spent the last decade in courts fighting for the return of their payments.
The courts have found in their favour, but the developer has declared bankruptcy and only two buyers have had their money returned to them.
While for Ms Nichapat and her family, the battle for compensation continues, the property itself is getting a new lease on life by a developer who is continuing the project with a different name, embracing Bangkok's rapid condominium growth and increasing interest from buyers.
Bangkok's latest property boom has brought with it a flood of new complaints to the OCPB. Even though developers are said to be regulated more strictly and consumer protection laws have been passed, prospective condominium buyers are told to avoid complacency. Last month, outgoing Bank of Thailand governor Tarisa Watanagase warned that buyers should be prepared for a hiccup in the rapidly-growing condominium market to avoid a similar experience to the 1997 bubble. Other analysts said there are no signs of a bubble yet, but warned the condominium market must be closely monitored. "It is necessary that consumers spend a great deal of time studying property projects they want to buy," said Nirote Charoenprakob, OCPB secretary-general.
Buyers are encouraged to thoroughly investigate whether high-rise projects have received a construction permit and environmental impact assessment approval from government agencies, as well as loan approval from banks for their projects, he said. Purchasing units sight unseen also exposes buyers to potential problems.
"In most cases, it's safer for them to buy finished projects rather than those with no construction in place," he said.
However, consumers have long criticised the OCPB for failing to offer sufficient and timely protection. The agency cites a lack of staff for its slow response time. PM's Office Minister Ong-art Klampaibul, who oversees the agency, promised on Monday he would work to track down "bad operators" and keep buyers better informed.
"Within a month, we will get information from banks and financial institutions on which property projects have had rejected loans and related permits," he said. The data will be available and updated regularly on the agency's website, http://www.ocpb.go.th , along with lists of approved and troubled projects.
"This will keep them informed about which projects they shouldn't buy," he said, adding financial institutions will be asked to reject loans for projects that are still waiting for construction permits.
In recent years, numerous legislation has been introduced to protect homebuyers from meeting a fate similar to those affected by the 1997 crisis. The Condominium Act of 2008 protects consumers against misleading advertisements. This means developers must fully deliver on what they promise in advertisements as part of a legal agreement with buyers or face a maximum 100,000 baht fine.
The Escrow Agreement Management Act 2008 enables a third party to hold a downpayment on a project until the delivery of ownership or project completion. "Consumers may not know that they can negotiate for an escrow account since this is not legally mandatory but voluntary," said Mr Nirote.
However, banks have been reluctant to act as escrow agents, citing a need to review the law and related regulations, said Ladavan Tanatanit, an adviser to the Thai Condominium Association, a group of 197 developers. Financial institutions are also concerned that they wouldn't earn enough from the venture, as the service fee is set at 0.3% of downpayment, she said. "I am confident the escrow management plan can practically begin by late next year," she said. "By then consumers will be better protected. If any problem occurs, they will get either the piece of property they bought or their money back," she said.
Mrs Ladavan, a former executive vice president for property development at Bangkok Bank, played down the central bank's warning of a potential property bubble. Current developers have better cash flow and better management than those during the 1997 crisis, while financial institutions are stricter with their lending measures, she said. During the next few years, condominium development will continue to grow steadily, with about 70,000 units offered to buyers every year, she said. "Competition will be fierce. But consumers will be better-served with quality property," she said.
(Source: Bangkok Post, 4/09/2010)
I'd say the same can be said about Pattaya ... many condominiums are definitely overpriced, and too many projects permitted without sufficient demand.
I feel pain whenever I see them slashing another square of lushly green here on Pratumnak.