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The effect of the Bangkok floods on the Real Estate market.

                                The effect of the Bangkok floods on the Real Estate market.

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It has surely not escaped anyone’s notice over the last few months that Thailand and now Bangkok are facing their worst flooding disaster for nearly 70 years! But how has this affected the property market in Bangkok?

Well the obvious and immediate affect has of course been the loss of habitable properties on the outskirts of Bangkok. Tens of thousands of homes, mainly Townhouses and Detached Houses, no more than 3 storey’s high many of them, have been inundated by 1-2m of water, even more in some areas! Some of our own EasyHomes team have had their properties flooded for weeks now on the outskirts of town.

With the average ground floor being about 2.5-3m high, it is easy to see how this has destroyed the ground level living areas for most of these properties. Many of the properties of course are not built for extreme weather conditions and often are of poor build quality to start with. Private housing on the outskirts of Bangkok is often inexpensive in nature and so for example a property that cost between 2-3m Baht is almost certainly not going to be built of the best quality materials on the market. The developers are of course setting out to save on costs and maximize profits as best they can.

This has of course led to 100 000’s of Bangkokians looking for alternative accommodation, with many heading to their families in the countryside and rural areas of Thailand (assuming of course they have not yet been affected by flooding yet). Others who still have perhaps a job to go to in the city center are looking for temporary accommodation in Bangkok’s city center, which at the time of writing is still yet to be flooded.

This is of course making a major impact on the supply of condos, apartments and other property in the city center. With many buy-to-let owners whom had a house on the outskirts of Bangkok and perhaps 1-2 properties they leased out to tenants in the city center, now occupying the properties themselves or their friends and family. This has meant thousands upon thousands of properties previously on the market are now off the market indefinitely!

And what of that word ‘indefinitely’, well there can’t be a more much apt time to use a word like that. As no one knows when the floods will fully recede, no one knows what damage has been done to individual properties and no one knows when life can go back to normal again. Will it be 1 month, 2 months, 3 months, 6 months or more?

I was speaking to a friend yesterday who is a senior executive of a factory in both Ayuthaya and Phatumthani, 2 areas close to Bangkok that have been affected for weeks and months now. He said at best estimate his factory in Phatumthani may start production in late December and the one in Ayuthaya sometime in February, but of course even these are optimistic estimates.

So if a fully established factory with hundreds of workers on hand working together to get the factory operational as soon as possible, will take approximately 2 months from now – again an optimistic assessment – then what hope a family whose house has been submerged for months and their possessions destroyed?

Again going back the build quality, if your house was never built that well in the first place then what irreparable damage will 2-3 months of submersion under 1-2m of water do? With poor quality, concrete, steel, iron, plastic piping, wiring and tiling all affected. And even if the water miraculously went down tomorrow then where wil you find a plumber, electrician and plasterer etc….these people are going to be in heavy demand! And even of you do find one, how and where will they find the supplies to do the job for you? The factories that make products such as plastic piping, wiring and tiles have been submerged and are out of action as well! Another friend of mine visited one of Thailand’s largest furniture shops with branches all over Thailand and huge warehouses last weekend and was told on 30th of October that if he was to order any of their products the earliest delivery would be 20th December. And that he was not allowed any of the showroom items as they themselves cannot replace them at present.

Of course all this is assuming that one has a bottomless pit of money and the fact your company, school or office is closed means perhaps you have no or low pay for the foreseeable future.

So when can you afford -in every sense of the word - to move back into your flood ridden house? Well how long is a piece of string?

  • So what does this mean for expats renting in Bangkok’s city center? Well it means there is less supply on the market now and perhaps into Q1 or Q2 of 2012.
  • Will this push prices up? Well I’m not sure, but it certainly won’t push them down. And once you see a property you like you will probably have to decide quicker than you would have in 2011, as there will be less choice on the market, and it is good then others will want it.
  • What advice would I give to those looking for a property between now and March? Be decisive and targeted. Decide what type of condo or property you want and decide on the location. Then be willing to make quick decisions and be flexible on buildings…the more popular buildings will fill up first.

Just keep in mind that the over-supply of condos and property every man and his dog have been talking about for the last 2-3 years is temporarily no with us. And with the floods being not only unprecedented, but also unpredictable no one knows the future and when the 100 000’s of people who’ve lost their homes can return to their properties.

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