Looking
At Real Estate In Bangkok, Bali & The Philippines
By Doug
Casey
The article
on this page by Doug Casey is one of our early articles, and while it is
now several years old it is still very much worth reading as Doug is a
very savvy individual and his insights are always of value. For an update
on what the current situation is in Bangkok readers may wish to read the
May 2004 article "Boom Time In Bangkok: Cheap Credit Fuels The Property
Market" - Real
Estate Boom In Bangkok - Banks
and finance houses that are lending money again for property purchases
are fuelling the boom, with advertising hoardings throughout the city shouting
out the latest deals available. Led by the Government Savings Bank, financial
institutions are pumping billions of Baht’s worth of cheap credit into
the marketplace.
The bank loaned
B68 billion (US$1.7 billion) in the second quarter of 2003, nearly doubling
its lending of B37 billion (US$0.92 billion) in the comparable period in
2002. By Andy Guest
My "big
picture" view to speculating in real estate is summed up in Chapters
24-27 of Crisis Investing For The Rest of the 90's. In brief
my argument is that vastly improving technology has made it unnecessary
to be in or near the cities to work. And you don't want to be near them
anyway; they're crowded, dirty, highly taxed, and socially explosive. Rich
people will increasingly locate out in the countryside, but not, obviously,
just anywhere. They'll go where the scenery and climate are beautiful,
but also where there is enough infrastructure to offer some of the advantages
of the big city. Make no mistake, there are plenty of disadvantages to
investing in property. But land is a likely beneficiary from current trends
in technology. And although a government can always steal it from you,
at least it can't just evaporate, like stocks or currencies can and do.
The template for this trend is, as I've long said, Aspen, Colorado
The best
time to buy straw hats is the winter, and the best time to buy property
is during a financial crisis.
I was in Indonesia
and Thailand during April with the intention of doing some bargain
hunting.
Indonesia
isn't so much a country as an empire, composed of about 16,000 islands
populated by around 200 million people. Although it was clear to me the
real bargains would be in Jakarta, I decided to pass. The city is a dump,
where I've no desire to be in the best of times, and with the army running
around shooting rioting students, and the general population warming to
a cyclical purge of the ethnic Chinese-well, you have to draw the line
somewhere. It seemed to me that Bali, the next island east of Java, but
with a totally different culture, might offer a good compromise between
risk and reward.
I spent
a couple of days driving around with brokers, trying to make them understand
what I wanted: something large, private, on the beach, and absolutely
first class.
I won't bore
you with the details; I found a couple places that would make the cut,
but even after the collapse of the rupiah the prices didn't impress me
as a bargain; you actually get more for your money in Hawaii these days,
thanks to the Japanese exodus.The problem is that Bali is entirely
driven by foreign, mostly European, money; it's insulated in many ways
from the rest of the Indonesian economy. Food and labor are truly dirt
cheap, but the foreign influence is too strong. Property owners think in
dollars, not rupiah.
The next
stop was Phuket Island, Thailand's premier beach resort. When you see
the travel posters from this country with incredibly beautiful rock formations,
white sand beaches and crystal clear water, they were all done in this
area. Incidentally, I far prefer it to Bali, which is awash with over-priced
mega-resorts, hotels indistinguishable from those on Miami Beach, unless
you go far into the interior, where there's basically nothing but villages.
Unfortunately, although Phuket prices were more realistic, i.e., off about
30% in the last year, there were still no bargains, again because the market
caters heavily to Europeans. My advice is that if you want a pleasant
vacation in either place, you reserve at an Aman resort.
You'll pay
$500 a night, about triple what the abominable Hyatt or Sheraton chains
get, but Aman hotels are far above whatever is in second place (probably
the Four Seasons); it's worth the money, assuming any hotel room can
be worth that much.
I then went
to Bangkok, a hot and crowded place, but my favorite city in this part
of the world, probably even ahead of Hong Kong. Poor planning got me there
in the middle of the Thai New Year, which meant everything was shut down
for a week, and I didn't get a chance to see a lot of property. On the
other hand, the whole city goes wild with a water festival; you walk down
any street and after five minutes you're completely soaked from squirt
guns and buckets of water thrown at you, day or night. It's great fun.
Bangkok reminds me of L.A. without the social problems. If
you're thinking of living in the Orient for a while, this is the place.
I'm in touch
with a number of property brokers in Bangkok, and will give you
specifics in the months to come. There must be a hundred tall, see-through
buildings, that can be had for a fraction of replacement cost. I don't
see any particular rush to buy, however, because the financial meltdown
here isn't over yet. But it is time to start looking so you know what to
buy when the bottom arrives. Even at present prices, however, it seems
that a I 1% per month triple net return is available.
Return to
the Philippines
Having visited
well over 220 countries, and lived in eight, I've come to be something
of a gourmet, or at least a gourmand, in sampling the world's political
and geographic locales. Seeing Chase Resource's property was the occasion
of my third visit to the Philippines, and one where I had a lot of time
to spend with locals, as well as get out of Manila, and off Luzon, the
main island.
Manila has
few charms; it's just another gigantic, hot, dirty Third World city. But
there are 7,000 islands in the archipelago, and they're a different world.
Some are still wild enough to credibly harbor stone-age people, or perhaps
a few Japanese soldiers left over from WWII.
I didn't go
to anyplace that primitive, and there aren't all that many primitive places
left. When you fly over the archipelago in a small plane, it becomes
apparent that the islands are largely deforested, an almost inevitable
consequence of overpopulation. In a country where the average income is
just a few hundred dollars a year, a peasant family will extract an old
hardwood tree (which may be worth upward of $10,000) from the middle of
nowhere, even it is taken them a year to do it. And with about two million
new people born here every year that have to find a place to live, you
can believe it's tough on the scenery.
This is going
on all over the Third World, and it's easy to just take it as a given.
But, at one cocktail party I met one of minority owners of the Taysan deposit,
an American in his 80s who'd been an aide to MacArthur. He described how
different the place had been in the old days, only 50 years ago, when there
were less than a quarter the number of people there now are. Even Manila
was a quaint and mellow place. His words make me think of Michener'sTales
of the South Pacific
(which may be his best work - and it's short).
There's something to be said for a golden era of tropical paradise, before
the whole world was awash in tourists. The Philippines' current
population of 70 million is likely to double again before it finally levels
off, and starts falling.
But, although
most of the islands are pretty torn up, there are some gems. I spent, for
instance, a couple of nights on Borocay, a mellow resort island approachable
only by boat. It's long beach has lots of nice restaurants offering excellent
$5 dinners. I went on a night dive and a deep dive (incredibly beautiful
waters) for $20 each, including all equipment. A one-hour shiatsu massage,
delivered by one of country's rather famous class of blind masseurs, was
$9. And all these prices were high, by Philippine standards, because we
were at a resort.
Costa Rica
has
always been my favorite as a place to retire, or just to go and chill out,
but I've got to say the Philippines have edged it out of the number one
spot. The culture combines the best of the Orient with the best of Latin
America (the place was a Spanish colony for hundreds of years, and most
Filipinos have Spanish surnames). Furthermore, most Filipinos speak
English, and there's enough of an American patina to make you feel vaguely
at home. Despite the fact that Clark AFB and Subic Bay Naval Base were
there for years, Filipinos still like Americans.
With Marcos
gone, the place is turning around; Filipinos are tired of being known as
the poor men of Southeast Asia.
