We have heard from more than one prospective buyer that they believe deeply discounted deals are “sure to come” as COVID-19 ravishes the planet, and with it, people’s finances. We have already found condominiums for some of our clients – at what we considered to be very attractive prices – only for the client to insist on making a still lower offer. They believe the seller must be desperate.
They are forgetting that there must be two sides to every sales transaction, and both parties must agree on the price. Furthermore, if the seller faces neither external pressure nor personal motivation to part with their property, they simply won’t sell.
On global stock markets, millions of times per day, one buyer and one seller agree on the “new valuation” of a company, and in doing so they move its share price higher or lower. Sometimes it is a fraction of a percent; sometimes – in volatile bear or bull markets – it can be considerably more than that. But for the millisecond it takes to complete that trade, the opinions of just two people can determine the share price of a billion dollar corporation.
The same is true of a property transaction. It is easy for a buyer to believe that certain economic events must be driving the market lower, but if they cannot find a single seller who agrees with them, then their understanding of the property market in that moment is extremely flawed.
Someone with the means to purchase a property may be motivated to hunt bargains in times of economic crisis, but there can be no transaction if that economic crisis has not also created a motivated seller. And if negative conditions have not created multiple motivated sellers, there is no “buyer’s market” of exceptionally cheap properties. (Actually, the best discounts are likely to be found on the properties which are already exceptionally cheap, e.g. budget condominiums, and we’ll expand on this in the next article.)
The bargains people are expecting to find are in the re-sale market, but what would cause someone to sell so urgently? There are a handful of reasons, but they all boil down to two primary motivations: emotional and/or financial.
Changes in someone’s financial situation could obviously bring them to sell their Phuket property, which is most commonly forced upon them by a divorce settlement or the need to raise cash for medical expenses.
An owner may have lost their job, and is struggling to afford the monthly management fees, or they have suffered personal financial collapse. This is possible, but unlikely. Only if their last remaining asset on earth was their Phuket condo would they be forced right now to sell for a bargain basement price.
We do occasionally come across sellers who are so cash-strapped during a period of unemployment that they may be forced to sell their Phuket condo. We know that these people exist, but their number within the Phuket real estate market is minuscule. People who are just a couple of pay checks away from a financial crisis are simply not buyers of investment properties overseas.
The other category of motivated sellers is those with emotional reasons for selling. These tend to be people with changing priorities. Perhaps the income they are receiving is less important to them than having all the money in the bank – liquid cash to do with as they please. Other people simply get bored living in the same place for too long, and these high-net-worth nomads will begin looking for another city or country in which to live.
It is also possible that someone bought a property with the intention of leaving it to their family, but their children have no interest in either using or owning an overseas condo. It is further possible that some of these same people will pass away before divesting of their condo, and their family must then complete the sale after their death In fact, of all the emotional grounds for selling a property, the one with the most urgency would be a family selling the late owner’s condo.
But again, the buying opportunities presented by either financial or emotional motivation are rare. Most owners are solvent enough to buy a property in cash, and are unlikely to be forced into selling it for financial reasons. Likewise, most owners do not get bored, get divorced or die in large enough numbers every year to create a bargain basement market.
Most buyers will not even hear about a cut-price property before it is sold because there are so few “fire sales” in Phuket real estate.
This article was provided by Thai Residential, creators of the 2018/2019 Phuket Property Guide. To view the 2019/2020 Thai Residential Phuket Property Guide online, visit thairesidential.com/phuket-property-guide. You can also contact Thai Residential directly at Email: phuket@thairesidential.com or Tel: +66 9484 11918.