Real Estate Experts Warn of Continued Crisis, Seek Government Support
Real estate experts have raised alarms about the ongoing crisis in the sector as the year draws to a close. They cite high mortgage rejection rates and declining sales, urging the government to extend supportive measures to stabilize the market.
Prasert Taedullayasatit, president of the Thai Condominium Association, highlighted that the Thai real estate market in the fourth quarter of 2024 continues to face challenges. These include issues with sales and transfers, exacerbated by loan rejections and high interest rates. Despite an anticipated improvement due to the completion of condominiums valued at 86,052 million baht, the overall market for 2024 is expected to decline by 20%, marking the steepest drop in a decade.
The market saw new completions valued at 35.686 billion baht in the first quarter, 20.778 billion baht in the second, and 33.235 billion baht in the third. Prasert noted that successful transfers of these completed condominiums could help the market recover fully by 2025. However, he emphasized the need for accelerated interest rate reductions to ease the financial burden on borrowers, particularly those in the lower-income segment.
Lower interest rates could also strengthen the baht, attracting foreign buyers and facilitating quicker condominium transfers. Prasert suggested that the Bank of Thailand's LTV (Loan to Value) loan control measures, which mandate a 20-30% down payment for second or third homes for at least two years, should be relaxed to stimulate short-term recovery.
"If we do not expedite solutions, we fear a domino effect next year, with entrepreneurs unable to repay loans or invest in new projects," Prasert warned. The upcoming Monetary Policy Committee (MPC) meeting on October 16 is seen as a crucial turning point, with potential interest rate cuts and LTV adjustments expected to boost purchasing power in the real estate market.
Soothorn Sathaporn, president of the Housing Business Association, expressed optimism for 2025, suggesting that the market had reached its lowest point in 2024. He emphasized the significance of the Bangkok market and surrounding areas, which account for 60% of revenue, while predicting that provincial markets may eventually surpass the capital.
Soothorn urged the government to extend supportive measures for another year, including reducing the registration fee for real estate transfers and mortgages for residential transactions below 7 million baht. These measures, set to expire at the end of 2024, should be accompanied by a review of personal income tax deductions.
"Over the past five years, while the government has managed inflation, the real challenge for the housing market has been the significant decline in credit access, especially for low- to middle-income groups," Soonthorn said. The primary obstacle to homeownership is not only insufficient finance but also increased loan rejections by banks, which range from 10-15% to 35-60% in some projects, particularly low-cost housing. Government support for consumer credit would significantly boost the market.
Pornnarit Chuanchaisit, president of the Thai Real Estate Association, noted that rising construction, labor, and material costs have led to higher house prices. This, coupled with stagnant income growth, has weakened consumer purchasing power. "While the real estate sector may see some recovery in 2025, we need to consider factors such as wage increases, construction material costs, and geopolitical issues that could affect oil and transportation prices," he said.
The real estate sector's recovery hinges on government intervention and strategic policy adjustments to address these multifaceted challenges.
