6 June 2024

Thailand’s residential market will gradually improve next year due to more balanced supply and demand and the easing of housing loan regulations, but the full recovery to pre-pandemic levels will not happen until 2023, experts say.

“We’ve seen positive signs at the end of this year and we expect to see a recovery in the Thai property market in 2022. Prices have not increased much and there is no oversupply. Developers can attract so-called “real demand” buyers who have purchasing power as well as long-term investors,” Kamolpat Swaengkit, Country Manager Thailand of DDproperty.com said at a virtual press conference on the market outlook in 2022.

Despite the favorable factors, she cautioned that economic uncertainty remained. “It very much depends on the pandemic situation especially after the arrival of Omicron variant, and how Thailand handles it.

“COVID-19 has affected all sectors and the property market is no exception. Earlier we thought that the sector would recover in 2021 but in fact, the market declined because of the uncertainties due to the pandemic. In addition, there are not many buyers left after the cut-throat competition and pricing wars in 2020,” she added.

After experiencing its worst year in a while, the property market is expected to pick up in 2022. One of the positive signs is that the Bank of Thailand (BoT) has further eased the loan-to-value (LTV) ratio for mortgage lending to allow homebuyers to borrow up to 100% of total home value. The relaxation is effective until the end of next year.

Don Nakornthab, senior director of the financial stability department of BoT, said that the LTV (relaxation) scheme aimed to help boost the property sector supply chains such as construction materials and furniture, as well as the overall economy, which has been affected by the pandemic. It will also help maintain employment in the real estate sector and related industries, which account for almost 10% of the country’s GDP.

“It helps the property market in that it encourages potential buyers to make a decision. The relaxation means a buyer could get a 100% loan for a home purchase. The BoT limits the LTV ratio to 80-90% for a second home, and 70% for a third home. But now a buyer can seek a 100% mortgage although that also depends on the commercial banks granting the loans,” he said at the same virtual press conference.

The central bank expects that the LTV relaxation will generate new mortgage loans valued at around 50 billion baht over the next year.

However, BoT and real estate developers are eagerly awaiting the government’s measures such as reducing property tax and the transfer fee to give a further boost to housing demand and purchasing power.

“The government can do it to stimulate the market. It need not spend money [from the budget] by doing so but just lose some revenue,” said Don.

The easing will also help maintain employment in the real estate sector and related industries.

He said foreign buyers, particularly the Chinese, would not return any time soon so the extra push from the government is practical to boost local demand.

While there is still a demand for housing, Kamolpat said that the COVID-19 pandemic became the key factor in delaying decisions to buy. “The outbreak affected the cash flow and confidence of prospective home buyers,” she said.

As many as 71% of Thai people still want to buy homes but have delayed their purchases, and 39% of them plan to buy homes in 1-2 years, according to the latest DDproperty’s Consumer Sentiment Study.

The major obstacle is loss of income during the pandemic (66%) followed by the price of houses  (63%), political uncertainties, and failure to get a home mortgage from the banks (equal at 37%). “It’s obvious that financial problems are still the main obstacle for home buyers,” she said. According to Agency for Real Estate Affairs, the residential units launched on the market in 2021 came to about 47,500, the lowest number in a decade. The new units are worth 224.6 billion baht in total – less than half of the pre-COVID-19 value. Before the pandemic in 2018, Bangkok’s residential market totaled 565 billion baht with 125,118 newly launched units in total.

By Veena Thoopkrajae