Developers beg BOT to ease loan measures as housing market slumps
Tight loan limits, and high interest rates keeping mid- and low-income sectors away, say property developers
The Thai Condominium Association is calling on the Bank of Thailand to ease its loan-to-value (LTV) ratio measure when considering housing loans as well as consider lowering interest rates to help revive the real-estate sector.
The LTV is a risk assessment ratio that lenders examine before approving a loan. For example, the sum approved as a loan for homebuyers will depend on their income and credit history. This measure was introduced to control non-performing loans.
Prasert Taedullayasatit, the association’s president, said on Wednesday that overall sales of the real-estate sector in the first quarter of this year contracted 30% year-on-year and has been the lowest in six years. The townhouse market suffered the biggest contraction in 12 years, he said.
“Transfer rates are down across the board, including detached houses, condominiums and townhouses, indicating a highly fragile purchasing power,” he said.
“The trend could well continue until the second quarter if no change is implemented.”
Prasert added that the only segments still enjoying profits are luxury properties costing more than 50 million and properties targeting foreign buyers.
He said the main reason for the slump in property sales is buyers in mid- to low-income segments have been denied loans due to the LTV measure and the high-interest rate.
Prasert said contracting sales has also led to developers holding off on launching new projects, especially condominiums.
He said some companies began launching new projects in May, mostly in the Huai Kwang area of Bangkok, where the target is foreign buyers.
“Some 29% of property transfers in the first quarter involved foreigners, mostly from China, Myanmar, Taiwan and Russia,” he said.
Prasert said measures need to be implemented to help the real-estate sector, or it risks contracting more than it did during the Covid-19 pandemic. Short-term measures include relaxing the LTV ratio and granting subsidies to first-time homebuyers to stimulate domestic demand in mid to low-income sectors.
“The BOT may implement the LTV measure on a year-by-year basis, as in, relaxing it when the economy is sluggish, and resuming when it turns to normal,” he said.
