Condo association warns of crisis in property sector
While some aspects can be compared to the Tom Yum Kung crisis, high national household debt will make the problems harder to solve
The Thai property sector will face challenges in meeting sales targets this year due to a decline in demand and purchasing power, Thai Condominium Association president Prasert Taedullayasatit said on Tuesday.
He referred to the Asian financial crisis in 1997 and its impact on property prices as financial institutions and asset management companies turned to offering non-performing assets at cheaper rates than the original sale prices. “The reason behind the decline in property prices during the Tom Yum Kung crisis was a weakening baht that triggered an increase in the debt burden among business entrepreneurs and banks,” he said.
“As many as 56 financial institutions closed, which had a massive impact on investment in various projects and sent entrepreneurs into a downward spiral,” he added, noting that entrepreneurs who took out loans in foreign currencies were affected the most.
However, Prasert said he considered this year’s economic crisis to be different as people suffered from informal debt and rising cost of living, resulting in a decline in property demand.
“Thai people in the lower to middle market have informal debt and are unable to purchase new homes,” he said, adding that some people have either not found employment or their salaries have not increased.
He noted higher interest rates also meant that home instalments were higher than before and the rejection rate for housing loans was currently standing at 70 per cent due to an increase in construction costs, including land, materials and wages.
“This crisis is harder to tackle compared to the Tom Yum Kung crisis as it is affecting economies worldwide, not just Thailand,” he said.
