Real estate experts warn of continued crisis, seek government support
Real estate experts have warned that the sector remains in crisis as we enter the final quarter of the year, citing high mortgage rejection rates and plummeting sales while urging the government to extend supportive measures to bolster the market.
Prasert Taedullayasatit, president of the Thai Condominium Association, said the Thai real estate market in the fourth quarter of 2024 still faced challenges from sales and transfers, hampered by loan rejection and high interest rates.
Despite an expected improvement in the fourth quarter due to the completion of condominiums worth 86,052 million baht, the overall market for 2024 is projected to decline by 20%, the highest in 10 years.
Compared to the first quarter, new completions were valued at 35.686 billion baht, followed by 20.778 billion baht in the second quarter and 33.235 billion baht in the third.
"If these completed condominiums can be transferred, it will help the real estate market to fully recover in 2025 after weathering the perfect storm," Prasert said.
However, he stressed the importance of accelerating interest rate reductions to alleviate the burden on borrowers. For those paying instalments, lower interest rates would ease their financial strain, particularly for the lower-income segment.
Moreover, interest rate cuts could strengthen the baht, attracting foreign buyers and facilitating faster condominium transfers. The Bank of Thailand's LTV (Loan to Value) loan control measures, which require 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 timing of interest rate cuts and LTV adjustments will depend on the outcome of the Monetary Policy Committee (MPC) meeting on October 16, a crucial turning point. Lower interest rates and relaxed LTV measures could stimulate more 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 highlighted the importance of the Bangkok market and surrounding areas, which account for 60% of revenue, while predicting that provincial markets may surpass the capital in the future.
Soothorn also 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.
Currently, the primary obstacle to homeownership is not only insufficient finance but also increased loan rejections by banks, ranging from 10-15% to 35-60% in some projects, particularly low-cost housing.
Government support for consumer credit would significantly boost the market.
Meanwhile, Pornnarit Chuanchaisit, president of the Thai Real Estate Association, noted that rising construction costs, labour costs, 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.
