Slowdown in the real estate sector

The real estate sector is considering proposing stimulus measures to the Prime Minister, aiming to boost the market after facing challenges in purchasing power in 2023. These challenges stem from negative global economic factors, domestic purchasing power and a surge in loan rejections.

The real estate market in Thailand is continuing to experience a slowdown. According to data from the Real Estate Information Centre, it is projected that the number of new residences launched in Bangkok and the surrounding areas for 2023 will be 87,732 units, a decline of 19.8% compared to the previous year when 109,451 units were introduced.

The expected total value for the year is 514.512 billion baht, which is higher when compared to the pre-Covid-19 average but represents a 6.5% decrease from 2022 when the new launch value was 550.146 billion baht—a significant 150% growth compared to 2021.

This decline is attributed to a decrease in purchasing power.

This outcome can be attributed to adverse factors, including the global economic impact of two wars and the challenging state of the Chinese economy.

The repercussions of the latter are being felt in the Thai real estate market, given that the Chinese represent a significant customer demographic.

Additionally, exports and tourism have not experienced the anticipated growth and the purchasing power within the country has declined, exacerbated by the shift towards higher interest rates and leading to an increase in loan rejections.

A worrisome factor is the remaining inventory. According to the data, in the third quarter, housing estates witnessed a remarkably high remaining sales value of 730.367 billion baht, indicating a significant increase in the accumulated supply of residential properties on the market.

However, the absorption rate has decreased, reflecting less favourable market conditions than anticipated at the beginning of the year.

This has led three real estate associations to propose stimulus measures for the sector.

The proposed measures to stimulate the real estate business next year include considering the extension of the fee reduction policy for property transfer and mortgage registration, which is set to expire at the end of this year.

Additionally, there is a plan to reduce the registration fees for residential rights and legal documents, with a 1% reduction in transfer fees and a 0.01% reduction in mortgage fees. 

The relaxation of the Loan-to-Value (LTV) ratio aims to ease credit control measures for residential properties. The proposal suggests allowing the public to borrow up to 100% for an additional 2 years after the Bank of Thailand (BOT) tightened the criteria.

This involves reverting to the previous LTV criteria, where first-time borrowers, with a loan amount not exceeding 10 million baht, could borrow up to 100% and an additional 10% for home decoration.

For a second house with a loan amount not exceeding 10 million baht, borrowers could secure 70-90% financing.

For the "Good House, Good Down Payment" programme, it is proposed to increase the down payment refund from 50,000 to 100,000 baht for home purchases at all price levels as well as introduce a soft loan initiative providing low-interest rate loans to facilitate easier access to credit.

A plan to reduce the tax for first-time homebuyers, aiming to make homeownership more accessible is also on the cards.

Another measure is the introduction of a 5-year visa for foreigners who purchase condominiums in the price range of 3-5 million baht.

Additionally, they will be allowed to buy into housing within a project, not exceeding 25% of the total project value in Bangkok (priced at 10 million baht or higher) and not less than 5 million baht in other provinces.

Moreover, the lease period should be extended to 50 years, enabling an increased proportion of foreign ownership of condominiums in excess of 49%.