The recent analysis by property associations reveals that the rising house prices, primarily driven by escalating construction costs, are having a lesser impact on potential homebuyers compared to the challenges they face in securing mortgage loans. This trend highlights the complexities of the current real estate market, where financial barriers overshadow price increases.
Key Takeaways
- House prices are rising due to global trends and increased construction costs.
- Stricter lending requirements have led to a surge in mortgage rejection rates.
- Developers are adjusting strategies to make homes more affordable.
- Calls for government intervention to stimulate the housing market.
Rising House Prices Amid Global Trends
The increase in house prices is not an isolated phenomenon; it reflects a global trend influenced by various factors. Pornarit Chounchaisit, president of the Thai Real Estate Association, noted that the ongoing war and its impact on oil prices are significant contributors to rising construction costs. Additionally, labor costs are expected to continue climbing, further pushing housing prices upward.
Despite these challenges, the market is expected to see a rise in house prices next year, largely due to the government’s plan to increase wages. However, this wage increase may benefit foreign labor, which constitutes a significant portion of the workforce, rather than domestic workers.
Mortgage Challenges for Homebuyers
While house prices are on the rise, the real hurdle for many prospective buyers lies in securing mortgage loans. Soonthorn Sathaporn, president of the Housing Business Association, emphasized that the increase in house prices has not outpaced inflation. The more pressing issue is the stricter lending requirements that have led to a dramatic rise in mortgage rejection rates.
- Current Mortgage Rejection Rates:
- Overall rejection rate: 35% (up from 15-20%)
- Homes priced at 2-3 million baht: 50-60% rejection rate
These statistics indicate a significant barrier for many potential buyers, particularly those looking for affordable housing options.
Developer Strategies to Address Affordability
In response to the challenging market conditions, some developers are adjusting their strategies. To make homes more affordable, they are reducing gross margins and accelerating construction processes to cut costs. This shift aims to attract buyers who are struggling to secure financing.
Calls for Government Intervention
To stimulate demand in the housing market, industry leaders are urging the government to take action. Suggestions include:
- Extending property measures set to expire at the end of 2024.
- Introducing income-tax deductions for first-time homebuyers.
- Easing loan-to-value (LTV) regulations to encourage second-home purchases.
Prasert Taedullayasatit, president of the Thai Condominium Association, echoed the need for temporary easing of LTV requirements, suggesting that the government could revoke these measures if any speculative behavior is detected.
Future Outlook and Upcoming Events
To further boost demand, the three property associations are organizing the House & Condo Expo from October 31 to November 3 at the Queen Sirikit National Convention Center. The event aims to achieve sales of at least 1,000 units, with a total value exceeding 4.5 billion baht. Additionally, they anticipate generating an extra 10 billion baht in sales in the months following the expo.
In conclusion, while rising house prices are a concern, the more pressing issue for potential homebuyers is the difficulty in securing mortgage loans. Industry leaders are advocating for government intervention to alleviate these challenges and stimulate the housing market.
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