Property developers in Thailand are sounding the alarm as the second quarter of 2023 recorded the lowest property sales in over a decade. They are urging the government to implement supportive measures to revitalise the struggling real estate sector, which has been significantly impacted by stringent lending criteria and a sluggish economy.
Key Takeaways
- Q2 property sales have dropped to the lowest level in 12 years, with a 54% year-on-year contraction for townhouses and properties under 3 million baht.
- Developers are calling for the easing of the Bank of Thailand’s loan-to-value (LTV) ratio to facilitate housing loans for Thais.
- The government has already introduced some measures, but developers are seeking further action to stimulate the market.
Current State Of The Property Market
According to the Thai Condominium Association, while there was a slight improvement in overall property sales from the first quarter, the figures remain dismal compared to the same period last year. The association’s president, Prasert Taedullayasatit, highlighted that the sales of townhouses and properties priced below 3 million baht have plummeted by 54% year-on-year, indicating a severe challenge for potential homebuyers.
Prasert noted that despite high market demand, many customers are unable to secure loans from financial institutions, which has exacerbated the situation. Additionally, the transfer rate of properties to foreign buyers has also slowed, with a 50% drop attributed to the ongoing political instability in Myanmar, affecting buyer confidence.
Developers’ Call For Government Action
In light of these challenges, developers are urging the new government to take proactive measures to stimulate the economy through the real estate sector. Athip Bijanonda, director of Supalai Australia Holdings, expressed intentions to meet with new ministers to discuss economic stimulus proposals. Earlier this year, seven major real estate organisations formally requested the government to invigorate the sector, which is still in a sluggish recovery phase.
Some of the proposed measures include:
- Reviving the "Baan Dee Me Down" project, offering a 100,000 baht down payment subsidy for first-time homebuyers.
- Relaxing the loan-to-value ratio for first and second home purchases.
- Reducing land and building tax rates in 2025 to ease the financial burden on businesses and the public.
Bijanonda emphasised that the real estate sector, valued at 800 billion baht annually, has the potential to significantly stimulate the economy if these measures are implemented.
The Role Of Foreign Investment
The Government Housing Bank’s Real Estate Information Centre (REIC) has also suggested that easing restrictions on foreign ownership could help alleviate the current market slump. The Cabinet has agreed in principle to increase the foreign ownership ratio in condominium projects from 49% to 75% and extend property leaseholds from 30 years to 99 years.
REIC director Wichai Wiratkapan warned, however, that these measures must be carefully regulated to avoid long-term negative impacts on the property market. He reported that there are currently 213,429 unsold units valued at approximately 1.21 trillion baht, a 36.5% increase from the previous year.
Conclusion
As the Thai property market grapples with unprecedented challenges, developers are calling for immediate government intervention to support the sector. With the potential for significant economic stimulation through real estate, the urgency for action has never been greater. The coming months will be crucial in determining the trajectory of the market and the broader economy.
Sources
- Developers ask for support as Q2 property sales lowest in 12 years, Nation Thailand.
- Property developers seek proactive measures from new government, Nation Thailand.
- Longer property leases for foreigners to boost slumping market: REIC, Nation Thailand.
