The Real Estate Data Center recommends the government to expand the ceiling for reducing transfer and mortgage fees from properties priced up to 3 million baht to 3-5 million baht, believing it will stimulate purchasing power as this segment represents a significant portion of the market with the highest remaining inventory. The proposal includes discussions with banks to consolidate short-term debts into long-term portfolios and increase the debt ceiling to further stimulate the second-hand housing market and attract buyers with financial capacity.

The real estate sector has been heavily impacted by the economic downturn caused by COVID-19, leading to a continuous increase in loan rejections, which has significantly slowed purchasing power. Real estate operators and related agencies are calling for the government to implement additional measures to encourage those with money who are still hesitant to purchase housing to make quicker decisions.

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Wichai Wiratthakhan, Director of the Real Estate Data Center, revealed that a survey on the direction of the real estate business indicates a continued slowdown for at least the next two years. Signs of this slowdown have been evident since mid-last year when the Bank of Thailand implemented Macroprudential measures or controls on housing loans (LTV - Loan to Value), which have been severely affected by the COVID-19 outbreak. It is expected that by the end of 2020, there will be 319,210 units transferred, a decrease of 18.6% compared to the previous year, which is lower than the average of the past two years at 392,863 units, representing a value of 723.213 billion baht, down 22.3% from the two-year average of 933.021 billion baht.

It is expected to take 5 years to return to the peak level of 2018.

It is anticipated that it will take up to 5 years for the real estate market to recover to the peak growth level of 2018, which saw the highest new housing loans nationwide at 702.9 billion baht.

The survey also found that the number of unsold units in the market is trending upwards. By the end of 2020, it is expected that there will be the highest number of unsold units in 5 years, potentially exceeding that. In the past two years, the unsold units were below 300,000, but they began to exceed 300,000 units, reaching 301,098 units since the second half of 2019. In the first half of 2020, the unsold units slightly decreased to 293,319 units.

When evaluating the absorption rate, which is trending downwards, it is expected that by the second half of 2020, the unsold units will increase to 319,528 units, valued at 1.4 trillion baht. The trend of unsold units is not expected to stop there, as by the end of 2021, it is projected to rise to 328,578 units, valued at 1.5 trillion baht.

Encouraging housing in the 3-5 million baht range.

Mr. Wichai further stated that in a slowing economy, if the government intends to use the real estate sector as a mechanism to stimulate the economy, it must promote home purchases, especially in the 3-5 million baht housing market, which has a high transfer rate and is not as affected by loan rejections compared to the market for homes priced below 3 million baht. This segment also has a high proportion of unsold units. In the first half of 2020, the price range of 3-5 million baht had a total of 86,949 unsold units, which is the second-highest ratio of unsold units after the 2.01-3 million baht market with 91,763 units. However, in terms of the value of unsold units, the 3-5 million baht housing segment has the highest value, totaling 356.5 billion baht.

Highlighting the highest value of unsold units in the market.

"If the government stimulates the real estate market in the 3-5 million baht range, it will revitalize the market as this segment has a high value of unsold units and consists of buyers with purchasing power. It is expected that in the 3-5 million baht price range, there will be 18,800 units completed and ready for transfer, with another 30,410 units under construction, totaling 49,000 units."

Therefore, it is proposed that the government expand the ceiling for reducing transfer and mortgage fees to 0.01% from properties priced up to 3 million baht to include those priced at 3-5 million baht, which is estimated to generate approximately 200 billion baht in economic circulation.

"Currently, the market situation is poor. Even though the private sector is trying to stimulate the market by reducing prices to maintain liquidity, as we enter the third quarter, the sentiment of buyers remains sluggish. It is expected to slow down until the end of next year. Therefore, it is suggested that the government stimulate the market with these measures to encourage people to make purchasing decisions more easily, allowing the market to return to growth from the previous normal baseline. Without stimulation, new loan disbursements by the end of 2020 are expected to decline by 15.2%, while the best-case scenario would see a decline of 10.8%. For 2021, the base case is projected at 1.3% growth, while the best case could expand by 8.1%.

Converting short-term debt to long-term debt.

Mr. Wichai also proposed addressing household debt issues that hinder housing loan disbursement after commercial banks have tightened lending measures and set aside funds to address potential defaults or non-performing loans (NPL) that may arise after October when the debt moratorium measures end. It is hoped that new loans will be reintroduced after the moratorium ends.

Thus, the government should discuss with relevant agencies to enhance financial measures at this juncture by making it easier for people at all levels to purchase assets (Ease to buy) by relaxing measures to access loans through loan portfolio adjustments, including high-interest short-term debts like personal loans and car loans into long-term loans to reduce the debt burden on the public. This will help increase the debt ceiling for housing loans, provided there are mechanisms and measures to manage risks associated with increasing debt in the future.

Additionally, the government should stimulate the real estate market through the second-hand home buyer segment, which accounts for 40% of the market, with approximately 130,000 to 150,000 second-hand homes available for sale each year. The average transfer rate over the past two years has shown that transfers of second-hand homes have exceeded those of new homes. In the second quarter of 2020, there were 32,711 transfers of second-hand homes compared to 22,490 for new homes. However, it was found that the growth rate for 2020 was negative 19% compared to new homes at negative 16%, resulting from the lack of measures to stimulate purchasing power.

Call for a roadmap to revive the real estate sector.

Furthermore, the government should establish a working group and set a timeline to create a roadmap for driving the real estate market based on the 21 measures proposed by the real estate sector during a meeting with Prime Minister General Prayuth Chan-o-cha. This plan should clearly outline cooperation between the government and the private sector to achieve tangible results.

SOURCE: www.bangkokbiznews.com/news/detail/900120