In the past six months, the real estate market in Thailand has faced challenges. If you were to ask various property developers, most would likely express their frustrations. This year, the real estate business has seen a downturn, with revenues falling short of expectations. Contributing factors include global economic volatility, trade wars, and China's financial controls on capital outflows, as Chinese clients have been significant customers for Thailand in previous years. However, one of the main topics of discussion this year has been the LTV measures, which many parties claim have significantly impacted the real estate sector. Today, Terrabkk would like to present a different perspective on the LTV measures for everyone to consider.

 

 

          Starting with an interview with Mr. Wit Kulthanwiphat, CEO of Capital One Real Estate Co., Ltd., a leading real estate consultancy in Thailand, he stated that the overall real estate market in Thailand remains concerning and requires close monitoring of risks, especially regarding the LTV measures from the Bank of Thailand (BoT), which directly affect investors and lead them to delay property purchases. He believes that the central bank's measures to curb the Over Supply issue in the real estate sector have not effectively addressed the problem, as the government has only focused on subsidizing and stimulating purchasing power for low-income groups.

          The middle-class, a crucial demographic, still lacks adequate support measures to enhance their purchasing power and is further burdened by the LTV measures, which have reduced their purchasing capacity. Particularly, those looking to buy a second home priced below 5 million baht may not have the necessary funds for a 20% down payment. Meanwhile, upper-tier clients with purchasing power of 5-10 million baht or more do not seem to be affected by the LTV measures, as they typically have reserves and sound financial management plans.

          From the agents' perspective, there remains concern about the real estate situation in Thailand, especially regarding joint ventures between Thai operators and foreign companies developing projects in the country. Coupled with continuously rising land prices, the cost of condominiums in city centers has surged, leading to decreased purchasing decisions among foreign clients and increased unsold inventory for developers.

          These two factors affect both buyers and sellers simultaneously. Therefore, it is suggested that the government should expedite short-term economic stimulus policies within the third quarter of this year, particularly measures to boost the purchasing power of the middle class, such as tax reductions, lowering transfer and mortgage fees, and revisiting the LTV measures. The central bank should reassess the benefits and impacts of these measures comprehensively to find solutions that align with the actual market situation, such as adjusting criteria for those looking to buy a second home to demonstrate genuine need, like purchasing for children near schools or for proximity to workplaces, with clear documentation to present to lending banks. This would not only support public purchasing power but also allow developers to clear their inventory in line with market mechanisms.

          Regarding the central bank's concerns about the oversupply of condominiums, it should start addressing issues with property developers to reduce the number of new condominiums being built. Although commercial banks have implemented some restrictions, there are still gaps that allow developers to continue funding new projects. Therefore, the central bank should impose legal limitations on the issuance of bonds by developers. The market for foreign clients has notably declined since late last year, particularly among Chinese investors, whose purchases have dropped by over 50% due to trade war issues and the strengthening baht, causing them to delay investments in Thai real estate and shift towards properties in Phnom Penh and Manila, where prices per square meter are lower and these cities are seen as continuously developing with better returns. Meanwhile, the Cambodian government has opened opportunities for Chinese developers to invest in real estate, attracting investments with lower transfer costs and taxes, making it easier for Chinese developers to market to Chinese investors. Clearly, the real estate business will not only compete in the domestic market but also face challenges from international markets, posing a significant task for Thai developers to remain resilient and navigate through crises in a world filled with conflicts.

 

 

          Mr. Pirapong Jarunek, CEO of Origin Property Public Company Limited, and Mr. Thanakorn Thanvarit, CEO of All Inspire Development Public Company Limited, both expressed that in an era where real estate is slowing down and facing restrictions from the LTV measures, causing customers to delay purchases, developers must pay more attention to the details of new condominium projects, especially regarding location, room sizes, and pricing to ensure alignment. Launching overpriced condominiums will be challenging in this era, as customers have more options in every location. Both companies are seeking ways to develop new projects that best meet customer needs and focus on pricing that is accessible to all customer segments.

          As for the condominiums still in stock, they are currently collaborating with foreign agents to sell products to international clients more effectively. In Thailand, the companies will offer special promotions for resale units or units still in stock, showcasing completed units ready for transfer at housing and condominium fairs. Regarding horizontal properties, they believe that this segment can still grow by about 15-20% this year, compensating for the declining condominium market, as horizontal property buyers tend to have purchasing power and well-planned finances for home purchases.

 

source : https://www.thebangkokinsight.com/

 

          Mr. Kitti Patthanapongpipat, President of the Housing Loan Association, commented on the LTV measures, stating that the Bank of Thailand implemented the LTV measures to standardize real estate lending to global standards, curbing investors who do not genuinely need homes and slowing down the market where property prices in Thailand are excessively high for real consumers. This aims to rebalance the Thai economy to better cope with global economic conditions.

          Terrabkk further inquired why the LTV measures were introduced this year, given the anticipated slowdown in the real estate sector. Mr. Kitti Patthanapongpipat explained that the LTV measures were necessary this year because the real estate sector had experienced high growth in previous years, allowing many real estate companies to profit significantly. This enabled property developers to manage the market balance brought about by the LTV measures and to address the need to keep Thailand's NPL ratio from rising too high, as Thailand currently has one of the highest average NPL ratios in the world.

 

source : https://baania.com/

          Mr. Alongkot Boonmasuk, Secretary-General of the Housing Loan Association and Senior Director of Partner Management and Marketing Promotion for Housing Loans at Kasikorn Bank, stated that Thailand should establish a uniform DSR or debt-to-income ratio standard across the country and noted that the current NPL ratio has been increasing at a lower rate than in the past. However, the reason for Thailand's high average NPL is due to accumulated past debts, primarily from operators, especially in the SME sector, which has been affected by global economic conditions and various external factors. Mr. Alongkot Boonmasuk suggested that various parties and agencies should collaborate and adapt, utilizing technology more in business operations, particularly in Big Data to assist in data collection, processing, and accurate market forecasting and analysis, ensuring reliability and uniform standards across all parties.

 

          Many of you may have noticed that each individual interviewed by Terrabkk regarding the LTV measures implemented by the Bank of Thailand to regulate the real estate business has differing opinions and perspectives. What do you think? What are the advantages and disadvantages of the LTV measures? How should they be adjusted? Feel free to share your thoughts!