Krung Thai Bank Research Center pointing to rising interest rate Construction costs have moved high. Relax LTV Negative factors drag the real estate market in ’66 to shrink by more than 10 billion.
Krung Thai Bank Research Center pointing to rising interest rate Construction costs have moved high. Relax LTV Negative factors drag the real estate market in ’66 to shrink by more than 10 billion.
Kanit Amsakul Mr Analysts, Krung Thai Bank Research Center or Krungthai COMPASS analyzed the housing market situation in 2022 that the value of housing transfer in Bangkok and the perimeter will recover 3.3%, or a value of 600 billion baht, supported by factors
1. Expand the Thai economy
2. Measures to stimulate real estate by relaxing LTV and reducing mortgage transfer fees Residential housing projects such as single houses, semi-detached houses and town houses, which are more suitable for working from home than condominiums, are still well received by consumers . This was reflected in the income of large housing developers in the stock market which expanded well.
As for the trend in 2023, although the Thai economy is likely to continue to grow AND the return of foreign purchasing power will increase the value of the transfer of ownership in Bangkok. And the perimeter can still expand by 2.5%, worth 6.2 billion baht, but there are negative factors to watch out for:
1. Interest rates are rising
2. Higher project development costs
3. Impact of the end of LTV relief measures when the Bank of Thailand (BOT) decides not to renew LTV relief measures
Mr assessed Kanit 1. The rising interest rate is a major negative factor affecting the housing market in terms of consumers’ ability to borrow. and what the developers are doing Interest rates for the rest of 2022 through to 2023 are expected to be up as the Monetary Policy Committee is likely to raise the policy rate once again from the current 1% to 1.25% in 2022 before increasing 3 more times to 2% in 2023
together with the increase in the transfer fee to the FIDF fund. 2023 will return to pay at the same rate of 0.46% from the current rate of 0.23% Such conditions will directly affect consumers interested in applying for home equity loans in 1-2 years. The 1% interest rate rise has reduced the value of the most affordable homes that consumers can afford by around 10%, while developers are likely to be “pressured” by higher financing costs. It is expected that every 1% interest rate rise will result in a decrease in net profit for developers of -0.56% on average.
along with 2 project development costs which still tend to be high This was reflected in general building materials prices in the first nine months of 2022, which increased by 5.8% on average, accelerating significantly from the five-year average last year, which only increased by 1.9% per year. Steel prices rose the most at 9.1%, followed by cement at 6%, wood and wood products 5.2%, tiles 4.2%, and electrical and plumbing equipment 3.6%.
As for the main building materials such as steel, it is expected that although the situation in the real estate sector China’s steel demand will decrease. As a result, steel prices are likely to fall sharply in the second half of 2022, but the average price of steel in 2022-23 will remain at the level. 23,500-24,000 baht/tonne, higher than the average in the last 5 years at 20,800 baht per tonne. This is reflected in the land price index in and around Bangkok for 9 months from 2022, which is still up 2.2% from the previous year. As a result, developing new projects will have correspondingly higher costs
Another factor to watch for is the end of the LTV relief measure on December 31, 2022 after the Bank of Thailand decided not to renew the measure, resulting in the purchase of houses in all cases except the address Based on a value of less than 10 million baht in the first contract, it is necessary to return to using the down payment of 10-30% because the Bank of Thailand sees that the real estate sector has gradually improved, leading to the year 2023 that the LTV criteria returns to standard.old (before relaxation)
which states that buying a house with a price of less than 10 million baht in the 1st contract (first house) can borrow up to 110%, the 2nd contract (second house) can borrow up to 90% if the 1st contract is more than 2 years Or borrow up to 80% if the 1st contract is less than 2 years, from the 3rd contract or more can borrow up to 70% when buying a house with a price of 10 million baht or more, the contract can 1st recover up to 90% The second contract can borrow up to 80% and from those contracts 3 or more can borrow up to 70% respectively
For users affected by the termination of the LTV relief measures, they are divided into 3 groups: 1. Unaffected group 2. Partially affected group. and 3. groups likely to be directly affected
The groups that were not affected were consumers who wanted to buy a home worth less than 10 million baht as their first contract. can still borrow up to 110% of the original collateral value Some of the affected groups are consumers who want to buy homes worth 10 million baht or more who have to return to pay the 10-30% portion down as before.
which in practice may not be affected much. This is because consumers in this group tend to have a relatively high proportion of buying homes with cash. In addition, even if the relaxation of LTV measures makes it impossible to borrow 100% as before, it is believed that consumers in this group will have the opportunity to There will be enough wealth ready to pay the down payment.
The group expected to be affected are consumers who want to buy houses worth less than 10 million baht in the 2nd and 3rd contract onwards, who will have to return to using the down payment in the proportion of 10-30% the next year. An example of a user in this group could be either 1) Real Demand who has already paid in installments for the condominium in the first contract. But there is a desire to buy the second or third low houses, etc., as well as 2) Demand for Investment, especially in the category of condominiums with prices not exceeding 3 million baht which is preferred by the majority of buy-to-let investors or Therefore, the renewal of LTV relief measures has the opportunity to directly affect consumers in this group who may have to decide to postpone buying houses in 2023.
From an Initial Assessment, non-renewal of LTV relief measures may be detrimental to the value of housing transfers in Bangkok. and metropolitan areas in 2023, at least about 10,500 million baht, or a “reduction” of almost 2% from the original estimate.
by this calculation Identify users in the group expected to be affected. Or consumers who want to buy a home worth less than 10 million baht in contract 2 and contract 3 onwards, which accounts for 14% of the total housing loans, must postpone the purchase of houses in the proportion of 10- 15% resulting in the transfer value of housing ownership in Bangkok And the perimeter next year has a chance to come down to 6.2 hundred billion baht.
