Krungthai COMPASS assesses the housing market in Bangkok. and the surrounding provinces, worth 604 billion baht, growing 3.3% YoY and likely to grow continuously at 2.5% YoY in 66, which is mainly supported by the continued expansion of the Thai economy. The return of foreign purchasing power And there is an opportunity for the government to extend the measure to reduce transfer-mortgage fees for another year.
However, the housing market still has a disadvantage due to rising interest rates, high project development costs. and ending Loan to Value (LTV) relief measures on 31 December.
For the value of the housing market at 65, it is expected that the value of the transfer of housing ownership in Bangkok and metropolitan areas will recover 3.3%YoY, worth 604 billion baht, which is mainly supported by 1. The growth of the Thai economy and 2. Measures to stimulate real estate. loosening LTV and reducing mortgage-transfer fees The market value forecast this time has not changed from the previous time. This is because the actual ownership transfer data in 8M/65 is still close to the projection frame.
Residential housing projects such as detached houses, semi-detached houses and townhouses which can meet the needs of working from home (WFH) better than condominiums are still well received by consumers. This reflected the income in the housing sector from major residential developers listed on the stock market which grew well in 1H/22, such as AP Thailand Plc (AP), which increased by 21.6% YoY, the same as CCC SC Asset Corporation (SC) and Supalai Public Company Limited (SPALI) grew by 11.7%YoY and 22.1%YoY, respectively.
For the year 66, although the Bank of Thailand (BOT) has decided not to renew LTV relief measures, the Thai economy is likely to continue growing. and the return of foreign purchasing power from an international travel situation that began to return to more normal conditions It is expected that the value of the transfer of housing ownership in Bangkok And the perimeter was still growing 2.5% YoY, worth 6.2 hundred billion baht.
In addition to the continued growth of the Thai economy this is considered a positive factor for the purchasing power of Thai consumers. The opening of foreign tourists increasing from 10.2 million in 65 to 21.4 million will be a positive factor for foreigners’ demand for housing in Thailand to grow accordingly.
Especially from Chinese, who account for half of all foreign purchasing power. Still interested in the Thai real estate sector, as reflected by information from Juwai.com, a real estate trading website. China’s largest foreign survey indicated that Thai real estate remained in the top 3-4 searches in 1H/65, the segment that would benefit most from foreign purchasing power, including condominiums, size 40-50 sq.m. ., price 4-5 million baht per unit. in Sukhumvit, Sathorn, Asoke, Rama 9, Ratchada and Huai Khwang, etc.
For new housing projects opened in the first 8 months of the year 65, the Bangkok housing market And the perimeter has 67,100 new units opened, an increase of more than 2 compared to the same period last year, divided into 37,900 units of condominiums and 29,200 units of housing estates. Each type of housing segment has been accepted by consumers which is reflected in having the highest pre-sale ratio, which includes
1. Single houses priced over 20 million baht with pre-sales 30.3% 2. Semi-detached houses 10-20 million baht Pre-sales 19.6% 3. Townhouses priced 5-10 million baht Pre-sales 42.3% and 4. The most popular segment condominiums is not valued more than 3 million baht / unit. or a group focused on offering value to consumers with pre-sales of 37.4%
For the full year 65-66, new units are expected to rise from 56,769 units in 64 to year on year. 90,000-100,000 units, split into housing estates of around 40,000-45,000 units and condominiums of 55,000-60,000 units as housing developers rush to stock up on their own backlogs After the 2020-2020 COVID-19 pandemic 64, most housing developers decided to maintain their liquidity by focusing on selling their homes. The old stock was completed. and postpone the opening of new projects until the situation improves
As a result, the unit opened again during that period. Therefore, it is at a low level of only 65,000 per year. The trend of new units to increase in 65-66 years is in accordance with the plans of the Top Developers that almost all of them intend to launch new projects higher in the year 65. from last year
Regarding the direction of housing loans (Post-Finance) The latest data from Q2/65 showed that the housing market accumulated an outstanding value of all Post-Finance loans of 2.64 trillion baht, growing 2.4% YoY, broken down into loans housing (low rise) at 1.76 trillion baht grew 3.8% YoY and condominiums (condominiums) at 0.61 trillion baht, grew lower than housing at 1.1%.
However, this was due to the direction of new mortgage loans (excluding refinancing) during 1H/22, where new housing units had 124.2 billion baht in new mortgage loans, a contraction of 3.6% YoY. Meanwhile, condominiums had new loans of 37.8 billion baht, negative than houses at 12.5% YoY.
For the rest of the year, the accumulated post-finance loans are expected to continue to expand. of speeding up ownership transfers before the end of the LTV relaxation measures, in line with credit conditions and financial institutions trend reports indicate Senior managers in charge of credit operations of 52 financial institutions see that the demand for post-finance loans in Q4/22 likely to accelerate from this quarter onwards.
Krungthai COMPASS sees that there are factors in the year 66 that should be monitored as follows:
1. Rising interest rates are a major negative factor affecting the housing market in terms of consumer borrowing and what the developers are doing It is expected that interest rates in the remainder of year 65 to year 66 will rise as for the Monetary Policy Committee (MPC) to tend to raise the policy rate once again from the current 1% to 1.25% in 65 before increasing. 3 more times to 2% in 66, plus an increase in the transfer fee to the Financial Institutions Development Fund (FIDF) which on 1 January ’66 will return Let’s pay at the same rate of 0.46% of the current rate from 0.23 %
The situation will have a direct impact on consumers interested in applying for home equity loans in the next one to two years by reducing the maximum loanable value of homes, with each 1% interest rate rise tending to reduce the maximum house value that consumers can afford to borrow by around 10% Meanwhile, housing developers are likely to be under pressure from higher funding 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.
2. Project development costs which still tend to be high This is reflected in general building material prices in 9M/65, which have increased by an average of 5.8% since last year, accelerating significantly over the last five years at an average of 1.9% per year increase. 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%.
Expected for main building materials such as steel. Even the situation in China’s real estate sector will reduce the demand for steel. As a result, steel prices tend to fall sharply in 2H/65, but the average steel price in 65-23 will remain at the level. 23,500-24,000 baht per tonne, higher than the average in the last 5 years at 20,800 baht per tonne
In terms of land prices, it was found that they continued to rise. This was reflected by the land price index in Bangkok and its surroundings at 9M/65 which was still up 2.2% from the previous year. As a result, developing new projects will have correspondingly higher costs
3. End of LTV easing measures on 31 December 65 after the Bank of Thailand decided not to renew the measures. leading to the purchase of houses in all cases Except for houses worth less than 10 million baht in the first contract, it is necessary to go back to using the down payment of 10-30%.
On October 31, the Bank of Thailand announced that it would not extend the LTV relief measures because it anticipates that The real estate sector has begun to gradually improve. The two ownership transfer units are in the expansion direction. as well as new open units which have started to return to a level similar to pre-Covid-19 (year 62)
As a result, in 66 the LTV criteria will return to the old criteria. (Before the relaxation), which states that buying a house with a price of less than 10 million baht in the 1st contract can borrow up to 110%, the 2nd contract 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, can the 1st contract borrow up to 90%, the 2nd contract can be borrowed Up to 80% and from the 3rd contract upwards, borrow up to 70% respectively
Krungthai COMPASS divides consumers into 3 groups according to the effect of the termination of LTV mitigation measures:
1. The group that is not affected are consumers who want to buy a house worth less than 10 million baht as the first contract. which can lend up to 110% of the original collateral value
2. Partially affected groups are consumers who want to buy homes worth 10 million baht or more. who have to return to using the down payment in the proportion of 10-30% as before, which is practical Krungthai COMPASS sees that it may not be affected much This is because users in this group tend to have a relatively high percentage of home purchases with cash.
In addition, although the non-renewal of LTV relief measures will make it impossible to recover 100% as before, it is believed that consumers in this group have the opportunity to have enough wealth to cover the payment to down
3. 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 next year to use the down payment in the a share of 10-30 % Examples of users in this group can be Real Demand who have already paid the condominium in installments in the first contract. But it is necessary to buy a low house as a second or third house, etc.
as well as the demand for investment, especially in the condominium segment with prices not exceeding 3 million baht, which most investors prefer to buy to rent or speculate. Therefore not having renewal of LTV relief measures an opportunity to directly affect consumers in this group. It may be necessary to decide to postpone buying a house at 66
Krungthai COMPASS preliminary assessment (Initial Assessment) that non-renewal of LTV relief measures could be detrimental to the value of housing transfers in Bangkok. And the perimeter in 66 lost at least 10,500 million baht, a decrease of almost 2% from the original estimate.
in 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 Having to postpone the purchase of houses in the proportion of 10-15%, resulting in the value of the transfer ownership of houses in Bangkok. And the perimeter next year has a chance to come down to 6.2 hundred billion baht.
“Krungthai COMPASS sees the housing market in the years 65-66 to be in an increasing direction. both on the demand side from the economic growth and the return of foreign purchasing power as well as the opening of new projects from housing developers to return to the level of 90,000-100,000 units per year again to offset the low launch of new projects from the 1-2 last years, however, the market still has a downside as a result of rising interest rates. Project development costs are still high. and the latest is the end of the LTV relief measures.”
The analysis indicates
By InfoQuest News Agency (09 Nov 65)
Tags: Krungthai COMPASS , LTV , housing market , real estate , Thai economy
