PUBLISHED : 8 Oct 2024 at 07:18
Recent data highlights the dramatic increase in house prices due to soaring construction costs, significantly impacting prospective homebuyers’ ability to obtain mortgage loans. According to key property associations, these hurdles far outweigh the direct effects of rising prices on buyers.
The president of the Thai Real Estate Association emphasized that escalating costs are part of a broader global trend, with urban housing prices reaching new heights.
“The ongoing conflict and its influence on oil prices are contributing to increased construction expenses for new housing developments,” he explained, noting that higher labor costs are likely to continue driving prices upwards.
Despite the challenges of selling homes, the trend indicates that house prices are expected to rise next year, spurred by government wage increases. However, this policy primarily benefits the foreign labor sector, which constitutes approximately 50-60% of the workforce.
In a related statement, the president of the Housing Business Association pointed out that the rise in house prices has not significantly outpaced inflation rates.
“The central issue lies in the stringent lending requirements, which hinder many potential buyers from obtaining loans,” he noted.
Furthermore, reports reveal that mortgage rejection rates have surged to 35%, compared to the usual 15-20%, with homes priced between 2-3 million baht experiencing rejection rates as high as 50-60%.
In response to this market challenge, some developers are reducing their profit margins to offer more affordable housing options and accelerating construction timelines to cut costs.
To stimulate demand in the market, industry leaders are urging the government to extend existing property measures set to expire at the close of 2024, as well as introduce income-tax deductions for first-time homebuyers.
Moreover, relaxing loan-to-value (LTV) regulations could encourage secondary home purchases, thereby targeting the need for properties in proximity to schools and workplaces.
Additionally, the president of the Thai Condominium Association echoed the call for temporarily easing LTV requirements to help invigorate the market, suggesting that these measures could be retracted if speculative behaviors emerge.
“Reducing interest rates would further empower homebuyers, particularly those from lower-income backgrounds, and could contribute to a weaker baht, positively affecting tourism and driving property purchases by foreign buyers,” he added.
In a bid to enhance demand in the upcoming fourth quarter, the three associations will host the House & Condo Expo from October 31 to November 3 at Queen Sirikit National Convention Center. Their goal is to sell at least 1,000 units, totaling over 4.5 billion baht, with expectations of generating an additional 10 billion baht in sales following the event.
