House prices having less impact than mortgage woes

The increase in house prices, driven by rising construction costs, has had a significantly lower impact on prospective homebuyers compared to the difficulty people face in securing mortgage loans, according to property associations.
Pornarit Chounchaisit, president of the Thai Real Estate Association, said the rise in costs is part of a global trend, with housing prices increasing in major cities around the world.
“The war and its effect on oil prices are driving up construction costs for new housing projects,” he said. “Additionally, rising labour costs will be a key factor in pushing prices even higher.”
While selling homes remains challenging, house prices will rise next year due to the government’s plan to raise wages. But the policy will benefit foreign labour, which makes up 50-60% of the workforce, more than helping domestic labour.
Soonthorn Sathaporn, president of the Housing Business Association, said the increase in house prices has not outpaced inflation.
“The real issue is that many potential buyers are unable to secure loans due to stricter lending requirements,” he said.
Mr Soonthorn added that the mortgage rejection rate has surged to 35%, up from the typical 15-20%, especially for homes priced 2-3 million baht, where rejection rates hit 50-60%.
Some developers have been forced to reduce their gross margins to make homes more affordable and accelerate construction processes to cut costs.
To stimulate demand, he urged the government to extend property measures set to expire at the end of 2024 and introduce income-tax deductions for first-time homebuyers.
Additionally, easing the loan-to-value (LTV) regulations would encourage second-home purchases, catering to the demand for properties near schools or workplaces.
Prasert Taedullayasatit, president of the Thai Condominium Association, echoed the call for a temporary easing of LTV requirements to stimulate the market, suggesting the government revoke these measures if any speculative behaviour were detected.
“A cut in interest rates will further enhance home purchasing power, particularly for lower-income earners, and contribute to a weaker baht, which can boost tourism and stimulate property purchases among foreign buyers,” he added.
To boost demand in the fourth quarter, the three associations will organise the House & Condo Expo from Oct 31 to Nov 3, at Queen Sirikit National Convention Center.
They aim to achieve sales of at least 1,000 units with a total value exceeding 4.5 billion baht. They also expect to generate an additional 10 billion baht in sales in the months following the event.