PLUS Views LTV Ratio Unlocking as Beneficial to Residential Properties across All Price Ranges; Reveals Findings from Survey of the Condominium, Detached House and Townhome Markets

Real Estate News Friday November 5, 2021 11:39 —PRESS RELEASE LOCAL

PLUS Views LTV Ratio Unlocking as Beneficial to Residential Properties across All Price Ranges; Reveals Findings from Survey of the Condominium, Detached House and Townhome Markets

PLUS Property views the relaxation of the LTV measure as a positive factor that will stimulate the property market at all price ranges.  Revealing results from its survey of the residential properties market in the first half of the year, PLUS found that condos with prices not exceeding 10 million baht had a selling rate of 67.5% and were receiving better response than ones that were priced higher than 10 million baht.  In the detached house and townhome categories, selling rates were more consistent across price ranges - the selling rates for detached houses and townhomes priced no more than 10 million baht was 57% and 53%, respectively.  Increasing the LTV ratio to 100% is believed to provide a starting point for revitalisation of the residential properties market.  However, the market is only expected to return to normal 1-2 years after the COVID situation lifts.  Any additional strong measures that benefit properties at all price points are believed to be of even more help.

Ms. Somsakul Limsuttaphan, Deputy Managing Director - Business Development and Asset Management Department at Plus Property, the full-service professional property and facility management agency, gave her view on the recent relaxation of the LTV requirement for home loans, where the LTV ratio was adjusted to 100% for all price levels and all types of mortgage loan contracts.  She believes the LTV increase, which will remain in effect until the end of 2022, would stimulate the property market at every price range.  For a good part of this year, property developers were focused on launching projects with approachable prices that would be in line with customers' diminished purchasing power.  But Thailand's 'reopening', the tendency for an economic recovery and the unlocking of the LTV requirement on mortgages should allow the property market to gradually recover.  Said recovery will likely be apparent for properties with approachable prices as well as for luxury projects with price tags of 10 million baht and above, as the latter also stand to benefit from the new LTV ratio.

A survey of the property market in the first half of 2021, carried out by PLUS's research and development division, found that 10,018 units of new supply came into the market for condominiums - this was a decline of 38% from the second half of 2020.  Properties in the price range of 40,000-90,000 baht per square metre retained the predominant share of the market, at 44%.  During this survey period, PLUS discovered that new supply priced lower than 40,000 baht per square metre and higher than 150,000 baht per square metre increased from the second half of 2020; this reflects the fact that developers tried to target a more diverse assortment of consumers this year.  Reception wise, the average selling rate at the property projects surveyed (newly launched condos and those in the middle of sales) was 67%, based on a total unit count of 180,261.  Viewed in light of the LTV criteria in use during H1 2021, condos priced no more than 10 million baht had a selling rate of 68% based on 166,315 total available units.  Those with prices exceeding 10 million baht had a selling rate of 60.5%, based on 13,946 on-market units.

In the category of single detached houses, 2,561 units of new supply entered the market; this figure is a 46% drop from the latter half of 2020.  The 5-8 million baht price level saw the most property launches.  Developers concentrated on launching these properties during the H1 2021 survey period, unlike during 2020 when emphasis was placed on launching projects in the upper price ranges.  The average selling rate among the surveyed projects (newly launched projects and projects in the middle of sales) was 57%, based on 44,693 units.  Differentiated according to the LTV criteria in use during H1 2021, properties priced no more than 10 million baht had a selling rate of 56.7% based on 33,846 total available units.  Properties priced more than 10 million baht had a selling rate of 58.1%, based on 10,847 on-market units.

For townhomes, the number of newly offered units belonging to this property type dropped the most among the 3 markets.  Newly launched development projects contributed 5,462 townhome units to the market; the number is a 58% decline compared to that in the latter half of 2020.  Most of the newly offered projects were in the 4-5 million baht price level - this price range has made up roughly 80% of new supply on offer in the townhome market since 2018.  The average selling rate at the development projects surveyed (newly launched projects and projects in the middle of sales) was 53%, based on 80,452 total units.  There was high demand for townhomes in areas along the route of the Yellow Line rapid transit service, to the east of Bangkok.  The area is considered to be in close proximity to business area, while offering a complete range of amenities and convenient road access to the city centre.  Examined with regard to the LTV criteria in use during H1 2021, townhomes priced no more than 10 million baht had a selling rate of 53.4% based on 80,197 total available units.  Townhomes that were priced more than 10 million baht had a selling rate of 49.8%, based on 255 on-market units.

"The market for residential properties is expected to head into a better direction toward the final stretch of this year.  This would likely take the form of a gradual recovery, as there will be many underlying factors for market recovery.  If the domestic [COVID] situation can be resolved by distributing vaccines and keeping outbreaks under control, the subsequent boon to the economy and the progression of country reopening should promote a return of purchasing power in the residential market.  This recent unlocking of the LTV measure will benefit new and used properties at all price levels.  Any additional measures - including drastic measures - to provide a stimulating force into the same direction, such as expanding the threshold for the ownership transfer fee and mortgage registration fee markdowns to cover properties at all prices, would increase recovery opportunities for the market.  However, close monitoring of circumstances will be needed in order to determine the direction of the residential properties market.  Among said circumstances are the uncertainties surrounding the spread of COVID in Thailand, which influence economic recovery, consumer confidence, national security and employment.  These, in turn, influence purchasing power and debt service capacity - and financial institutes will be taking this into consideration when approving mortgages," said Ms. Somsakul.

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