The residential property market has been facing a challenge once again since the beginning of 2021 due to the resurgence of COVID-19. In 2020, it was adversely affected by the COVID-19 pandemic as evidenced by substantial contractions in the residential property business indicators.
On January 26, 2021, the Cabinet, however, approved the extension of measures, aimed at reducing transfer fees for residential properties under THB3 million each to 0.01 percent of the property price, from the previous 2.0 percent, and the mortgage fee to 0.01 percent of the mortgage value, from the previous 1.0 percent, effective until December 31, 2021.
KResearch is of the view that the government's move represents good news for the residential property market amid numerous risks, particularly the resurgence of COVID-19, which has derailed recovery in the business sector and in turn hurt consumer purchasing power and confidence towards employment. The extension of such measures is expected to help reduce the financial burden for home buyers, especially middle-income earners, which are classified as a mass market, intending to purchase homes in 2021.
Concurrently, such measures will help residential property developers reduce marketing costs in releasing unsold homes, which remain high, especially condominiums and townhomes under THB3 million each. Presently, unsold condominiums and townhomes account for 57 percent of all unsold residential properties in the market. Despite accelerated efforts by residential property developers to release their unsold units in 2020, the total number of unsold units kept rising as of the end of 2020. According to Agency for Real Estate Affairs, the number of unsold residential properties in Greater Bangkok totaled 226,645 units as of the end of 2020. Although the extension of such measures will help reinvigorate the sluggish home market, it will continue to suffer from many risks. Moreover, due to uncertainties surrounding COVID-19, it is expected that property developers will continue to be hesitant towards future investment, especially in locations with a lot of unsold homes under THB3 million each.
KResearch is of the view that the extension of transfer and mortgage fees for residential properties will help the residential property market avoid a steep contraction as seen in 2020. But, because of the increased risk in the business, we at KResearch have revised our 2021 forecast for the number of home ownership transfers in Greater Bangkok to 182,000-185,000 units, representing a contraction of 3.1-4.7 percent (-4.7 to -3.1 percent), which is well below the potential level. (The downward revision of our projection for the number of home ownership transfers is a result of the resurgence of COVIC-19, which has affected recoveries in the business sector and employment. Our previous projection also took the impacts of the extension of home transfer and mortgage fee reductions into account.)