The Bank of Thailand has planned to issue macro-prudential measures to control speculation in the property market, where the measures are expected to set the loan-to-value (LTV) for the second home or other specific requirements to ensure debt servicing ability of the borrowers. KResearch views that the measures will impact the property developers' business planning in terms of their marketing and will prompt them to take a more cautious approach for their product launch, especially when the property market is now facing an oversupply of unsold property projects and a challenge from the anticipated higher financial costs amid the cyclical uptrend of Thai interest rates.
Nonetheless, since the central bank's measures are likely to take effect around late this year or early next year, the impact on the real estate market in the remainder of 2018 should be limited. The housing backlog in Bangkok and its perimeter is forecasted to stand at 190,000 units at the end of 2018, which is considered high and close to the 2017 figure. At the same time, housing loans approved by financial institutions in 2018 may increase around 6.5 percent versus the 6.1-percent rise in 2017.
KResearch holds the view that the Bank of Thailand's macro-prudential measure will have a clearer effect on the property market in 2019 while the market adjustment also depends on an overall economic expansion and an extent of the policy rate increase next year. Based on KReseach primary estimates, the impact from such measures, coupled with the gradual increase of interest rates, will urge the property developers to regularly review their business strategies, thus possibly slowing the housing backlog in Bangkok Metropolitan Region and housing loans approved by financial institutions in 2019. At the same time, financial institutions will have to place emphasis on precautionary credit policy while non-performing loans may not be lower than the rate registered in 2018.