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11 Nov 2022

Econ Digest

Residential property market after the expiration of the LTV easing measures


        In 2022, residential property market indicators reflect a good recovery, but are not yet comprehensive. Residential property developers are accelerating their investment in new projects, driven by the confidence in the economic recovery after the COVID-19 outbreak subsides plus the recovery of the tourism sector. According to the data of the Agency for Real Estate Affairs (AREA), new residential launches in Bangkok Metropolitan Region during the first nine months of 2022 grew as high as 110%YoY to 77,000 units, more than half of which were condominiums and most of the launches were priced at less than THB2 million. However, transactions of new residential properties have not fully recovered due to the fragile purchasing power of households caused by the high cost of living and debt burden, while sales of second-hand residential property are favored by buyers. While the last two months of 2022 may see an acceleration in the residential property ownership transfer as the relaxation of loan-to-value (LTV) regulations end at the end of this year, it will still depend on the ability and qualifications of buyers.

        Looking ahead to 2023, KResearch takes a more cautious view of the outlook for the residential property market as supportive factors begin to fade after the relaxation of LTV regulations ends on December 31, 2022. Issues to be monitored by the market include: whether the authorities will renew the measure to reduce residential property ownership transfer fees, the highly-uncertain economic recovery, the still fragile purchasing power, the upward trend of interest rates, the high business costs, the intense competition in the business and the high level of residential units for sale. The accumulation number of residential units for sale in Bangkok Metropolitan Region at the end of 2022 is expected to be higher than the 207,000 units in the first half of 2022; all of which will put pressure on residential property purchases and investment activities going forward.

        KResearch views that the total number of residential ownership transfers in Bangkok Metropolitan Region (both juristic persons and individuals) will reach approximately 175,000-182,000 units in 2023, ranging from a contraction of 2.8% to an increase of 1.1% as compared to an expected growth of 7.5% for 2022. The volume of new residential launches in the Bangkok Metropolitan Region may shrink to 89,000-86,000 units, or a contraction of 6.3% to a 1.1% increase, when compared to a 57.1% increase in 2022.

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