[Special Scoop] It looks like 2017 will see the Thailand property market rebound, but how big a step up it can take from 2016’s stagnancy is another question. So far, there are both positive and negative signs for this year’s outlook. How balanced will the industry be in 2017, and which area of risk exposure should consumers be aware of are among the questions that need to be answered. Let’s take a brief look at this information to gain a better understanding of what 2017 will bring.
Positives
The government has several megaprojects under construction. There are multiple new mass transit lines being built that will debut in the coming years. Wherever the train goes, new supply and residential demand always follows. There are also other projects such as the double-track railway, new highway, and several airport expansions in the works. The total infrastructure improvement budget this year is set at THB 1.79 trillion with THB 8.9 trillion estimated to be spent on 36 projects to improve the country’s transportation network during the next few years.
Furthermore, the Government Housing Bank launched a stimulus package featuring low interest home loans to encourage more transactions and market growth earlier this year. The interest rate will surge to around 1.75 per cent next year due to the inflation rate. This is why it’s not a bad time to buy properties. Meanwhile, with consumer confidence and the economy slightly improved, the property market this year is expected to grow by 5 per cent.
Negatives
The largest unfavourable factor for the property market is the high mortgage rejection rate that carried over from last year. The tightened lending rules make it difficult for borrowers to qualify for mortgages with the most impacted groups being freelancers and SMEs whose earnings are not fixed. The rejection rate rose to 30-40 per cent last year. Nevertheless, with the home loan restrictions in place, there is less of a chance that a real estate bubble forms with approved loan applications being limited to only the real-demand ones.
The rejection rate, however, is expected to decline this year due to the end of repayments for the First-Car Buyer Scheme. This should improve home loan approvals moving forward. Another uncontrollable negative factor is surging land prices, especially in prime areas. The higher land prices have translated to higher property prices and these are now rising beyond many consumers’ salaries in certain locations.
While the government’s schemes and megaprojects are the main engine in driving the real estate industry back to its equilibrium in 2017, the restricted mortgage criteria and high household debts could slow down the process. This year will be a step in the right direction, but the word “booming” doesn’t quite describe the real estate market in Thailand just yet.
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