Mortgage applications for homes priced below 3 million baht are expected to continue experiencing higher rejection rates over the next two years due to a slowdown in the residential market.
According to SCB EIC, the research center under Siam Commercial Bank, the sale of homes valued at less than 3 million baht in the Bangkok Metropolitan Region (BMR) is anticipated to decline for 1-2 years, a trend attributed to a sluggish economic recovery, increasing regular expenses, and the household debt burden, particularly within the lower to middle-income brackets.
Houses in this price range constitute two-thirds of transferred units in the BMR and represent one-third of the total transfer value.
The research center pointed out that interest rates and the loan-to-value (LTV) ratio set by the Bank of Thailand at 90-100% are significant constraints for homebuyers seeking mortgages.
SCB EIC indicated that the mortgage rejection rate for homes priced under 3 million baht is likely to rise in tandem with the property market slowdown over the next 1-2 years.
Last week, the central bank announced a relaxation of the LTV ratio, allowing banks to offer ratios exceeding 100% exclusively to homebuyers involved in a debt consolidation program. The standard ratio remains unchanged at 90-100%.
Alongkot Boonmasuk, secretary-general of the Housing Finance Association, noted that the mortgage market is expected to slow down in the latter half of this year, continuing the trend observed in the first half in line with the property market.
Homebuyers with lower to middle incomes, particularly those earning less than 30,000 baht per month, continue to face challenges with loan rejections, according to him.
Property developers have shifted their focus to buyers earning more than 30,000 baht per month, promoting houses priced between 3-7 million baht each.
Developers are also targeting foreign buyers with strong purchasing power to boost sales.
In light of the market slowdown, developers have recently requested soft mortgage measures from the Finance Ministry to support the industry and have called for further easing of the LTV ratio.
Mr. Alongkot expressed concern that the LTV ratio relaxation for debt consolidation conditions would not adequately support housing loans or the property market as a whole.
“We recognize that the central bank aims to manage household debt, but these restrictions also adversely affect homebuyers, particularly in segments with genuine demand,” he stated.
According to data from the Bank of Thailand, the country’s household debt-to-GDP ratio stood at 90.8% in the first quarter of this year. Mortgages accounted for 34% of total household debt, while personal loans made up 25%, occupation-related loans constituted 18%, auto loans represented 11%, credit cards comprised 3%, and other categories accounted for 9%.
