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Mortgage Rejection Rates Impact Condo Developments

Mortgage Rejection Rates Impact Condo Developments

The high mortgage rejection rate in the first quarter of 2024 has prompted condo developers to halt new launches in Greater Bangkok during the second quarter, which may result in a record low for launches by the year’s end.

Sunchai Kooakachai, director and head of research and advisory at property consultancy Knight Frank Thailand, reported that the number of new condo units launched in Greater Bangkok decreased by 39% year-on-year in the second quarter of 2024.

“Household debt is a significant factor behind the elevated mortgage rejection rates, putting pressure on the housing market this year,” he said. “It remains high—over 90%—largely due to the slow pace of economic recovery.”

A survey by the Bank of Thailand among five major banks indicated that the home loan approval ratio fell to 23.4% in the first quarter of 2024, down from a recovery of 21.7% in the first quarter of last year to 38.7%, 30.8%, and 36.1% in the second, third, and fourth quarters of 2023, respectively.

The approval ratio saw a slight increase to 25% in the second quarter of 2024 but remained low, with home loan demand declining by 7.8%.

This marks the third consecutive decline since the fourth quarter of 2023, when demand dropped by 7.1%, followed by a 10.1% decrease in the first quarter of 2024.

Knight Frank noted that the condo sales rate improved to 43% in the second quarter, as the decrease in supply outpaced the drop in demand. The new supply totaled 7,321 units, compared to new demand of 3,145 units, down from 11,930 units and 3,324 units in the same period last year.

“Condo sales rates have not surpassed 50% since 2020, even as the market showed signs of recovery post-pandemic in 2022,” stated Nattha Kahapana, managing director. “New condo supply for this year is expected to be below 20,000 units.”

Under normal circumstances, the yearly average for new condo units launched in Greater Bangkok ranges from 50,000 to 60,000.

“Developers have adopted a wait-and-see strategy and are exercising caution as the sales rates may not meet their expectations,” Mr. Nattha explained. “Units priced below 120,000 baht per square meter and located near mass transit lines showed the strongest sales.”

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