Given the volatile world market, hopes are resting on government spending on megaprojects to boost the economy and the property sector this year, although high household debt remains a major concern.
Wisudhi Srisuphan, deputy finance minister, said the property sector this year would grow 5% on a windfall from government investment in megaprojects like the rail system, roads and airport, which will help boost the overall economy.
In the first quarter, around 5 billion baht will be injected as part of the state's investment budget from the total annual target of 450 billion baht. In the second quarter, 23% of the total will be spent.
"The global economy is still volatile. We need to monitor many issues like the rouble, the Swiss franc and quantitative easing of the euro zone and Japan, which will have an impact on the financial market and exports," he said yesterday at a seminar on property and the economic index.
Tongurai Limpiti, the Bank of Thailand's deputy governor for financial institutions stability, said the economy this year would be challenged by the world's fragile economic recovery despite a pickup in consumption.
"High household debt was the main reason consumers spent less last year, as their future demand was consumed in advance through the first-time car buyer scheme," she said.
Overall non-performing loans (NPLs) in the third quarter last year stood at 2.65%, slightly up yet still very low compared with NPLs during the 1997 financial crisis. NPLs from home loans reached 2.5% in the third quarter last year, marginally up from 2.3% in 2013.
However, the central bank was not worried as commercial banks are now very cautious about approving home loans, while property developers adjusted themselves to the slowing market. Some of them returned booking money to buyers at projects where sales were not as good as expected.
"Housing demand is growing amid lower fuel prices, but we are concerned about the economy, farm product prices, rising land costs and higher household debt," she added.
Due to high household debt, the rejection rate last year was 31%, while total new home loans declined from 2012-13. The majority shifted from condo units to single houses and townhouses.
Chartchai Payahanaveechai, president of the Government Savings Bank, said high household debt would continue to affect homebuyers' borrowing capability, while soaring land costs dampened the purchasing power of people in the middle- and low-income segment.
Last year, outstanding home loans totalled 2.83 trillion baht, an increase of 10.8% from 2013. The amount remained high as existing borrowers who had tighter income did not overpay to reduce their loan amount.
"Condo transfers were a major problem as untransferable condos were more difficult to resell than low-rise houses," said Mr Chartchai.