Condominium market picked to slow in 2019
Bracing for impact from new LTV rules
The residential market in 2019 will slow down, with new condominiums in middle- to lower-end segments expected to delay launches if the Bank of Thailand's new requirements on loan-to-value (LTV) limits, scheduled to be announced tomorrow, are unchanged, says an industry chief.
Prasert Taedullayasatit, formerly president of the Thai Condominium Association, said new residential supply next year will be flat at 430-440 billion baht, the same amount as this year, if the new LTV requirements do not change.
"Developers planning to launch new condos in the middle- to lower-end segment will likely delay the opening for 3-5 months to give customers time to prepare for a higher down payment of 20%, up from 10-15%," he said.
The new requirements include LTV limits capped at 80% of home value for second or higher contracts, or for units priced 10 million baht or above. They will take effect on Jan 1, 2019.
Many developers commented that the new requirements should only apply starting from third contracts as many buyers want to buy a unit in the inner city as a second home for their children or a place to stay near work during the week.
The effective date should be extended to July 2019 so buyers who booked a unit prior to the central bank's announcement last month on the new LTV have sufficient time to prepare for the higher payment during the transfer period, said Mr Prasert, also president of premium business at Pruksa Real Estate, a subsidiary of SET-listed Pruksa Holding Plc (PSH).
The central bank is reviewing developers' comments and suggestions before finalising and making an official announcement tomorrow.
"The new LTV limits will have no impact on the upscale condo segment," he said.
"Condo buyers in the upper-end market for units priced 10 million baht or more are able to pay a higher down payment of up to 20% of the unit price."
Half of the buyers in this segment use cash to buy, said Mr Prasert.
During the first 10 months this year, Pruksa's premium business launched a four new condo projects worth a combined 7.3 billion baht and recorded 7 billion baht in presales, higher than its target of 6.8 billion for the whole year.
He said the upper-end condo market next year will have higher competition as demand in this segment has been absorbed, though a chunk of supply launched this year and last still remain.
"Upper-end condo developers should seek niche demand and position products accordingly," said Mr Prasert.
"Large units for a big or extended family are still in demand."
This month the company will launch a new condo project worth 1.75 billion baht on Thong Lor Soi 25.
Pruksa also plans to launch a high-rise condo project by the Chao Phraya River on Charoen Nakhon Road in the fourth quarter next year to capitalise from the positive impact of the opening of Iconsiam.
PSH shares closed yesterday on the Stock Exchange of Thailand at 20.20 baht, a decrease of 10 satang, in trade worth 6.49 million baht.