Second and subsequent new mortgages, particularly for condo purchases, plunged 39% year-on-year in the three months to June after the central bank's tougher loan-to-value (LTV) regulations came into force in April.
First-home mortgages fell by 2.9% from a year earlier during the quarter, said Titanun Mallikamas, assistant governor of the monetary policy group for the Bank of Thailand.
For the six months to June, new mortgages still surged 14.2% on the same period last year, but second and subsequent new mortgage contracts tumbled 13%.
According to a breakdown by types of residential project, second and subsequent new home loans for high-rise properties slumped 25% from a year earlier, while for low-rise they rose 3.7%.
First-home mortgages jumped 14% from a year before during the first six months, with low-rise homes gaining 17.9% and high-rise properties increasing 5.8%.
New home mortgages during April to June increased by a mere 2.4% from a year earlier, compared with 27.9% year-on-year growth in the previous three months.
"The sharp decline in second and subsequent new housing loan contracts, especially for high-rise projects, will help keep a lid on prices or even lead to a reduction in price tags," Mr Titanun said. "Homebuyers with real demand will reap the benefits if that's the case."
He said the central bank will further monitor excess property supply in the wake of the new LTV regulations.
In addition, policymakers will keep a close watch on financial stability and maintain macroprudential and microprudential policy in order to control financial system risk.
Yunyong Thaicharoen, chief economist of the Economic Intelligence Center (EIC) under Siam Commercial Bank and first executive vice-president of SCB, said the significant decline in mortgages for condos was largely due to a 10.4% decline in new housing loans in the second quarter and a 13.7% slump in transfer value growth.
EIC forecasts overall home transfer value to dip 14% this year, a situation that could continue into next year.
Home transfer value from purchases by foreigners fell to 27 billion baht for the first five months of the year from 35 billion baht in the same period a year earlier, Mr Yunyong said.
Foreign investors, especially those from China and Hong Kong, bought residential units in the Thai market at a significant rate over the past two years.
Foreigners purchased residential units worth 71 billion baht in 2017, with buyers from China and Hong Kong accounting for 34%, and the amount surged to 93 billion baht in 2018, with 43% from mainland Chinese and Hong Kongers.
"The cancellation rate will continue to increase for both local and foreign homebuyers because of deteriorating payment ability and lower willingness to buy," Mr Yunyong said.
EIC predicts new home sales to decline by 20% this year and 2% the next.
Based on the assumption, unsold property supply, especially at condo projects, will increase. For the first half of the year, unsold condos in Bangkok and the vicinity totalled 89,000 units, up 9% from 82,000 in the same period a year earlier.
The supply glut and sales slowdown will lead to price correction in the property market, particularly in the condo segment, Mr Yunyong said.