The Bank of Thailand is being urged to revise the new loan-to-value (LTV) limits that are set to come into force on Monday for those buying second and subsequent residential properties, as market sentiment is weak and the limits may prevent those who really want to buy homes from owning their own homes.
Atip Bijanonda, president of the Housing Business Association, said the property market this year will register growth in a range of 0-5% from 2018, mainly because of the new LTV limits.
"The LTV limits will definitely have a strong impact on the market this year, as they already affected housing sales in the first quarter," Mr Atip said. "The central bank should review their effect because it could reverberate in the overall economy."
In the low-rise housing segment (single detached houses and townhouses), developers will build more off-plan units because homebuyers are given a longer period to make down payments.
Mr Atip said the new LTV limits will not give homebuyers time to make a higher down payment, as many are buying second homes to expand their family or relocate closer to workplaces or schools.
"The new LTV limits should not include homebuyers in the low-rise segment because they represent real demand, not speculation," he said. "Speculators have left the condo market the past few years."
He suggested developers prepare homebuyers in advance to help them get mortgages approved after the new LTV limits take effect. One method is to clear up their bank statements. Another is to recommend that homebuyers choose a unit they can afford.
Vichai Viratkapan, acting director-general of the Real Estate Information Center (REIC), said the LTV limits will have a stronger impact on the housing market than interest rates and the overall economy.
"Those who are co-borrowers or co-signers and those who have no money to pay for a higher down payment will be affected by the new LTV limits," Mr Vichai said. "Co-borrowers should be allowed to withdraw their names after a mortgage loan is paid for a certain period."
He suggested establishing a housing fund for homebuyers who are not approved for mortgages from financial institutions.
He said the new LTV limits will reduce new housing transfers in the second quarter, an effect that may extend to the third quarter.
The amount in the fourth quarter will show the true effect of the LTV limits on the market, Mr Vichai said.
According to property consultant Colliers International Thailand, new condo supply launched in Bangkok in the first quarter totalled 8,443 units, down 60% and 40% from the fourth and first quarters of last year.
Sales value of first-quarter new supply also declined to 45.4 billion baht from 86 billion baht in the first quarter of 2018.
Of the total amount, some 2,400 units were low-priced condos under the government's Baan Pracha Rat housing loan project.
"The sharp drop suggests that the new LTV limits work," said Phattarachai Taweewong, associate director of the Colliers research department. "Condo developers adjusted to the new rules."