End of eased loan-to-value limits mars mood

End of eased loan-to-value limits mars mood

REIC predicts 19% dip in demand

People look at a model of a condo at a housing expo. Total home loans are expected to drop by 4% in 2023 if the LTV measures end.
People look at a model of a condo at a housing expo. Total home loans are expected to drop by 4% in 2023 if the LTV measures end.

The expiration of lower loan-to-value (LTV) limits at the end of this year will affect residential demand by 19% in 2023 as many homebuyers have insufficient time to adapt, according to a market researcher.

Vichai Viratkapan, acting director-general of the Real Estate Information Center (REIC), said the announcement on Oct 31 that the eased LTV measures would not be renewed next year left little time for homebuyers to prepare.

"Those booking an off-plan condo unit or a presale house this year that will be transferred in 2023 need to seek additional money to receive the transfer if they want to use a mortgage and their down payment is insufficient," he said.

REIC projected two scenarios based on the LTV measures expiring and being extended.

For residential transfers in 2023, the difference is 71,780 units or 19% based on 392,057 units if the measures are extended, compared with 320,277 units if the measures expire.

The expiry will also cause a contraction of 14.2% for unit transfers next year, compared with 373,253 units REIC expects to be transferred in 2022, which is an increase of 8.6% from 2021.

In terms of value of residential transfers, the difference is 117 billion baht or 11.7% based on 1.07 trillion baht if the measures are extended and 953 billion if the measures expire, Mr Vichai said.

If the measures are extended, residential transfer value in 2023 will grow by 7.3% from 997 billion baht, which is a 5.6% gain from 2021 after a slowdown for three consecutive years since 2019, he said.

Total home loans will drop by 4% to 615 billion baht in 2023 if the measures end, but will dip by only 0.04% to 640 billion if the measures are prolonged, according to the REIC.

On the supply side, the expired LTV measures will cause a 10.4% dip in the number of new land allocation permits or permits for low-rise houses, and a 8.2% fall for new building construction permits or permits for condos, said the centre.

New residential supply being launched next year will total 98,580 units worth 514 billion baht if the measures expire. Supply will total 100,300 units worth 562 billion baht if the measures are extended, according to the REIC.

"The impact of the expired LTV measures affects not only the new home market, but also the second-hand home market," said Mr Vichai.

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