Stable Price Growth Expected for Thailand Real Estate
A healthy economy and its industrial means are two of the biggest factors that could influence the stable growth of Thailand’s real estate market in the next five years, according to the Bangkok Post. Although this is the case, many experts have voiced their concerns about the growth in Thai real estate. Lately, concerns have surfaced that the rapid growth of residential construction in Bangkok and other cities in Thailand is powered by the unsteady returns in individual wealth from the stock market, which has resulted from an enhanced foreign portfolio investment.
Price Hike Concerns
For the last decade, Thailand property prices have continued to escalate at an overwhelming rate. With the high demand, the same trend is poised to continue. The increase in rates is expected in the next five years, according to Housing Finance Association chairman Kitti Patpongpibul. Although this might sound promising, Kitti is actually concerned with the economic stability of banks, with regard to loan-to-value ratio and the lending per appraised value of 90 percent of condominiums costing as much as $335,000 or THB 10 million. He is also alarmed over the same practices on 95 percent of single houses, as these figures are higher than the usual rate of 70 to 80 percent of that in neighboring countries.
Housing for the Poor?
The Thai economy is devoid of practices to motivate private banks to lend money to low-income individuals, added Kitti. Apart from that, town planning legislations provide only a few rewards for private companies who wish to develop residential condominiums for low-income families. With this problem, Kitti hopes that new laws can be passed in order to aid the poor Thais. New regulations, he adds, should implement an additional permitted utilized space per plot to make up for the monetary losses of real estate developers who build homes for low-income citizens. Apart from fiscal problems, Kitti sees another problem with this trend: social discontent. Since the real estate prices are seen to surge in the next five years, this could result to more social problems as rich people get to purchase more extravagant homes, while the poor are not given any chance to have what they can call their own.
Apart from the improving economy, another factor that can improve the real estate market is better consumer power, reported Songtham Pinto, who works as a senior economist for the Bank of Thailand. He speaks a word of caution for the government though. He advises the officials to avoid igniting the economy as it could result to unmanageable growth – one that could spark an economic meltdown similar to the United States and the European Union. Pinto and other economists are worried about the economic imbalances that might result from monetary and fiscal regulations that could boost consumption, since the credit growth of banks are steadily escalating at a rate of 16 to 18 percent. As a result, household debt now covers 73 percent of the country’s gross domestic product. This, according to Pinto, is brought about by low interest rates, as well as the customer loans provided by state owned banks.