Mr. Chatchai Payuhanaveechai, Executive Vice President of KASIKORNBANK, said the overall housing loans in November to December 2013 decreased 10-15 percent over-year, while housing loan growth in January remained below the forecast target due to postponement of house transfers and mortgage registrations by homebuyers, demonstrating concerns over prolonged political uncertainty. As a result, property developers postponed residential project investments and launches scheduled for 2014 awaiting some clarity over the impacts on the economy overall. On top of this, some residential markets in Bangkok and its vicinity have been saturated. Most land developers have shifted their focus to low-rise residential projects in the provinces, where the market has been less affected by political unrest.
Over the first 11 months (January-November) of 2013, condominium sales topped 90,000 units before reducing to 5,000 units in December. It is expected that condominium sales in 2014 will drop further to 52,000-60,000 units.
In 2014, the total number of new housing loans of the banking industry is likely to total 560.02 billion Baht, while total outstanding balance at the end of the year will be equivalent to 2.7 trillion Baht, up 6.5-9 percent. For 2013, the total outstanding balance is estimated at 2.48 trillion Baht, up 10.5 percent from 2012. KBank aims to see its housing loan business grow by 7 percent this year, with 52 billion Baht in new loans and 230 billion Baht of outstanding balance. Also this year, loans extended to Bangkok and provincial areas will be on a ratio of 55/45, compared to 60/35-40 last year. Over the next three years, the ratio is likely to be 50/50.
Mr. Chatchai added that 2014 supporting factors for property and housing loan businesses include improving global economic conditions and urbanization which boosts growth of condominiums in some markets including tourist destinations, educational sites, and industrial estates. Other factors include the government’s extended infrastructure projects, improving incomes for the population, border trade and the implementation of the ASEAN Economic Community (AEC) in 2015. Moreover, the Bank of Thailand is expected to maintain its pro-growth stance with the policy rate unchanged at 2.25 percent, while housing loan rates will average out at an affordable level of approximately 6 percent.
However, threats to the property market include prolonged political uncertainty which leads to customers postponing house transfers and mortgage registrations; particularly those in Bangkok and the vicinity. Moreover, household debts remain a burden, despite a slowdown in the rise of household debts and average household debt to GDP being on par with other regional countries. In 2014, household debts to GDP ratio is likely to grow at a slower pace or staying at 83.5 percent, compared to 77.3 percent and 81.5 percent in 2012 and 2013. Other challenges include workforce shortages which cause delays in construction, while construction costs and construction material prices have risen across residential buildings overall.