Interest rates in Thailand should not be raised because doing so would adversely affect the housing market where demand is weak, say analysts.
Therdsak Thaveetheeratham, executive vice-president for research at Asia Plus Securities, said the Thai economy recently passed its valley and is projected to grow by 3.3% in 2023.
“To achieve that, the economy needs to grow by 3.8% in the second half,” he said. “It is possible, with the fourth quarter anticipated to be the strongest of the year, as the tourism sector continues to grow and exports are rebounding.”
Under such circumstances, interest rates should stop rising because the baht is one of the world’s most resilient currencies, while monetary policy was excessively tight, said Mr Therdsak.
Peerapong Jaroon-ek, president of the Thai Condominium Association, agreed with Mr Therdsak regarding the inadvisability of raising interest rates.
“Thailand should focus on attracting foreign funds through tourism instead of countering capital outflows or preventing the baht’s depreciation by raising interest rates,” he said.
In addition to boosting the tourism sector, the government should encourage tourists to visit more than one time by luring them via property purchases, which has the potential to significantly increase GDP.
“The measures proposed by the previous government had too many requirements,” said Mr Peerapong, also chief executive of SET-listed developer Origin Property.
“The government may consider offering visas to foreigners who purchase property worth 1 million baht or more, allowing them to obtain a 1-year visa per 1 million baht, as longer stays result in increased daily spending in Thailand.”
The government may also consider setting a foreign ownership quota of up to 24.9% for the purchase of low-rise houses in projects to further stimulate foreign property purchases.
To safeguard the purchasing power of the majority of Thais, this measure may impose minimum house prices for foreigners, such as no less than 10 million baht in Greater Bangkok and no less than 6 million baht in the provinces.
In addition to keeping interest rates stable, the government should consider relaxing lending curbs again for 2-3 years to reduce the burden of high down payments for buyers of second or third homes, said Mr Peerapong.
“New graduates are purchasing fewer properties. First-time homebuyers should be stimulated, similar to first-time car buyers,” he said.
Somboon Wasinchutchawal, acting chief executive of Frasers Property Home (Thailand), said interest rates should not be hiked as home purchasing power was recovering.
“The hospitality business began to recover, particularly with a notable increase in free independent travellers, mainly from Taiwan and Indian tourists,” he said. “The occupancy rate has now returned to 90%.”
As a result, along with a shortage of workers, hotel staff receive higher service charges, which rose from 8,000 baht per head during Covid-19 to 20,000 baht.
“If this trend continues, it will lead to the growth of townhouses priced around 3-4 million baht a unit, and condos priced around 3-5 million baht a unit,” he said. “But interest rate hikes should be halted.”
CONDO MARKET FLAGS
Vichai Viratkapan, acting director-general of the Real Estate Information Center (REIC), said the condo market this year was unfavourable due to weak demand among local buyers.
“Unsold completed condos are a worrying issue,” he said. “In the second quarter, remaining unsold units didn’t increase significantly but there will be an additional 4,000 units completed in the future.”
REIC reported that the number of unsold, completed condos in Greater Bangkok totalled 20,918 units in the second quarter of 2023, down from 24,121 units in the first quarter.
However, there were 32,618 unsold units under construction that would be completed in the next few years, up from 30,034 units in the first quarter, and 20,694 units that had not started construction, up from 15,565 units.
According to Asia Plus Securities, the tally among 15 listed developers’ completed condo units that remain unsold was 132 billion baht in the second quarter this year, down from 136 billion in the first quarter.
The peak was in the fourth quarter last year at 145 billion baht, soaring from 120 billion in the third quarter of the same year.
The average during the first quarter of 2020 to the second quarter of 2022 during the pandemic was 111 billion baht per quarter.
“The recent amount is not a cause for concern as there has been reduced new supply from completed projects with unsold units in recent years, as developers adjusted by slowing down launches,” said Mr Therdsak.