Thailand's real estate market faces challenges due to a slowing economy, reduced tourism, and declining foreign investment. To revive the market, the government plans to offer support to qualifying homebuyers, including reduced fees and tax breaks on purchases up to $42,000. Additionally, the loan-to-value ratio (LTV) for eligible buyers will be increased from 70%/90% to 100%, enabling them to purchase homes without a down payment. This initiative aims to boost domestic demand and stimulate the residential real estate sector and the overall economy.
According to a Deputy Finance Minister for Thailand, Krisada Chinavicharana, property measures will be introduced to support low-income earners to make it easier for them to purchase homes. The move is aimed at both boosting the ailing residential real estate market and slowing the economy.
Qualifying home purchasers will receive support for buying homes worth up to 1.5 million baht (i.e., $42,000). The Ministry has also proposed that loan-to-value (LTV) limits be reduced for qualifying purchasers so that they can take out mortgages worth 100% of the value of the property.
The government has successfully implemented similar initiatives in the past. In 2011, first-time home buyers were provided a tax deduction of up to 100,000 baht for purchasing homes valued below 3 million baht. In 2016, a similar program offered a 50% reduction in registration and transfer fees for first-time home buyers. In 2019, a personal income tax deduction of up to 200,000 baht was permitted to first-time home buyers. All of these programs have expired.
Thailand's residential sales have slowed considerably since a peak in 2019. While regional variations exist, sales have declined between 20% and 30% from 2019 to 2023. In Bangkok, 54,963 condo units were sold in 2022, down 29% from 2019 figures. Prices are down generally from 2019 by 5% - 10% on residential units, which isn't as bad as it may initially sound given the low inflation the baht has experienced.
Stricter lending requirements have impacted the luxury market but also from waning interest by foreign investors. Chinese buyers accounted for 50% of condo purchases in Bangkok in 2019, but now only for 28%. In the first half of 2023, condo transfers to Chinese buyers in Thailand dropped by 37% compared to the same period in 2022. Chinese purchasers face stricter capital controls domestically and an ailing economy.
Russians were once major purchasers of luxury real estate in Thailand, but in recent years the share of purchases by Russians has almost vanished entirely. The absence is felt since in 2019 10% of foreign condo buyers in Thailand were Russian. South Koreans are buying more now than in 2019, but the numbers are small in comparison to what has been lost.
A recent 8-point proposal presented by the President of the Thai Chamber of Commerce's Housing Business Association, Issara Boonyang, sheds light on what the market sees as the factors holding back Thailand's residential real estate market. The proposal was submitted in association with six groups: The Housing Business Association, the Thai Condominium Association, the Thai Real Estate Association, the Real Estate Sales and Marketing Association, the Thai Real Estate Broker Association, and the Home Builder Association.
The 8-Point Proposal submitted in January 2024:
Expand Property Fee Reductions: Raise the price cap for reduced transfer and mortgage fees (currently 3 million baht) to 5-7 million baht, or offer the reduced rates for the first 3 million baht of properties 5-7 million in value. This aims to make homeownership more affordable for middle-income buyers.
Tax Break for Self-Built Homes: Provide a 10,000 baht tax break per 1 million baht of construction value, capped at 100,000 baht, for individuals building their own homes. This encourages investment in self-built housing and supports individual ownership.
Boost Lower-Income Homeownership: Offer low-interest (3%) loans and a 100,000 baht down payment subsidy to first-time, low-income homebuyers. This directly addresses the affordability gap and increases access to ownership for underprivileged groups.
Relax Land Size Requirements: Reduce minimum land size requirements for detached houses, twin houses, and townhouses. This allows for more efficient land use and promotes the development of smaller, more affordable housing options.
Temporary Tax Reduction: Implement a 50% reduction in land and building taxes for one year to stimulate the real estate sector and encourage market recovery.
Attract Foreign Investment: Enhance regulations for foreign property ownership by extending the maximum rental period from 30 to 60 years and allowing visa holders to purchase properties based on visa duration (10 million baht for a 10-year visa, 5 million baht for a 5-year visa). This aims to attract foreign investment and diversify the market.
Review LTV Policy: Revise or relax the Loan-to-Value (LTV) ratio restrictions imposed by the Bank of Thailand to facilitate easier loan access for potential buyers and boost market liquidity.
Streamline EIA Process: Allow developers to apply for Environmental Impact Assessment (EIA) permits before land transfers, reducing financial risk if the permit is not granted. This aims to expedite project development and improve efficiency.
