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2022, How real estate business survives the covid crisis - the Ukrainian-Russia war
The real estate business has not been affected much by the Ukrainian-Russia war. Foreign investors especially the Chinese have enjoyed buying 100 million baht luxurious condominiums in the Rama 9-Ratchada-Huay Kwang-Chinese embassy areas, as well as in popular tourist destinations like Phuket,Pattaya and Chiang Mai. Minister of Finance is ready to listen to every problem.
Mr.Termpittayapaisith who is the Minister of Finance, regulates both monetary and fiscal policy discussed the government's policy towards the real estate business now that the Covid-19 situation has eased, but the war has escalated.
There has been some impact on the real estate sector because of the interconnectivity of the following:
1. The increasing price of petroleum
2. Inflation and the subsequent cost of living increase
3. The Increasing domestic interest rate
4. The depreciation of Baht
The government has already taken measures to help, such as the establishment of an oil fund, the gradual increase of interest rates based on the lowest ceiling, the distribution of funds for the low income earners. On top of that, the private sector has provided a lot of assistance. If there are any obstacles in the real estate sector, the minister is ready to discuss them.
The state has also introduced tax assistance measures such as the transfer tax a mortgage tax, LTV measure of the National Bank, as well as taking care of the grassroots with the Treasury Department's home allocation "Ramatanarak" for the elderly and people with disabilities
Moreover, to enhance private sector employment, the government officers’ accommodation construction allows the private sector to be an outsourced contractor. Meanwhile, there are tax reduction measures for foreigners who come to buy a residence in the country for their retirement and support with relief regulations for office building rental, housing estates or condominiums. Foreigners are primarily interested in Thailand because in neighboring countries like Vietnam, the price of land is expensive. Therefore,construction and design should take facilities for the elderly or the handicapped into account. For example, bedrooms and bathrooms should be built on the ground floor of the house to make it convenient for the buyers.
Mr. Chatchai Sirilai, Managing Director of Government Housing Bank, discussed the drawbacks created from the war as it will affect cost because the FAD and the MPC (Monetary Policy Committee) have raised the interest rate by 0.15 baht, It is a gradual increase in interest rates for low- and middle-income people who are an important sector financially. In 2021, there were issued loans of about 22,600 million baht, and in 2022 it was expected that 30 billion baht of loans would be released, with NPL reserves of over 1 billion baht.
However, the National Bank still considers that sector an important part of economic strategy. Therefore, the private sector should take this market into consideration as it is not small and strategies should be applied to get more volume in that market place.
Mr. Prasert Taeduliyasatit, Chief Executive Officer of the Real Estate Business Segment of Ananda Development PCL and Honorary President of the Thai Condominium Association believes the investment of foreign capital to help stimulate the Thai economy is essential for the survival of real estate in an era of inflation and will always be necessary. The analysis showed that foreign investment was a approximate total of 65 billion baht. Of that amount, 10 billion was split up with 40% in the condominium market, 20% in houses, with the remaining 40% in both commercial and office buildings as well as home offices.
Foreigners, especially Chinese like to buy real estate in Thailand, specifically luxury residences near international schools, hospitals, shopping malls, roads with convenient transportation. This seems to be because we have good international academies, premium hospitals and friendly neighbors that are difficult to find on their countries.
High-income people of Burmese and Chinese descent are interested in buying luxurious houses and condominiums in Thailand where they can have all they need in their residences. They want to strengthen their security because the currencies in their country (chard/yuan) cannot be controlled, whereas the Thai baht tends to be much more stable.
Mr. Pattarachai Thaweewong, Research and Communication Director of Colliers Company international Thailand Co., Ltd. , (a real estate agency) said the international market is still very active. For example, in 2022, the total sales of real estate to foreigners was over 10 billion baht.
“In addition to Chinese and high income Burmese, customers from Europe, America, Italy, Russia, Germany are also interested in buying low-rise houses and condominiums. The middle class Chinese often like to buy condominiums in the 3-5 million baht range therefore in 2022, we may see sales surpass 60 billion baht."
Mr. Misak Chunharakchot President of the Thai Real Estate Association said that, overall, the business is considered better than expected with so many customers from the middle class with high purchasing power.
This group of customers helps to support the market quite well and those who bought before 2020 will stand to make a good profit if they choose to sell now.
"The government should enact a law on "separating property" which would allow the separation of property from land to make it commercial. One example would be the private sector to building tall buildings on state land and the state pays rent. This would benefit the government officials in that area not having to commute too far to work which could help with efficiency"
The government should provide tax support to those who have savings to encourage them to invest in the real estate business for rental or resale because the savings in the system is more than 1.5 trillion. Nowadays, the home rental business is growing because people prefer to rent as it can cost four times less to rent than buying. Investors who join this project should have their taxes waived as it facilitates projects generating money for the businesses because as government built housing projects in remote areas for low-income people create an inconvenient commute.
The foreign market looks to Thai real estate to find condominiums priced around 50-80 million baht, which are constantly being bought and sold and for the Chinese this is because the government does not support people in this aspect. For example, the Chinese government may use crypto-currency for money transfers or charge more taxes which in turn may be causing the instability of the yuan making Chinese people want to invest their money in Thailand.
In conclusion, while the real estate market has begun to send positive signals, even in the current period of war-driven inflation, we still have a record high number of assets in 21 provinces across the country valued up to 1.2 trillion baht available for sale. If the government does not hurry to create more flexibility in regards to certain regulations it could hinder the sale of all residual properties.
Walai Chuthamthat Executive Editor.
