Real estate is at risk of crisis becoming NPL in 5 years.

Real estate is now at risk of facing 4 negative factors. Big Land and House revealed that customers with 4-5 years installment start having problems in payment causing the rise in NPL. They also pointed out 1-3 Millions Baht group is at the highest crisis. Price war is on the waiting list to burst as 40 Thousand units of stock need a release in spite of 50% decrease of purchasing power.

Real estate business situation in 2017 tends not being able to raise. It is also facing 4 negative factors which continuously happened from last year and tended to get worst. They are as follows; 1. world economic condition has not been recovered affecting domestic economy 2. commercial banks are more strict on credit release including project finance and minor credit causing deficient credit person being rejected 3. it is found in customers and demands that there is hesitancy in purchasing of group buying for a purpose of profit speculation and investment. While group purchasing for the purpose of residence especially, big market of 1-3 Millions Baht is facing the increase of household debt. In contrast to top customers as they mainly focus on better return than deposit interest 4. there are 30-40 thousand units of product stock need a release causing the up coming price war.

Real estate is at risk of crisis becoming NPL in 5 years.

Mr. Anan Aussapokin, Land and Houses Public Company Limited’s President and Chair of Executive Board, said that the increasing household debt is affecting finance institutes’ strictness to release minor credit particularly, less than 2 Millions Baht products. Most consumers in this group do not earn regularly so, there is 30-50% high chance of rejection.

Payment installment of 4-5 years is still NPL

Mr. Anan continued that the existing problem encourages some entrepreneurs to allow customers pay by installment. So, they can have records submitted for credit with finance institutes. At present, there is an increase in housing credit’s NPL. Before, NPL customers was less than 3 years payment in installment. Now, 4-5 years payment in installment can become NPL. It is because of low down payment (5%) collected by entrepreneurs or non-down payment by some projects ending up NPL when it comes to installments. There is an decrease in risk of NPL once the down payment goes up at 10-15% and customers’records are to be considered prior to reservation in order to prevent subsequent rejection.

Bureau credit

Mr. Athip Pichanon, President of Housing Business Association, stated that years ago the credit rejection was more than 40% especially, freelances and Start-Up SME according to unstable income and discontinuous statements. In addition, group with former Bureau credit can not ask for a loan even though there used to be the statement from finance institutes that the consideration for a loan of such group should be case by case. In fact, there will be credit rejection for such group in every case.

Besides, political situation within the country is still unclear.

The credit rejection increment 

Mr.Settha Taweesin, Managing Director of Sansiri Public Company Limited, stated that year 2017 is a challenge. Business needs awareness and disciplines in finance including appropriateness in project launch. This is because of high household debt problem causing a high number of credit rejections. The expectation is that market’s growth rate will not be more than 5%. Sansiri this year, 19 new projects at 4.12 Ten Thousand Millions Baht are planned for a debut.

1-3 Millions group is in trouble

Mr. Thongchai Piyasantiwong, Managing Director of GY Co,.LTD. and real estate strategist, said that the big real estate market is 1-3 Millions Baht group. Each year, the trade of about 60 Thousand units has been profit speculation, investment and residence with purchasing power at about 60% or 30.6 Thousand units. Even though first-car measure has been unlocked after the demand of 1.2 Millions cars, such group of consumers still owe credit card debt resulting in the decrease of ability to ask for residence loan. This is the same result that they are group of consumers purchasing 1-3 Millions Baht real estate.

The 5 years freeze purchasing power because of first-car measure caused the numbers of 1-3 Millions Baht real estate’s cancellations and 1 Hundred Thousand units of stock left in market. It took years to absorb not knowing any income. Most stocks were in the hands of major entrepreneurs which were considered as obligation to them. Therefore, strategy on price was the main focus to clear stocks last year resulting in price war for quicker income acknowledgement. Once prices were lower close to minor entrepreneurs, there were cancellations and change from minor to major entrepreneurs.

“Economic condition’s negative factors and strictness of commercial banks in products release affects purchasing power. In normal circumstance, there are 20% of profit speculation, 20% of investment and 60% of residence. This is particular to group purchasing for residence that the numbers may decrease more because of the decrease in trust and customers’ credits. In conclusion, customers or purchasing power of such group will disappear from market more than 50%” said Mr. Thongchai.

40 Thousand Condominiums on the waiting list to be released

The research department of Colliers International Thailand found that 2-3 years ago, there were more than 40 Thousand units per year of registered condominiums in Bangkok. In 2017, there will be 40 Thousand units. However, thing to be worried about is property transference.Even though each year the numbers of transference are more than the actual completed condominiums, rejected loans and purchasers with completed down payment unable to do transference were quite a lot last year especially,middle class purchasers or lower. This was because banks had strict considerations over credit release.

Some entrepreneurs selling middle or lower level projects have suffered from this problem as their customers got rejected almost 50% of numbers submitted for credit. The numbers of transferred condominiums each year are more than completed condominiums. It is not because every unit of completed condominiums will be transferred. However, the outnumber includes previous constructed condominiums and some units changing owners more than once.

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