LPN Wisdom Expects Positive Feedback for New Projects Launched in 2021 while “House-Buying Power” Remains Unchanged
LPN Wisdom speculates that the new projects launched in the real estate market in 2021 will grow 5-10% as the number of products in the market is decreasing but the “purchasing power” tends to remain unchanged or grow 3-5% compared to 2020. It is as a result of increasing household debt, unemployment risk and stringent loan approval criteria of financial institutions.
Mr. Prapansak Rakchaiyawan, Managing Director of LPN Wisdom and Solution Co., Ltd. (LWS), a research and consulting company for property development under L.P.N. Development Public Co., Ltd. (LPN), stated that in 2021, the number of new projects launched will tend to increase compared with 2020. It is expected that there will be around 72,000-80,000 new units launched in Bangkok and peripheral areas in 2021, valuing 300-315 billion baht. It is equivalent to a 10-20% increase when comparing to around 65,000 new units launched in 2020. At the same time, the value of new projects launched increases 5% in comparison with the value of new projects launched of 285-300 billion baht in 2020.
“Real estate developers have been launching new projects since the end of Q4/2020 as a result of a decreasing number of products in the inventory. Many property developers launch new projects at the end of Q4 because of the marketing campaign launched in Q2 and Q3/2020 to boost the market. New projects will also continually be launched at the beginning of 2021 in order to match the needs of customers in 2021 and generate income in 2022-2023,” Mr. Prapansak said.
The real estate purchasing power in 2021 tends to remain unchanged from 2020 even though the Office of the National Economic and Social Development Council and the Bank of Thailand have speculated the economy to improve and achieve the growth of 3.5-4.5%while that in 2020 suffered the negative growth of -7-8%.
The economic growth in 2021 will owe to the government’s measures to boost the economy and improve export performance and investment in the private sector. However, the tourism industry will still suffer. The household debt will still be as high as 90% of the GDP. The loan approval criteria of financial institutions will thus remain stringent in 2021. In 2020, the loan rejection rate of 2-3 million baht housing was 50-60%, that of 5-7 million baht housing was 30-40% and that of over 10 million baht housing was 10-15%.
Moreover, the unemployment risk is increasing. The unemployment rate in 2020 was 1.9% or 740,000 people. In 2021, it is expected to reach 2-3% or around 2 million people according to the Office of the National Economic and Social Development Council. It is because the debt holiday was over in October so some business operators may plan to implement a pay cut or layoff in 2021. Home buyers may delay the plan to buy new homes because of income uncertainty. The purchasing power in the first half of 2021, therefore, tends to remain unchanged. However, it is expected that this will improve in the latter half of 2021 when COVID19 becomes controllable because of the arrival of the vaccine in mid 2021. As a consequence of the above trend, LPN Wisdom expects that the purchasing power in 2021 will be similar to or grow 3-5% from 2020.
It is found from the survey of LPN Wisdom that during the first 10 months (January-October) of 2020, the total of 58,087 new units were launched in Bangkok and peripheral areas, decreasing 36% from 90,935 new units launched during the same period of 2019. The average sales of new projects launched during the first 10 months of 2020 was 19% of all units opened for sales, decreasing from the average sales of new projects launched in 2019 of 26%. During the first 10 months of 2020, 65% of new units launched were from horizontal projects i.e. single house, twin house and townhouse projects. The popular price range in the market was lower than 5 million baht per unit. The other 35% were condominium units. The price range that received the positive feedback in the market was lower than 3 million baht per unit. The value of new projects launched during the first 10 months of 2020 was 231.111 billion baht, decreasing 35% from the value of new projects launched during the same period of 2019 of 354.268 billion baht.
“From the above survey, we expect that single house and townhouse with the price of lower than 5 million baht will continue to receive positive feedback in the market in 2021. At the same time, condominium units with the price of lower than 3 million baht along the old and new BTS and MRT lines, BTS Green Line extension and new Pink and Yellow lines will be well-accepted in 2021,” Mr. Prapansak added.
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