Developers still able to deliver affordable housing

Ballobh Kritayanavaj, Government Housing Banks’ (GH Bank) senior vice president and head of its research and information services department, recently told The Nation that combined with the relatively low-interest rate environment, Bangkok and its metropolitan region (BMR) homebuyers have a wide range of choices in different price ranges.

The bank’s statistics showed that in 2012, 53 per cent of the 103,000 new houses up for sale in the BMR went for Bt2 million and below.

“If a borrower obtains a Bt1.7 million, 20-year loan at a 7 per cent interest rate, monthly payments would be about Bt13,180. In addition, most banks will require a 20-per-cent down-payment toward the home’s purchase,” Ballobh said.

Most Thai financial institutions, he said, require that qualified borrowers’ monthly payments must not exceed 30 per cent of the gross income. For instance, in the above case, purchasers of a Bt2-million house should earn at least Bt43,932 per month to qualify for a home loan.

Ballobh added that GH Bank statistics showed that more than 82 per cent of new homes offered for sale by developers in 2012 were priced at Bt5 million or less. “At a 7-per-cent interest rate, buyers of Bt5 million homes with a 20-year loan and a 20-per-cent down-payment will require a monthly income of about Bt109,830 to qualify.”

Surprisingly, very-high-end houses priced at more than Bt5 million and extremely high-end houses priced at more than Bt10 million, seen in newspaper and television advertisements, only constitute about 12 per cent of the homes offered for sale by developers.

Ballobh also said that GH Bank, which is celebrating its 60th anniversary this year, primarily services middle-and-lower income homebuyers. “More than 81 per cent of our new loans in 2012 were for homes priced at less than Bt2 million.”

In fact, more than 52 per cent of GH Bank loans in the BMR were for homes going for less than Bt1 million.

GH Bank’s statistics also showed that in 2012, developers in Thailand did not produce any new homes for sale at less than Bt1 million. “This indicates that people earning about Bt22,000 per month will have difficulty purchasing a new home in the BMR.”

Over the past few years, housing types have also been evolving with more condominiums being built in the BMR. GH Bank statistics showed that in 2012 about 57 per cent of all new housing completions were for condominiums; 32 per cent for town houses and 11 for single-detached homes. In 2009, condominiums only constituted about 30 per cent of total units completed.

Although private-housing developers were not able to offer new housing units for sale in 2012 at Bt1 million or less, the National Housing Authority (NHA) continued selling Baan Ua-Athorn subsidised homes at Bt390,000.

According to Ballobh, GH Bank financed 23,828 Baan Ua-Athorn units in 2012. “From 2005 to 2012, GH Bank has financed 171,892 units of the 264,797 Baan Ua-Athorn units sold by the NHA to low-income purchasers.”

Each of these units received a government subsidy of Bt80,000.

With costs continuing to rise, Ballobh said private-sector developers have indicated that they are currently having difficulty building low-cost housing units that can be sold for less than Bt1 million.

At a recent NHA sponsored symposium “New paradigm of housing and urban development in Thailand” to celebrate its 40th anniversary, global housing experts from the Pacific Rim Council on Urban Development and panellists concluded that a gap currently exists for new homes priced for sale at between Bt390,000 and Bt1 million.

Many delegates concluded that this area could perhaps be filled by the NHA either through rental housing or other subsidised government programmes.

However, Ballobh also said that homebuyers in Thailand should consider buying in the second-hand market that is currently estimated to be as large or larger than the new home market.

“The second-hand home market, especially in Bangkok and its periphery has been growing over the past several years because many homebuyers realise that in many cases, they may offer better-value for money.”