A visitor scrutinises deals on offer at the May 2024 edition of House and Condo show. (Photo: Varuth Hirunyatheb)

SCB EIC, the research centre of Siam Commercial Bank, predicts that the transfer of new residential units in Greater Bangkok will decline by 10% this year, with a further contraction of 1-3% projected for 2025, mainly due to the country's sluggish economy.

In terms of value, the decrease is estimated at 9% for 2024, but it may stabilise to between 0-2% next year, according to the research house.

The downturn in the residential market is attributed to economic challenges, including rising living costs, weakened purchasing power, a high level of household debt, increasing interest rates, and stricter mortgage approval criteria.

These factors are causing prospective homebuyers, particularly in the lower- to middle-income segments, to postpone purchasing decisions.

Additionally, SCB EIC forecasts that the number of newly launched residential units in 2024 will decrease by 28% year-on-year, with the figure expected to recover in 2025 with a projected contraction of 2-4%.

In response to these conditions, property developers are focusing more on middle- to upper-market projects, where purchasing power remains stronger.

Amid tighter mortgage approval processes, major local banks reported a contraction in mortgage loans during the first nine months of this year.

SCB, the fourth-largest bank by total assets and the industry leader in housing loans, reported a mortgage loan portfolio of 779 billion baht as of September 2024, down 15.5% quarter-on-quarter, 39% year-to-date, and 38.5% year-on-year.

As of September, Bangkok Bank (BBL), Thailand's largest bank, had a mortgage loan portfolio of 332 billion baht, a slight decrease of 0.6% quarter-on-quarter and 1.7% year-to-date. Meanwhile, Bank of Ayudhya (Krungsri) saw the value of its housing loan portfolio drop to 248 billion baht, down 3% quarter-on-quarter and 7.6% year-to-date.

TMBThanachart Bank (ttb) also reported a decline in overall mortgage lending, with a drop of 0.8% quarter-on-quarter and 2.2% year-to-date as of September, according to a statement it released to the Stock Exchange of Thailand (SET).

Krungthai Bank (KTB), the second- largest lender in Thailand, was the only major bank to report growth in home loans. As of September, its mortgage loan portfolio stood at 498 billion baht, up 1.5% quarter-on-quarter and 2.9% year-to-date.

Kasikornbank (KBank) did not disclose housing loan data in its financial statement to the SET.

In response to market conditions, large local banks announced across-the-board cuts to their lending interest rates, including the minimum retail rate (MRR) used for housing loans. BBL currently offers the lowest MRR among major banks, at 7% per year.

Other banks' loan rate reductions will take effect on Nov 1. The new MRRs will be: KTB at 7.445%, KBank at 7.180%, SCB at 7.175%, Krungsri at 7.275%, and ttb at 7.705%.