People check out deals on houses and condos at this year's House and Condo Show. Somchai Poomlard

The recent 0.25-percentage-point cut in interest rates is unlikely to have an immediate effect on the housing market as the reduction is too modest to generate a significant impact, according to SET-listed developer Sena Development.

Kessara Thanyalakpark, managing director of Sena, said the effects of last month's interest rate reduction on home sales or inflation may not manifest themselves in the short term.

"To create a significant impact, a 1% reduction is needed, which could potentially lower monthly payments for homebuyers from 5,500 baht per 1 million baht borrowed down to about 4,000 baht. This dip is meaningful for those in lower and middle-income segments," she said.

While current mortgage rates are already relatively low, the main obstacle for homebuyers is limited borrowing capacity because of restrictions imposed by banks, said Ms Kessara.

"However, we remain optimistic that the lower policy rate will ease the financial strain of mortgage payments for households," she said.

Sena's Livnext solution addresses this challenge by providing alternative financing options for individuals struggling to secure mortgage approvals, said Ms Kessara.

The programme allows buyers to make monthly payments directly to Sena, bridging the gap until they qualify for a full mortgage from Government Housing Bank, one of the company's banking partners.

This approach has proven effective, with 500 units valued at 1 billion baht approved out of a total of 800 units booked, worth a combined 1.6 billion baht.

"An increase in home prices has outpaced income growth, a trend seen globally, making it increasingly challenging for individuals to afford residential units, which has contributed to the high mortgage rejection rates," Ms Kessara said.

Kessara: Boost in Q4 unlikely

Another reason for the high rejection rate is the increasing debt levels, leading to changing consumer behaviour, particularly among younger generations, who prefer renting over buying due to financial readiness and job security concerns.

Renting has become a more viable option compared to long-term home loans spanning 30 years, especially when daily expenses and travel costs rise.

Consequently, younger buyers are finding it harder to afford home ownership compared to previous generations, as housing prices escalate faster than incomes. This decline in affordability aligns with a significant drop in ownership transfer rates.

"Housing transfers in the second half of the year will likely be 13% lower than in 2021, during the pandemic," said Ms Kessara.

This could signal a need for property developers to adapt business models, shifting from traditional long-term mortgage sales to a more diversified platform, she said.

Ms Kessara added that the typically active fourth quarter in the housing market is unlikely to see the same seasonal boost this year, due to low consumer confidence in making large purchases.

Instead, the company is focusing on the first quarter of next year as buyers might be more confident after receiving bonuses.