A rate hike is likely to have a negative impact on the housing market

Analysts say higher interest rates in Thailand could have a negative impact on the housing market, where demand is weak. Terdsak Thavithiratnam, executive vice president for research at Asia Plus Securities, said Thailand's economy has recently passed its bottom and is expected to grow at 3.3 percent in 2023.

"To achieve this, the economy must grow 3.8 percent in the second half of the year," he said. "This is possible, especially in the fourth quarter, which is expected to be the strongest quarter, as the tourism sector continues to grow and exports recover. "

In such circumstances, interest rates should not rise because the baht is one of the world's most stable currencies and monetary policy has been overly tight, Mr. Terdsak said.

Pirapong Yarun-ek, president of the Thai Condominium Association, agreed with Mr. Terdsak that interest rates could not be raised.

"Thailand should focus on attracting foreign funds through tourism rather than countering capital outflow or preventing baht devaluation by raising interest rates," he said.

Besides developing the tourism sector, the government should encourage tourists to visit the country several times by attracting them through real estate purchase, which can significantly increase GDP.

"The measures proposed by the previous government were too many," said Mr. Yarun-ek, who is also the CEO of Origin Property, a SET-listed company.

"The government may consider granting visas to foreigners who purchase properties worth 1 million baht or more, allowing them to get a 1-year visa for every million baht, as longer stays result in higher daily expenses in Thailand. "

PravyFirst-time buyers should be incentivized similar to first-time car buyers," he said.

Somboon Wasinchutchawal, executive director of Frasers Property Home (Thailand), said interest rates should not rise as purchasing power in the housing market is recovering.

"The hotel business has started to recover, especially with a marked increase in independent travelers, mainly from Taiwan and India," he said.

As a result, along with labor shortages, hotel staff are receiving higher tips, which have risen from 8,000 baht per person during the pandemic to 20,000 baht.

"If this trend continues, it will lead to an increase in demand for townhouses, priced at around 3 to 4 million baht per unit, and apartments, priced at around 3 to 5 million baht per unit," he said. "But the rise in interest rates should be stopped. "

Vichai Weeratsapan, acting CEO of the Real Estate Information Center (REIC), said the condominium market has not been favorable this year due to weak demand among local buyers.

"Unsold finished condos are a worrisome problem," he said. "The remaining unsold apartments did not increase much in the second quarter, but an additional 4,000 units will be completed in the future. "

The number of unsold completed apartments in Greater Bangkok stood at 20,918 units in the second quarter of 2023, up from 24,121 units in the first quarter, according to REIC.

There are still 32,618 unsold units under construction that will be completed in the coming years, up from 30,034 units in the first quarter, and 20,694 units that have not yet started construction, up from 15,565 units.

According to Asia Plus Securities, the amount of unsold finished apartments of the top 15 developers totaled 132 billion baht in the second quarter of this year, up from 136 billion in the first quarter.

The peak was in the fourth quarter of last year at 145 billion baht, up from 120 billion in the third quarter of the same year.

The average during the first quarter of 2020 through the second quarter of 2022 during the pandemic was 111 billion baht per quarter.

"The recent number is not a cause for concern as the number of new supply of completed projects with unsold units has declined in recent years as developers have reduced the pace of launches," Mr. Terdsak said.