Nudging Buyers Off the Fence with Perks

December 2, 2019


More stimulus measures sail through the cabinet, but critics question their impact on the housing market.

The government’s latest property stimulus measures, including a 50,000-baht cash rebate greenlighted last Tuesday by the cabinet, could help accelerate the decision-making of some hesitant homebuyers. But they are likely to yield little effect on the broader market while key problems remain unsettled, property experts say.

Issara Boonyoung, honorary president of the Housing Business Association, said the time is right for homebuyers to get engaged, as there are two state-sponsored property measures already available, interest rates are low and developers are touting heavy discounts and attractive offers.

“The latest measures may not stimulate new demand much, but at least they can urge some homebuyers who want to buy but are hesitant to make a decision amid the unfavourable economy, as a house is a product for which a buyer can wait,” he said.

Last Tuesday, the government rolled out 144 billion baht worth of new stimulus measures, including Baan Dee Mee Down, a 50,000-baht cash rebate programme.

Under the Baan Dee Mee Down scheme, homebuyers who receive a cash rebate of 50,000 baht must have a monthly income of no more than 100,000 baht or 1.2 million baht a year and must be taxpayers in the Revenue Department’s tax database.

The scheme is limited to the first 100,000 participants who meet the Finance Ministry’s criteria, apply for a mortgage loan between Nov 27, 2019 and March 31, 2020 and register between Dec 11, 2019 and March 31, 2020.

Co-borrowers are welcome, but only qualified main borrowers will receive a cash rebate.

Mr Issara said 50,000 baht may be minimal for some homebuyers, but the amount can help reduce the burden from expenses associated with owning a home, such as furniture, appliances and home decoration.

“Buying a house today, homebuyers can carry only luggage to move in because developers offer almost everything homebuyers need to spend when moving into a new house,” he said.


Housing campaigns from developers include a waiver of all expenses homebuyers need to pay on the transfer date, comprising transfer fee, stamp duty for mortgage loan, common area fee, sinking fund, fire insurance premium, and water and electricity meter fees.

“All of these expenses together with other offers like discounts and giveaways of furniture, appliances or home furnished items can cost higher than 50,000 baht,” Mr Issara said. “It’s developers’ attempt to boost sales of existing supply as much as possible.”

The government in October approved a property stimulus package consisting of a property transfer fee cut from 2% to 0.01% and mortgage fee reduction from 1% to 0.01%. The fee reductions apply to homes priced at no more than 3 million baht. They are effective from Nov 2, 2019 to Dec 24, 2020.

In early November, the cabinet also approved the “Dream Home for New Year” programme, a 50-billion-baht mortgage scheme with a fixed interest rate of 2.5% for three years.

The Finance Ministry has been collaborating with the Thai Real Estate Association, the Thai Condominium Association, the Housing Business Association and real estate companies nationwide to roll out promotional campaigns for the project.

The Dream Home for New Year programme will give the public access to ownership of a house priced at 3 million baht or less.

According to Mr Issara, the property measures can help shore up the property market to a certain extent this year from an earlierprojected contraction of as much as 20-30%. The full-year drop is now anticipated at 10%.

Theerathat Singnarongthon, an assistant to the chief executive of SET-listed developer Property Perfect Plc, said the property measures can help drain the company’s housing stock and inventory worth 6 billion baht by the end of next year.

“Purchasing power is gradually resuming after consumers became aware of the new lending curbs, but in the fourth quarter it is maybe not as strong as we expected,” he said.

Aliwassa Pathanadabutr, managing director of property consultancy CBRE Thailand, said the latest measures are not strong enough to revive the property market.

“The measures should cover all market segments or every unit price if the policy wants to have a strong impact like previous measures did,” she said. “The cut in transfer and mortgage fees should be given to all price ranges.”

Ms Aliwassa said most buyers of units valued at 3 million baht or less have less purchasing power during a sluggish economy.

“50,000 baht is also too little to create new demand in the upper-end segment that qualifies,” she said. “But at least consumer confidence will improve as buyers feel they get help from both government and developers.”


Nonarit Bisonyabut, senior research fellow at the Thailand Development Research Institute, said only limited segments will benefit from the programme because of the criteria and conditions.

“Rather than from the government, the giveaway [cash rebate] should be offered by developers themselves in the form of price reductions or heavy discounts,” Mr Nonarit said.

“We don’t think the programme can work,” he said. “If it could, why don’t developers offer it themselves. Despite a property market slowdown, they continue to perform well. They still post profits, albeit lower profits.”

To boost the property market, Mr Nonarit suggested the government focus on overall economic expansion, infrastructure development and Eastern Economic Corridor initiatives (EEC). “The high-speed train may fail if the EEC does not happen,” he said.

The government should focus on long-term development like mass transit lines and transport networks to help jump-start the property sector, he said, as the impact from the tax incentives is short-lived.

If economic growth is lower than 3.7%, property market growth will be 1.5-3% because population growth in the future will trend downwards, with a decrease of 0.57% per year projected for people aged 20-60.

“To boost the property market, we may need to rely on foreign demand, but that raises security concerns because foreigners have high purchasing power, making property prices soar,” Mr Nonarit said.

Household debt is a key factor weakening residential demand, he said. Many people are unable to get a mortgage loan because they have high debt.

“There is an oversupply in the condo market,” Mr Nonarit said. “Those with high purchasing power and the ability to pay a mortgage, such as baby boomers, don’t prefer condos, while target buyers have high debt.”

Risky segments include first-jobbers who spend heavily day-to-day and those earning 30,000 baht or less per month who have debts.

Prasert Taedullayasatit, honorary president of the Thai Condominium Association, said the inability to get a mortgage loan is a key problem hindering potential homebuyers.

“As long as the new lending curbs are unchanged or relaxed, homebuyers who are not qualified under the rules cannot get a unit anyway despite heavy campaigns or discounts,” Mr Prasert said.

He suggested the loan-to-value limits be revoked or postponed until the economy recovers. Or the new lending curbs should be applied to the third home onward, not the second.

“Purchasing power is gradually resuming after consumers became aware of the new lending curbs, but in the fourth quarter it is maybe not as strong as we expected.”