The rising trend in interest rates is a risk factor for the commodity market, especially high-value segments such as real estate. Both entrepreneurs and consumers are inevitably affected by “cost” of the increased interest rate
Mr. Prasert Taadulasatit Chief Executive Officer Real Estate Business Division Ananda Development Public Company Limited said that a 1% interest rate hike under normal conditions would affect customer installment payments on average 7-8%. On the demand side, it will not affect only 1% because most banks are quite conservative in order to reduce costs faster than usual. causing the customer’s repayment capacity to decrease. This means that every 1% will have an impact of 8-10%. This is a situation that affects the demand in the real estate market.
interest rate rise It also affects the selling price of about 1.5%, meaning that the rising interest rate situation will affect both demand and supply by about 10%. Must rely on customers with purchasing power in the high-end market that are not affected by the rising interest rate. whether it is a group of Thai or foreign customers Because excess liquidity (Excess liquidity) is among these people. who are ready to buy a luxury home or penthouse because they hold cash in hand
However, the guideline to adjust during the rising interest rate real estate operator Must pay attention to the appropriate investment size. Because if the situation drags on for a long time, it will not bring good results. therefore need to use economies of speed or Economies of Speed To run a business to be able to produce products faster, reduce costs to fight rising interest rates.
“If the speed is good, the interest burden will decrease. At the same time, it is necessary to study accurate marketing information. This is the reason that real estate operators turned to develop horizontal projects because the construction of houses is faster than condominiums Can manage costs more easily Because interest is the cost of every business.”
Raise interest rates by 0.25% to stop the economy.
Prasert said that this rate hike under an economic recession was a frightening thing. Because the economy is not as good as you think. Raising interest rates against the economic conditions It’s something that needs to be balanced well. In terms of raising interest rates for Thailand
“Don’t raise interest rates too quickly because the Thai economy has not fully recovered like other countries. Should be adjusted by 0.25%, soi the frequency of going up to see the feedback See the right timing so that the market is not shocked recovery does not stop Don’t rush to America, Europe.”
Meanwhile The state must manage the stability of the baht in balance. Depreciation is not a bad thing. Because it has resulted in more foreigners wanting to travel to Thailand. This is good for the tourism industry. which must balance every engine to drive the country’s economy
Recommend price adjustment suitable for lower purchasing power
Mr. Piya Prayong Executive Chairman Pruksa Real Estate Public Company Limited said that from high inflation problems very weak currency capital outflow need to raise interest From the perspective of entrepreneurs, they want to increase as little as possible gradually so as not to stumble the economy. As for the Bank of Thailand (BOT), it must be studied as carefully as possible. And it’s a more gradual increase than a 1% straight up after facing rising prices, wars, rising oil prices.
“Real estate operators The project development model must be adjusted to be more cost-effective and economical. Choose only the necessities Product has been adjusted Packages to suit the purchasing power of customers The design must be adjusted accordingly. Because all the materials go up while the purchasing power of people decreases.”
In the past, there are pre-orders to lock some of the original price, but it can’t be locked for a very long time because of the same risk. Some products are short, some are long. because now steel prices have begun to decline depending on the situation If you buy and stock up, you have to bear heavy interest burdens. That’s why almost every company has turned to do more horizontally. Because it was built and sold, it is not as risky as launching a condominium project.
Raising interest rates affects real estate by 2 bounces
Mrs. Kesara Thanyalakpark Managing Director of Sena Development Public Company Limited said that an interest rate hike, for example, a house price of 1 million baht, 5% interest, paying 5,000 baht per million, homebuyers would think that if the interest rate was 6%, they had to pay millions. 6,000 baht per person, so if people who buy houses do not have enough salary Paying 6,000 baht per month will prevent him from buying a house for 1 million baht.
It can be seen that the first effect is the purchasing ability. “reduce” Can’t buy a house at the price you want to buy second story effect Due to the long loan term of the house up to 30 years, therefore, when interest increases, the overall picture will have to pay more expensive installments. Obviously, in a house price of 1 million baht, when the interest rate is 6% compared to the interest of 5%, the total amount that must be paid is different. despite having the same home as a result of rising interest rates
“The house is a long-term loan. But in fact, interest rates do not always go up. There may be some ups and downs. But usually when the interest rate increases hedging bank cause to pay more monthly therefore a negative factor affecting the real estate market because it was affected by 2 bounces, namely, house costs increased. House selling prices have risen, although homes of the same price are still more expensive because of rising interest rates. That means you’ll find 2 bounces.”
Focus on investing in markets with demand
However, real estate operators Can not pass the cost burden to consumers at all. For example, from the original cost of a house price of 1 million baht, but now building a house of the same size costs 1.2 million baht. To get the same profit, but doing that is quite difficult. because consumers can not afford to pay more The situation is like a fateful hit that the developer has to face 2 bounces as well, meaning that the profit must be reduced.
Mrs. Kesara continued that the reason for the interest rate hike this time was to solve the inflation problem. Just like the US does But the US economy has recovered more than Thailand. The Bank of Thailand (BOT) has announced that will raise interest rates to combat inflation “Smooth Take Off” gradually increasing as the Thai economy has not yet recovered. Because if the interest rate increases a lot, the impact is severe. Making some developers unable to continue doing business will affect the real estate market. Overview and impact on the economy
“Real estate operators The cost is more expensive than instant noodles. The method of adjustment will reduce the size. Real estate is no different, but what is different from consumer products is that the location may have to be farther away. because the price of land is higher or the size of the house is smaller so that the price is not too high that the consumer purchasing power.”
For the concept of Sena Focus on developing projects in demanding locations The most important thing is where people buy. Then think about how to reduce costs. But not going to that location because the cost can be reduced as much as possible. Because even if the cost is the lowest, but if no one buys it, it’s not as useful as renting a market area that is cheap but without people to walk and pay rent for free.