Residential developers should rent out their unsold supply and turn tenants into homebuyers by partnering with financial institutions amid tepid demand and excess supply, says TMBThanachart Bank.
The bank's chief executive Piti Tantakasem said developers whose financial status is strong should offer their unsold units for rent. When tenants make a payment on time for at least 12 months, they can then turn to homebuyers.
"Tenants can use their monthly payment record to apply for a mortgage loan if they want and are ready to own a unit," he said. "Developers can turn monthly instalment payments into a down payment."
This should be a co-programme between developers and banks. Developers should also agree to buy back the units if they become a non-performing loan within a specified period, said Mr Piti.
"The idea would help both developers and homebuyers," he said. "Developers will not lose a chance and waste time selling units, while homebuyers have a chance to acquire a mortgage with a good record. The rent can turn into a down payment."
Developers with a glut of unsold units should apply this idea to manage inventory, particularly the excess supply of condos that built up over the past three years, said Mr Piti.
Homebuyers' purchasing power, particularly in the lower-end segment, is fragile at the moment because of the pandemic, he said.
Potential buyers' income dropped while expenses grew based on rising inflation, said Mr Piti.
"Household debt has soared to 90% of GDP, mostly stemming from consumption," he said.
"The younger generation borrowed money for daily expenditures, dining and travel as they can easily obtain a credit card."
NEW CHALLENGES
Mr Piti said residential demand and supply were disrupted by several factors.
On the demand side, the number of potential buyers shrank because of the decline in the working age population and the rising number of elderly.
"The birth rate is lower as people stay single. Many couples have fewer children or none," he said.
"People who are unmarried or without kids are unlikely buy a new home."
According to a 2020 survey by the National Statistical Office, Thais got married at 33 on average, up from 28 in 2010.
Many adult Thais stay with their parents and will not relocate to a new home, meaning new home purchases will decline, said Mr Piti.
Developers should design homes to meet new requirements, such as functions that appeal to single people or the elderly, security technology and design-friendly facilities, he said.
As real demand for both first and second homes continues to decrease, investment buyers, speculators and foreign buyers have also waned, which should push developers to find new demand from locations with a large pool of jobs, said Mr Piti.
"The most attractive areas will be eastern provinces, where around 200,000 people will relocate to work by 2032," he said. "In the past, the tourism boom made Phuket outstanding, but after the pandemic more workers migrated back to their hometowns."
Mr Piti said the pandemic caused a drastic change in consumer behaviour as more people worked from home and environmental concerns came to the fore. As a result, demand for low-rise houses has risen since 2020.
"Before Covid-19, people preferred a condo near a mass transit station to avoid heavy traffic. But when they have to work from home or have kids studying at home, a condo is not a good choice," he said.
In addition to location, houses with solar rooftops and an EV charger became preferable options for a new generation of homebuyers.
"Developers should change the way they do business," said Mr Piti.
