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Home-buyer urged to close deal this year ahead of higher prices

August 12, 2011

Officials from two major banks have suggested that buyers should quickly make decisions to purchase homes this year to escape next year’s expected rise in home prices and a rise in mortgage rates.

Chatchai Payuhanaveechai, first senior vice president of Kasikornbank (KBank), said yesterday that higher inflation and the increasing minimum daily wage are pushing up construction costs, and if buyers do not quickly make up their minds this year, they might have to pay higher prices.

Construction materials represent 73 per cent of home-building costs, and if material prices were adjusted by a maximum of 10 per cent, the cost of building a home would rise by 7.3 per cent. At the same time, labour represents 20 per cent of home-building cost and equipment related to home building makes up 7 per cent of total cost.

He added that if the government adjusts the minimum wage to Bt300 from Bt215, labour cost for building homes would rise by at least 8 per cent.

Developers also expect to witness an 11 to 15 per cent increase in the cost for building a home, and they will need to pass on these higher costs to customers. The overall cost is expected to increase by 9 per cent. The price adjustment will be made next year, he added.

While the repurchase rate is expected to climb in line with inflation, KBank officials expect the rate to reach 4 per cent by the year-end and 4.5 per cent by the end of 2012. Banks will then have to adjust their mortgage interest rates to deal with the RP.

People planning to buy a home should do so this year or they could face higher prices next year besides a rise in mortgage rates, he suggested.

Inflation

Pikun Srimahunt, executive vice president of Siam Commercial Bank’s mortgage business division, said that inflation is forcing developers to adjust project prices. Individual home prices this year were adjusted to Bt2.7 million, from Bt2.5 million last year. He said housing prices were expected to continue to rise, especially for new housing.

Next year, buyers will see an upward adjustment in the prices of homes. Therefore, buyers who want to avoid paying more should finalise their deals this year. Developers also are strongly promoting their ongoing projects with the aim of concluding sales this year.

However, a trend of rising prices might reduce speculation and benefit buyers.

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