How do changes in interest rates affect real estate investment?
In real estate investment, both novice and experienced investors must pay close attention to "interest rates." Closely monitoring changes in interest rate policy is crucial. The policy interest rate refers to the rate set by the Bank of Thailand and affects all other interest rates in the economy. In other words, when the policy interest rate rises, other banks nationwide will also raise their rates. Conversely, if the policy interest rate falls, other banks nationwide will also lower their rates.
The reason investors need to pay attention to changes in interest rates is because these changes directly impact real estate investment in the following ways:
__________________________________________
1. Impact on house buyers
When interest rates rise, the people most affected are those who have to make mortgage payments on real estate purchases, whether houses or condominiums. When people decide to buy a house, they often choose banks offering low interest rates to minimize their monthly payments. However, when the policy interest rate rises, all banks must adjust their interest rates in line with the Bank of Thailand, increasing monthly payments. This directly affects the purchasing decisions of those seeking housing, making them hesitant to buy due to concerns about excessive monthly payments and potential future financial problems.
__________________________________________
2. Impact on Investors
Whether you're an investor buying real estate, houses, or condos for resale or rental, you're all affected by changes in interest rates to varying degrees. If interest rates rise, people are less likely to buy houses or condos, making it harder for investors to sell their properties and achieve their profit targets. Simply put, if investors don't monitor interest rate trends and invest in real estate during a period of high interest rates, they'll find it difficult to sell and will have to bear the burden of mortgage payments and ownership costs themselves. Without proper financial management, this could lead to financial problems and the loss of their property, such as foreclosure or selling at a loss.
__________________________________________
3. Impact on Real Estate Businesses
When potential buyers are hesitant and investors don't see opportunities for profit in real estate investment, these are the ripple effects of changes in interest rates on businesses. This would slow down the real estate sector because there would be no purchasing power entering the market, neither from genuine housebuyers nor investors. Ultimately, real estate developers would be affected because they wouldn't be able to sell properties according to their targets, lacking cash flow to keep their businesses running. At the same time, they would have to pay off business debts, and of course, when interest rates rise, they would have to bear an even heavier burden. This could lead to a domino effect affecting everyone in the sector and could even result in an economic crisis if real estate companies face financial problems, mass layoffs, or bankruptcy.
__________________________________________
From the overall impact described above, it's clear that changes in interest rates play a significant role in determining the direction of the real estate market and also indicate the trend of the domestic economy. Therefore, it is essential for all real estate investors to closely monitor changes in policy interest rates to stay informed and adjust their investment plans appropriately, ensuring safe, low-risk investments and maximizing the chances of achieving their goals.
__________________________________________
Thank you for the valuable information from REIC.
