House prices are expected to decline for the first time in a year in August as loan repayments period and soaring inflation finally took a toll, with the slowdown forecast to deepen in the coming months.
Average home prices are expected to fall by 10% in the coming months, according to the real estate agents in the country.
According to the CEO of Bhutan real estate, Lhakpa Tshering Tamang, a price decline is anticipated in the coming months as the market returns to typical seasonal patterns following a frenetic two years of the pandemic.
“I don’t expect housing prices to recover to pre-pandemic levels, but rather to be lower than they were in February, this year,” he said.
He shared that many people who have kept the property as a mortgage with the bank will try to sell quickly in a short period at lower prices. “So, this could be the main reason for the drop in house prices,” he said.
“As some owners who have avoided paying the Equated Monthly Installments (EMI) to the banks until now will have the overdue accumulated. They would rather prefer to sell it than to have the bank seize their property,” he explained.
He also shared that subsequently when the price of the house falls, the newly constructed buildings will also lower the prices.
“The 3bhk flat was available for Nu. 3.5mn in March, but it now costs around Nu 6mn,” real estate owners, Hemant said adding that presently they have more buyers than sellers thus, the price is high right now.
Meanwhile, the slowdown is expected to mark the start of a material loss of momentum for the housing market, which boomed during the pandemic. Households across the income spectrum are now facing a brutal cost of living squeeze, with inflation set to hit more.
Some experts say that since the Druk Gyalpo Relief Kidu fund has been dissolved, borrowers must make loan repayments in addition to selling their properties at a lower price rather than letting the bank seize them.
However, the price of flats in the Thromde area has risen by 42.8% in the last four months compared to the first quarter of the previous year.
Currently, a two-bedroom hall kitchen (bhk) in core areas of Thimphu costs around Nu 5mn to Nu 6mn and Nu 3.5mn to Nu 4mn in other areas and a 3bhk flat is valued between Nu 6mn to Nu 8mn.
The proprietor of PD real estate express stated that in the coming few months, there will be more people selling and fewer people buying as many people would be unable to purchase the flats right now due to rising living costs and inflation, and there will be more sellers than buyers.
“That way, when supply is high and demand is low, prices would automatically fall,” he said.
“Negligible monthly declines in house price growth will get steeper,” real-estate agents said adding that mortgages have become noticeably more expensive in recent months, which will dampen demand as cheaper offers are made earlier this year and people roll off fixed-rate deals.
One of the experts says that the hit to living standards is taking hold at a time when affordability for first-time buyers is more stretched than ever.
“Higher borrowing costs from the banks are already having an impact during the pandemic, so the price of the house will drop,” they said.
Tshering Pelden from Thimphu