Thailand’s residential market has faced significant challenges due to both external and domestic pressures, such as reduced global demand for construction and rising household debt.
The slowdown in China’s real estate market contributed to a worldwide decrease in construction demand, resulting in a surplus of materials like steel in Southeast Asian markets.
This surplus has led to increased price competition, forcing some Thai businesses to close. Concurrently, household debt in Thailand rose to 89.6% of GDP by the second quarter of 2024, curtailing consumer spending.
Mortgage rejections for loans under 3 million baht have soared to 70%, further suppressing demand. Additionally, with 20% of the population now over 60 years old, indications suggest slower population growth ahead.
In the first half of 2024, land allocation permits nationwide fell by 14.7% year-over-year, with the Northeast region experiencing the most severe decline at 67.1%.
Similarly, approved construction areas declined by 14.9% across the country, with a significant 24.8% drop in Bangkok and its vicinity.
Despite 32% of potential buyers identifying homeownership as a key objective in the second quarter of 2024, many face financial barriers.
The primary demographic of home buyers was those aged 25-34, with 35% earning a monthly income between 15,001 and 30,000 baht.
In response, the government has launched initiatives to stimulate the market. For example, in April 2024, the Government Housing Bank cut fees by 0.01% for ownership transfers and mortgages on properties valued below 7 million baht.
The “Happy Home” project, offering low-interest loans for homes priced under 3 million baht, was also introduced.
Moreover, the Bank of Thailand has implemented debt consolidation programs to relax loan-to-value ratios for housing and personal debts.
Foreign ownership of condominiums, especially in the luxury market, has declined, although there is an increase in units priced over 10 million baht.
Foreign investments in condominiums dropped by 6.2% in the second quarter of 2024, with 3,342 units sold for a total of 14.87 billion baht—a 17.7% decrease in value.
Chonburi leads in foreign property ownership, followed by Bangkok. Although properties under 3 million baht are most popular, demand for high-end units priced over 10 million baht has increased by 12% annually since 2019.
Developers are now prioritizing the luxury market, with land allocation permits in Bangkok decreasing by 27.3% year-over-year, but increasing in value by 43.8%.
As the residential market adjusts, challenges remain, particularly for lower-income buyers, possibly leading to a K-shaped recovery. Persistent issues like the middle-income trap and limited purchasing power pose significant barriers to growth.
Developers may increasingly rely on wealthier buyers, while those with restricted financial resources continue to face challenges. The trajectory of Thailand’s real estate sector remains uncertain, dependent on improvements in purchasing power.
