The housing market in Bangkok is experiencing tremors as a result of the country’s high levels of household debt, rising interest rates and dwindling purchasing power.
According to a Kasikornbank Research Centre report, the year’s low housing demand will continue. In comparison to last year, sales in Bangkok and its suburbs may decline by 7.8% this year, the report says.
Since the beginning of the year, there has been a decline in housing sales, according to the research centre. This has occurred despite the fact that foreigners have come back to buy condominiums and despite fees and mortgages being reduced for properties priced at less than Bt3m.
Pent-up demand from the pandemic has already been satisfied by the market, especially once the loan-to-value requirements were loosened.
Consumer spending hasn’t entirely recovered from the epidemic, household debt is still high, and mortgage interest rates are going up. According to the research centre, this results in higher monthly payments and more restrictive credit limitations.
According to the report, rate increases from September 2022 to July of this year resulted in an average increase in monthly payments of roughly 13%.
Booking acquisitions for residential properties in the Bangkok metropolitan area decreased by nearly 12% during the first seven months of 2023 compared with 2022, and property transfers decreased by around 3% during the first half of the year.
The research organisation predicts that the housing market will steady the following year and that property transfers in Bangkok and the surrounding area might increase by 1.2% to 4.6% from this year.
It advises keeping an eye on the timing and specifics of the new administration’s economic stimulus programmes, which would target lower- to middle-income households and contain measures that will have an impact on the real estate market. According to the centre, these stimulus measures have a good chance of boosting property market sales in 2019.
Three significant obstacles to the real estate industry were noted.
- The housing market in Bangkok and the surrounding area is out of balance between supply and demand. For more than six years, there have been more than 200,000 unsold housing units on the market. In Bangkok and its surrounding areas, there were 220,000 unsold units in the first half of 2023. If no new housing developments are developed, clearing these units could take longer than three years.
- As company expenses continue to rise, housing costs rise (per-unit costs may stay the same, but available space decreases) and some developers may find it more challenging to borrow capital. Construction materials are becoming more expensive as a result of the drive towards ecologically-friendly building, while land prices are also rising. Additionally, rising costs include those for labour, marketing, real estate taxes, and finances.
- Population decline and an aged society. Bangkok’s population has been decreasing for three years at an average rate of 0.2% annually (migrant workers excluded). On the other hand, the suburbs had an average population growth of 0.6% each year throughout that time.
