The price index for vacant land in Greater Bangkok fell in the second quarter of this year compared to the first quarter, primarily due to a sluggish economic recovery and a slowdown in the residential real estate market.
Vichai Viratkapan, the acting director-general of the Real Estate Information Center (REIC), indicated that the decrease in the land price index could be attributed to developers halting land purchases.
“Owning land comes with costs, including land and building taxes,” he explained. “It can become burdensome to acquire land when it’s not the optimal time for development or project launch, particularly in an unfavorable market climate.” He noted that the property market experienced a significant downturn in the first half of the year, driven by various negative factors such as a slowing economic rebound, decreased investment, and the revocation of eased loan-to-value limits.
Additionally, he pointed out a high level of household debt, which stands at 90% of GDP, coupled with elevated interest rates and stricter lending regulations. These conditions have led to reduced affordability and borrowing capability among potential homebuyers.
In the second quarter of 2024, the price index for vacant land in Greater Bangkok registered at 398.2, reflecting a 2.4% decrease from 407.8 in the first quarter but marking a 5.8% increase compared to the second quarter of 2023. This decline from the first to the second quarter of 2024 signifies the third consecutive quarterly drop since the REIC began monitoring land prices in 2012.
The initial drop occurred in the first quarter of 2021, which saw a 2.2% reduction from the fourth quarter of 2020, largely attributed to the pandemic that began in late 2019. The second decline was recorded in the second quarter of 2023, where the index fell by 2.4%, following a series of interest rate hikes implemented five times between August and September 2022 and from January to March 2023.
Mr. Vichai noted that the year-on-year increase in the second quarter was significantly lower than the pre-pandemic average annual growth of 14.8%, recorded over the five years from 2015 to 2019. “This year, there have been no reductions in the land and building tax,” he added. “Additionally, many developers have shifted their focus to regions outside Greater Bangkok, such as Phuket, which has contributed to a decline in demand for land within the Greater Bangkok area.”
