The weakening influence of Covid-19 helped foreign buyers gradually return to international real estate markets. In particular, they did not ignore Thailand but not everything is as clear-cut regarding this. What was the real estate market like in Thailand in 2021? The article will explain how the pandemic affected and what trends have been in the housing sector during the year.
Content:
- The impact of the pandemic on the Thai economy
- The situation of the real estate market compared to previous years
- Volumes of real estate transactions
- Dynamics of Thai real estate growth and decline in 2021
- Demand for real estate
- Construction of new projects and development of old ones
- Dynamics of 2021 in numbers: report on the economic situation in Thailand
The impact of the pandemic on the Thai economy
According to the Real Estate Information Center of Thailand (REIC), in 2020, Thailand’s housing market slowed down sharply due to the economic problems caused by the COVID-19 pandemic. Exports and tourism declined sharply, demand and construction activity fell, and housing prices remained unchanged or fell. In 2020, only 6.7 million foreign tourists visited the country, compared to almost 40 million in 2019.
In the first quarter of 2021, the tourism situation worsened and only 20,172 tourists visited Thailand, 99.7% less than a year earlier.
During the first quarter of 2021, Thailand's economy shrank even more – by 2.6% compared to the previous year. The drop was recorded for the fifth consecutive quarter but it was the lowest since the 1st quarter of 2020. As a result, the National Economic and Social Development Council (NERDC) has reduced its growth forecast for 2021 to 1.5-2.5% from the previous forecast of 2.5-3.5%.
The situation of the real estate market compared to previous years
According to the Central Bank of Thailand (ВОТ), from January to May 2021, the average house price in Thailand increased by 1.2% but decreased by 5.9% compared to the same period last year, which was the lowest growth compared to August 2017. Despite this, the sector remained stable with low-interest rates on lending.
Compared with the figures of 2020 (7.9%), in May 2021, prices for condominiums increased by a slight 0.1% (decreased by 2.3% in real terms), which was a sharp slowdown.
From January to May 2021, prices for townhouses increased by 1.4% (but decreased by 1% in real terms) but decreased by 5.5% less compared to the same period last year.
Land prices were more stable. Their growth in May 2021 was 8.4% (5.8% in real terms), compared to 5.6% growth in 2020, 1.7% and 2.8% in 2019-2018, respectively.
The pandemic continued to hold back the housing sector. Nationwide condo registrations fell 33.6% to 17,618 units in the first four months of 2021 compared to the same period last year. In Bangkok, the number of registered apartments decreased by 41% over the same period.
Volumes of real estate transactions
According to ВОТ, in the first four months of 2021, the volume of land and housing transactions amounted to ฿267.81 billion baht ($8.24 billion), which is 11.7% less than the results of 2020, and 19.4% of 2019.
In 2021, as the epidemiological situation in the country deteriorated, the demand from foreigners was expected to decrease. In June 2021, the government announced new restrictions in and around Bangkok.
Investors from China and Hong Kong accounted for almost half of the total foreign demand for residential real estate in the country. Besides them, the most active buyers were citizens of the USA, Singapore, Taiwan, Japan, and the UK.
Dynamics of Thai real estate growth and decline in 2021
REIC reports that although the isolation caused by COVID-19 eased in the third quarter of 2021, signs of an economic downturn have persisted. Moreover, weak purchasing power hindered the recovery of the real estate market.
Since the beginning of 2021, the housing price index has been declining steadily and stabilized by December. Meanwhile, the supply index has been steadily growing. Many developers in Thailand have focused on low-rise buildings and detached houses, gradually reducing the number of vertical properties.
According to Trading Economics, in the 4th quarter of 2021, the Bangkok supply increased by 7%. The residential real estate price index rose from 183 points to 178 points, which is 2% less compared to the previous quarter.
As an incentive, Thai developers are introducing new advertising strategies and discounts to attract buyers. The decision was successful and met current demands. The price index for condominiums has declined due to increased demand for detached houses and townhouses while the prices of detached houses jumped by 10% and the townhouse sector by 8% compared to the 3rd quarter of 2021.
The supply index in the condominium sector remained the highest at 86% while detached houses and townhouses accounted for 8% and 6%, respectively.
Demand for real estate
In Thailand, real estate ranks second (23% of the total) in the consumer price index. In addition to it, this list includes:
- Food and soft drinks — 36%;
- Transport and communications — 24%;
- Medical care and self-care — 6%;
- Clothing and shoes — 3%;
- Tobacco and alcoholic beverages — 1%.
Thailand estimates the attraction of long-term foreign residents at $24 billion.
Places outside the Central Business District and on the outskirts of Bangkok such as Wang Thonglang and Lat Phrao, recorded the highest price index growth thanks to new and upcoming sky train routes.
In general, thanks to lower prices and fees for the transfer of ownership rights, 2021 is still favorable for investors with high purchasing power.
In its forecast for 2021, a leading international real estate consultant (CBRE) reported an uneven recovery in regions and sectors despite a continuing decline since 2020. In 2022, it will be difficult for the housing market to recover. Commercial markets will be in a mixed state as logistics is developing; while the office space market expects a high supply inflow and a lag in the tourism and retail sectors.
Construction of new projects and development of old ones
In the second half of 2021, limited new construction launches focused on central/suburban areas and affordable segments as prices gradually stabilized. Developers have concentrated on already built but not completed buildings to increase financial liquidity.
To reduce losses and ease the financing threshold for banks, companies scaled back construction. Low-rise construction has become a key area for new projects as developers seek to reduce risks while demand for condominiums is still on the market but from lower-budget buyers.
Aliwassa Pathnadabutr, Managing Director of CBRE Agency in Thailand, says: "Based on the number of transactions in 2020, the luxury housing market is still in high demand among both end buyers and investors with high purchasing power, especially for luxury real estate. However, purchasing decisions have become longer. The commissioning of large properties in the super-luxury segment where sales were low in the past has become more active this year. The interest of foreign buyers, especially Chinese investors, in investing in Thailand remains in all segments.
In the future, when the influx of tourists and foreigners becomes more stable, sales volumes will recover. To attract foreign buyers, it is necessary to promote sales and effective government programs. CBRE expects to see a more effective incentive plan covering broader aspects that will better support the housing market in 2021-2022."
Dynamics of 2021 in numbers: report on the economic situation in Thailand
Trading Economics provided a detailed report on the economic situation in Thailand.
The consumer confidence index of the University of the Chamber of Commerce of Thailand rose to a seven-month high of 44.9 in November 2021 from 43.9 a month earlier. Thus, the improvements lasted for three consecutive months as a result of an improvement in the situation with COVID-19 and the resumption of the tourism sector in the country.
To date, more than 57% of people in Southeast Asia's second-largest country have received all doses of coronavirus vaccines. Meanwhile, in early December, amid concerns over Omicron, Thailand banned travelers from eight African countries including Botswana, Eswatini, Lesotho, Malawi, Mozambique, Namibia, South Africa, and Zimbabwe.
Thailand's annual inflation rate rose to 2.71% in November 2021 from 2.38% in October, above the market consensus of 2.5%. It was the highest figure since April as consumption levels went up after an increased number of vaccinations against COVID-19. State subsidies were abolished. The cost of food increased by 0.43%, overcoming the decline in the previous four months facilitated by the increase in prices for vegetables, fruits, and meat.
In addition, transport inflation increased (11.72% vs. 11.61%) due to vehicles and vehicle operation. The cost of housing decreased less actively (-0.12% vs. -0.17%). For 2021, the government maintains its inflation forecast of between 0.8% and 1.2%.
Analysts ВОТ believe that the consumer price index in 2022 will grow from 0.7% to 2.4%. Core consumer prices rose 0.29% YoY in November, the highest in five months, rising 0.21% in October. Monthly, prices rose by 0.28% – this is the lowest figure in three months after an increase of 0.74% in October.