In 2023, the market for real estate in Thailand has continued to recover from the decline due to the coronavirus pandemic of 2019-2021. Market growth has been driven in particular by the positive impact of the tourism sector and the influx of buyers from abroad. This article outlines the current state of the Thai housing market and the factors that may appear in the second half of 2023.
Content:
- The current situation on Thailand’s real estate market
- Expensive housing goes up, cheap accommodation goes down
- The most active home buyers
- The decline in supply volumes
- Economic developments that may influence the state of the real estate market in 2023
- Conclusion
The current situation on Thailand’s real estate market
According to REIC (Real Estate Information Center), despite the positive impact of foreign investors and buyers, the country’s real estate market could have been better in the first quarter of 2023 than various developers predicted in the 4th quarter of 2022. As experts point out, the market's growth potential is far from being exhausted.
The market still needs to rely on external demand to drive ascention , as domestic buyers experience difficulty securing loans, as evidenced by the decline in home purchases for 1st ¼ 2023.
As Vichai Viratkapan, acting general manager of the Real Estate Information Center, puts it, "First-quarter figures showed negative trends in demand and supply. In percentage terms of sales volumes, this year the market is expected to see a double-digit drop. It will be caused by the expiration of the LTV (loan-to-value) ratio easing, which happened at the end of 2022.
Expensive housing goes up, cheap accommodation goes down
In the 1st quarter, the total amount of homes transferred to buyers nationwide declined 0.8% from 85,320 units to 84,619 units recorded in 1st ¼ 2022.
Nevertheless, the total value of transactions rose 8% to THB 241 billion ($6.8 billion) from THB 223 billion ($6.3 billion), mainly due to properties in high-end segments.
Residential units priced between THB 7.5 million ($213,142) and THB 10 million ($284,190) rose markedly by 34%, and those over THB 10 million grew by 22.6%. However, apartments priced below THB 3 million ($85,257) recorded declines ranging from 0.2% to 11.4%.
Of the total number of sales in the 1st quarter of the current year, 3,775 commonhold property units with total value of THB 17.1 billion ($485.9 million) were purchased by foreign buyers. On an annualised basis, there was a 2.47% increase in sales volume and a 4.57% increase in value.
The most active home buyers
Among foreign buyers acquiring property in Thailand in the 1st quarter of 2023, the most notable were:
- Chinese nationals — 1,747 units purchased worth THB 8.2 billion ($233 million), representing 46 and 48 per cent of total deals by foreign citizens, respectively.
- U.S. buyers accounted for 156 units worth THB 703 million ($19.9 million), representing 4% of total sales to foreigners;
- British and German buyers took the fourth and fifth positions, with 146 units worth THB 653 million ($16.5 million) and 131 units worth THB 611 million ($17.3 million), respectively;
- Eighth place went to buyers from Myanmar, with 76 units purchased worth THB 497 million ($14.1 million).
The decline in supply volumes
The decline in supply volumes оn the market can primarily be attributed to developers' need for more stable demand after the expiration of the LTV relaxation limits in 2022. It has become much more difficult for buyers to get approval from banks. Those who planned to buy a second apartment in Thailand on a mortgage now need to seek additional funds to cover the down payment. This event impacted two-thirds of registered developers, resulting in a decline in annualised home sales revenue in the first quarter of 2023.
Consequently, the total number of residential units commissioned in Bangkok fell by 59 per cent to 12,026 in the first quarter of this year. The combined value of these units was estimated at THB 65.1 billion ($1.8 billion), reflecting a 39% year-on-year decline.
The total number of land allotment or low-rise building permits nationwide fell 13.6 per cent to 15,267 units.
Economic developments that may influence the state of the real estate market in 2023
Several unique issues have affected the country's real estate market for the past several years. Political instability has been one of the main ones. It has led to a drop in investor confidence and moderated the market's growth.
In particular, the COVID-19 pandemic has had a negative impact, causing a slowdown in demand and a decrease in property costs. Moreover, Thailand is facing trouble related to infrastructural development. Although there have been major improvements in recent years, especially in transportation and energy, issues still need to be resolved.
For instance, many rural communities need access to roads, electricity and other basic infrastructure facilities, which can impede economic development and restrict the real estate market's potential in these areas. Also, Thailand's public transportation system still lacks sufficient facilities to provide efficient commuting and reduce congestion.
Government support and investing in infrastructure projects
The project of high-speed rail and the enhancement of the capital's public transportation system are the primary considerations. They will help improve transport links and make property prices grow in adjacent areas.
Government activity to foster economic growth and attract overseas capital
Attracting investment from abroad will help boost demand for commercial property.
Global economy
A new factor in the deceleration of the country’s real estate market is the global economy and the potential for a significant recession. The consequences are unknown, although it could lead to reduced demand for properties. Nevertheless, it will eventually lead to a recovery in the market during the second half of 2023.
Conclusion
To summarise, the residential real estate market in Thailand is heading in the right direction. However, experts now refrain from making precise predictions for many reasons related to economic processes within the country and the foreign policy environment.
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