Housing Market Situation

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The housing market faced numerous pressures in 2020, primarily due to the COVID-19 situation, <\/span>leading to a deteriorating economic situation for businesses across various sectors, especially those related to tourism and aviation. This has impacted consumer purchasing power, particularly for those employed in the private sector or owning small and medium-sized enterprises. Coupled with the political unrest in the last quarter of the year, the overall housing market in 2020 was not favorable compared to the previous year.

When the second wave of COVID-19 hit in late 2020 and continued into early 2021, the number of infections in the country rose rapidly within a few weeks, resulting in movement restrictions. Medium and small businesses were likely to face ongoing difficulties. Thus, the housing market situation in the first quarter, or possibly extending through the first half of the year, showed no signs of improvement. Additionally, with the rise in non-performing loans in the housing credit sector, financial institutions had previously implemented measures to ease principal or interest payments or adjusted debt suspension conditions according to the Bank of Thailand's criteria. Most had extended the duration of these measures, which would end in early 2021, leading commercial banks to tighten new loan approvals, except for state-owned banks that continued to provide housing loans at a high level as part of the government's assistance for low and middle-income earners. The loan rejection rates of commercial banks for housing at various price levels remained at 30-50% for medium to low-priced housing, but the rejection rates were lower for high-priced housing, which had fewer units sold.

The housing market in the first half of 2021 remained at its lowest point or the base of the U-shape, continuing from late 2020. If the government can provide sufficient COVID-19 vaccines for the population and the outbreak situation abroad improves, allowing people to travel and visit each other more normally in the second half of 2021, it would positively influence economic recovery. The purchasing power of both Thai and foreign consumers may gradually return. If so, the housing market situation could show clearer recovery in the first half of 2022.

In the past year, housing project developers have adapted to the situation. Most large developers and some medium-sized ones managed to control costs or manage liquidity, along with successfully transferring ownership of properties from the existing backlog, resulting in relatively stable income. However, in 2021, with the ongoing public health situation and continued protests due to political differences, smaller developers would face even greater difficulties in sales.

Amidst the prominent negative macro factors, there are still positive factors for the housing sector in certain areas of the country. Significant positive factors include the opening of extended electric train services that began in late 2020, the launch of new electric train lines scheduled for the second half of 2021, such as the Pink Line, Yellow Line, and Red Line suburban train. The opening of Bang Sue Central Station, along with the opening of highways or expressways and the expansion of roads, including new alleyways, will contribute to the development of infrastructure and the growth of the real estate market in the peripheral areas of Bangkok. This includes both commercial and residential real estate in the future, particularly for low to medium-priced housing such as twin houses or townhouses priced between 2-5 million baht and condominiums priced between 1.5-3 million baht along the electric train lines, especially the extended lines and new lines, which are more affordable during unfavorable economic times. Meanwhile, the trend of housing loan interest rates remains low.

In addition to the positive factors regarding transportation infrastructure, it is expected that the government will step in to support the market by introducing supplementary measures. Even though the measures to reduce transfer and mortgage fees ended in late 2020 and have not been extended,

Although the accumulated unsold housing inventory, particularly condominiums, remains high, the number of new condominium projects launched was significantly reduced in 2020, with only about one-third of the usual new condominium units (approximately 60,000-65,000 units) in the Bangkok and surrounding areas, leading to a decrease in the supply level of condominiums available for sale in the market.

The housing market in other provinces is expected to slow down more than in the peripheral areas. In 2020, new housing sales dropped by at least 20% in all areas, while the number of remaining units for sale increased significantly, especially in tourist provinces that rely on purchasing power from outside the area or foreign buyers. Even in the Eastern Economic Corridor (EEC), the slowdown is notable due to the COVID-19 outbreak in early 2020 continuing into early 2021. Additionally, the economic minister who previously promoted the EEC project is no longer in the cabinet, which may hinder the progress of the EEC project. The trend of layoffs or reduced working hours may further shrink purchasing power in the area.

The prolonged public health situation regarding COVID-19 has made the trend of working from home a more significant factor in considering housing purchases. Housing types such as single-family homes or condominiums designed to facilitate work and the use of technology or designs that help residents avoid direct contact will gain more attention. At the same time, the aging society will make housing designed to accommodate the elderly, considering health care and safety, a favorable trend.