Highlights from the Annual Seminar “Real Estate Economic Index 2024”

Dr. Paipoom Rojanasakul, Secretary to the Minister of Finance, opened the event and delivered a keynote speech on “Government Policies Supporting the Real Estate Sector,” stating that the government has various real estate policies and measures aimed at benefiting the economy and the public as much as possible. The Ministry of Finance recognizes the importance of the real estate market and has introduced economic stimulus measures in the real estate sector, which are crucial tax and financial measures for 2024 as follows:

Tax Measures (5 measures)

1. “Personal income tax deductions for interest paid on loans” for borrowing to purchase, lease, or construct residential buildings, up to 100,000 baht, to alleviate the burden on earners.

2. “Reduction of land and building tax” by 90% for operators under development for up to 3 years to ease the tax burden during construction.

3. “Exemption from land and building tax” for common property held for joint use by co-owners under the Condominium Act, public utility land under the Land Allocation Act, and the Industrial Estate Authority of Thailand Act.

4. “Extension of land and building tax collection period” for the general collection of land tax in 2024 by an additional 2 months.

5. “Reduction of registration fees for rights and legal transactions for residences” reducing transfer registration fees from 2% to 1% and mortgage registration fees from 1% to 0.01% for registrations in 2024.

Financial Measures (2 measures)

1. “One Million Houses Project” supports citizens in owning affordable housing, with the Government Housing Bank providing relaxed loan conditions of 20 billion baht, with a maximum loan of 1.5 million baht, a maximum loan term of 40 years, and a fixed interest rate of 3% per year for 5 years.

2. “Happy Life Loan Project” encourages citizens to own their homes, with loans starting from 2.5 million baht, a maximum loan term of 40 years, and an average interest rate of 2.98% per year for 3 years, with the lowest interest rate in the first year at 1.95% per year.

Regarding the direction and opportunities in the domestic and international real estate market in 2024, Mr. Atthitaya Kasemlawan, Head of Residential Project Sales at CBRE (Thailand) Co., Ltd., stated that the overall housing market in 2023 still faces global economic issues, particularly in the Chinese market, which has been affected by the Russia-Ukraine war and the Middle East. These external factors have impacted the market, with GDP expected to grow by 2.8%, down from the previously forecasted 3.5%. The supporting factors include global elections, while Thailand must wait to see the government's stimulus measures for the real estate sector, which will affect business momentum.

In Thailand, after the development of infrastructure systems, it has facilitated real estate development, making it easier for people to move into urban areas. In the next 6 years, the transportation system will be ready to support both tourism and real estate.

Data from real estate developers listed on the stock exchange from 2017 to 2023 show a continuous launch of new projects, recovering after COVID-19. Luxury homes priced between 30-70 million baht saw a doubling of launches in 2023, with sales reaching 60%. The eastern Bangkok area has a high supply and sales of up to 70%.

In 2023, foreign customers accounted for 10-13% of condominium purchases and transfers, with a significant increase in purchases in provincial areas, while transfers in Bangkok decreased by over 50%. In Phuket, new villa projects priced between 15-35 million baht have gained high popularity, especially in the western area, with sales soaring by over 80%.

Looking ahead to 2024, the foreign market is expected to recover due to the increasing number of tourists, particularly from Malaysia and China, while customers from Taiwan and Myanmar are also showing increased interest in purchasing condominiums.

Regarding LTV measures, it is observed that most CBRE customers are from the luxury segment, who have cash and high purchasing power, thus not needing to set strict limits. However, customers may apply for loans to utilize cash for business operations. Therefore, it is suggested that the Bank of Thailand should set LTV measures on a case-by-case basis, allowing those with purchasing power to buy more real estate.

Mr. Anavil Chiamprasert, Head of Research and Consulting at Jones Lang LaSalle (Thailand) Co., Ltd. stated that in 2024, the vacancy rate in general office space is expected to be 18% and in CBA areas 14%. This year, an additional 840,000 square meters of supply will enter the market from projects like One Bangkok and Dusit Central Park, marking the highest number since 1999. Currently, rental prices have decreased, with average office rents in Bangkok dropping to 717 baht/sqm, while CBA areas average 963 baht, but actual rental prices are around 1,155 baht/sqm, with CBA averaging 963 baht/sqm.

The trend for office buildings this year in CBA areas is that tenants are focusing on green buildings, which meet tenant demands nearly tenfold compared to 2020-2021. ESG remains significant, with tenants moving from older buildings over 25 years old to new buildings, totaling 140,000 sqm. Over 90% of tenants have moved into green buildings that comply with ESG standards.

In the next 2-3 years, we will see tenants moving from old buildings to new ones. New supply players need to analyze and develop buildings to maintain competitiveness, such as ensuring quality of life, air quality, and common areas, as tenants need to provide attractive work environments for employees.

In terms of urban planning development in the eastern region, it is noted that the eastern zone of Bangkok is developing the Orange Line electric train system, which will align with the expansion of low-density housing and reduce flood-prone areas.

The Suwit Wong area still has some industrial space, and currently, there are no large retail developments, but it is believed that after further urban planning development over the next 5-10 years, more retail will open. For large office buildings, it is believed that there will not be large buildings opening in that area, but there may be home offices or co-offices in those locations.

Mr. Keojia Tiao, Managing Director of Harvey Land Co., Ltd. stated that many wealthy individuals from China are relocating to Singapore, including owners of high-profile companies like Alibaba. From 2023 to 2025, high-purchasing power Chinese nationals are expected to migrate to the USA, Canada, and Australia, increasing demand for real estate in those countries, whether for personal use or rental. From the Chinese perspective, Thailand is seen as a market with potential, livable conditions, and a complete infrastructure system, with roads and electric trains considered superior compared to neighboring countries.

Currently, Chinese purchasing power is recovering better than during COVID-19, but they are not rushing to buy as in the past. Regarding the issues in the Chinese real estate market, it is viewed that there is no direct impact on the Thai real estate market, as Chinese customers purchasing real estate in other countries are often linked to their children's education or migration for business purposes.

Dr. Wichai Wiratthakhan, Banking Inspector and Acting Director of the Real Estate Information Center stated that in 2023, the number of condominiums grew by 0.9% compared to 2022, while the value increased by 5.6%, indicating that higher-priced condominiums are expanding. For 2024, if economic factors remain negative, we may see negative transfers in the 3 million baht condominium segment. Looking at trends from 2022, property transfers have been declining since Q1/2023.

Developers are also adapting by increasingly targeting the high-end housing market. In 2023, the number of licenses for single-family and twin houses increased, while townhouses decreased by about 5%, reflecting that developers are tailoring products to meet the purchasing power of customers.

Regarding new project launches, it is observed that in Q4/2023, developers are launching more projects compared to the previous three quarters. In the EEC market in 2023, new projects were continuously launched throughout the year. In the 18 provinces outside of Bangkok and the EEC, major developers are rapidly launching condominiums in major cities like Phuket and Chiang Mai, while sales have not been as strong as expected. In Q4/2023, 20,000 new condominiums were launched, but only 18,000 units were sold, indicating that sales are not keeping pace with launches, leading to an increase in unsold inventory, which poses risks for sales in the Bangkok and surrounding areas, while the EEC market continues to perform well, closely matching new project launches.

Additionally, in the second half of this year, interest rates are expected to decrease, and there are currently no special government measures in place. Data on transfers in 2023 continues to show negative trends, and without supportive factors, the market may remain sluggish in the first half of the year, even though developers are offering promotions to stimulate sales. If projects continue to launch for more than four quarters, sales will likely decline, prompting developers to adapt to changes.

Demand from the middle to lower segments is weak due to multiple debt burdens, leading to a high likelihood of loan rejections. However, there is still potential in the foreign customer segment, with Myanmar customers emerging as an interesting new group, while CLMV customers remain attractive due to Thailand's higher stability compared to neighboring countries.

Ms. Sumitra Wongphakdee, Managing Director of Terrabkk.com stated that brand building is a challenge for many developers in this era, making competition difficult. TerraBKK has conducted ongoing research and found that customers are interested in brands that meet seven criteria: Meet Needs, Trusted, Dynamic, Familiarity, Brand Famous, Unique, Brand Love, which are crucial for brand development.

Different customer groups have varying housing needs, such as feeling safe, having construction standards, quality, and good after-sales service.

Currently, the Gen Z group is emerging as a new customer segment that will influence market dynamics, especially for condominiums around universities, which are seeing continuous transfers. This group primarily uses online media, and platforms like TikTok are gaining popularity as this generation increasingly prefers vertical video content.

In terms of developing new products, developers need to adapt or create new brands to change their image to meet the needs of new customers, which can be achieved by referencing the parent brand or creating a new brand to generate new customer perspectives.