“LWS” anticipates that the launch of new real estate projects in the Bangkok and surrounding areas in 2024 will likely grow by 5-10%, while housing prices are expected to rise by approximately 5-10% due to increasing land prices, labor costs, construction material prices, and interest rates.

Meanwhile, property transfers are expected to remain stable, similar to 2023, or grow by no more than 5% compared to 2023, due to high household debt burdens, which have led financial institutions to tighten mortgage loan approvals. It is recommended that real estate developers adjust their strategies from developing and selling properties to becoming financial advisors for housing, both for living and investment purposes.

Mr. Prabhan Sak Raksaiwan, Managing Director of LWS Wisdom and Solutions Co., Ltd. (LWS), a research and development company in the real estate sector under LP&D Development Public Company Limited, predicts that the trend for launching new real estate projects in Bangkok and its vicinity in 2024 will likely grow by 5-10%. Meanwhile, property transfers are expected to be similar to 2023 or grow by no more than 5%, depending on the growth rate of the Thai economy in 2024, the borrowing capacity of buyers, and the mortgage loan approval process of financial institutions.

In making these predictions, LWS has analyzed the potential for economic and real estate growth under three scenarios:

  • Best Case: This scenario is based on the expectation that the Thai economy will grow by no less than 3.5-4%, according to forecasts from the Bank of Thailand and the National Economic and Social Development Council. Export conditions are expected to continue to recover, and public investment can proceed as planned, particularly the digital wallet policy with a budget of 500 billion baht, anticipated to be implemented in the second quarter of 2024. Meanwhile, tourism, domestic consumption, and private sector investment continue to expand, and energy prices remain stable at no more than $100 per barrel, keeping inflation at no more than 1.5%. This would lead to the launch of approximately 110,000-115,000 new real estate units in Bangkok and its vicinity in 2024, valued at about 497-520 billion baht, representing a growth of about 5-10% compared to 2023, which is estimated to see around 106,000 new units valued at 474 billion baht. The total value of new property transfers nationwide in 2024 is expected to be around 1.1 trillion baht, growing by 3% from 2023, which is estimated to have around 377,382 units transferred, valued at approximately 1.07 trillion baht, a 0.1% increase from 2022.
  • Base Case: This scenario predicts that the Thai economy will grow by about 2.5-3%. Export recovery is expected, but public investment may be delayed, particularly the digital cash distribution project, which might be postponed from the planned implementation in May 2024 to the third or fourth quarter. Meanwhile, tourism, domestic consumption, and private sector investment continue to expand, and energy prices remain stable at no more than $100 per barrel, keeping inflation at no more than 1.5%. LWS expects around 107,000-110,000 new real estate units to be launched in Bangkok and its vicinity in 2024, valued at approximately 481-497 billion baht, representing a growth of about 3-5%, with property transfer values expected to be similar to 2023 at around 1.07 trillion baht.
  • Worst Case: This scenario is based on the expectation that the Thai economy will grow by less than 2.5%. Export conditions remain stagnant, and public investment may not proceed as planned, particularly the digital cash distribution project, which may face legal and political constraints. Meanwhile, tourism, domestic consumption, and private sector investment continue to expand, but energy prices rise above $100 per barrel due to prolonged conflicts in Gaza and Ukraine, leading to inflation exceeding 2%. This would result in the launch of new real estate projects in Bangkok and its vicinity in 2024 declining to levels similar to 2023 or decreasing by no less than 5%, while property transfer values are expected to be negative compared to 2023, with values below 1.07 trillion baht.

The launch of new projects in 2023 is expected to decline by about 5-8% from 2022.

According to LWS's survey, it is expected that in 2023, the number of new real estate projects launched in Bangkok and its vicinity will decrease by approximately 5-8%, while the value of launches is expected to increase by about 10-15% compared to 2022, which had 103,000 units launched valued at 457 billion baht. The average sales rate on the launch day in 2023 is around 17%, down from an average sales rate of 29% on the launch day in 2022, with 52% of new units being residential projects and the remaining 48% being condominium launches. The average housing price in 2023 is expected to be 5.2 million baht per unit, an increase of 17.38% from the average price of 4.43 million baht per unit in 2022, due to the proportion of launches in the price range of over 10 million baht increasing to 34% of the total value of new projects launched in 2023.

As for completed and under-construction housing from 39 listed real estate companies on the Stock Exchange of Thailand as of September 30, 2023, the value is at 663,188.48 million baht, an increase of 10.43% compared to the value of completed and under-construction housing of 600,548.76 million baht as of December 31, 2022. Compared to the recognition of real estate companies in the Stock Exchange, it takes about 2 years and 6 months to sell the inventory.

Four Risk Factors Affecting Real Estate in 2024

In addition to the volatility of the global and Thai economies impacting the real estate sector in 2024, there are four risk factors that directly affect the real estate sector:

  1. Interest Rates: Expected to remain high, directly impacting the financial costs for real estate developers and homebuyers, leading to increased project development and housing purchase costs in 2024 compared to 2023.
  2. Minimum Wage Increase: The government's policy to raise the minimum wage to 400 baht per day, effective in 2024, directly affects the operational costs of real estate developers and is a factor that contributes to rising housing prices.
  3. Construction Material Prices: Expected to rise in line with increasing energy prices, leading to higher construction costs and housing prices in 2024 compared to 2023.
  4. Tightening of Mortgage Loan Approvals: This directly impacts purchasing power in the market. In 2023, the rejection rate for loan approvals was at 60-65%. In 2024, the Bank of Thailand is expected to maintain a strict monetary policy regarding loan approvals due to high household debt burdens and a high proportion of non-performing loans (NPLs) in housing loans compared to other personal loans, which will directly affect purchasing power for housing, especially for properties priced below 3 million baht per unit.

Given these business risk factors, Mr. Prabhan suggests that LWS recommends real estate developers adjust their sales strategies from developing and selling housing to becoming financial advisors for housing, both for living and investment purposes. This includes providing financial management advice to clients to ensure their personal financial structures are accepted and considered for loans from financial institutions. Since clients who are often rejected for loans tend to be self-employed with unstable income, if real estate companies can collaborate with financial institutions and provide financial management advice to clients, it will reduce the risk of loan rejections.

“Planning and adapting real estate operators to align with buyer behavior is crucial for driving the business to overcome risks and fluctuations and maintain sustainable business growth, regardless of the risks and uncertainties faced,” Mr. Prabhan stated.