In the past year, the Thai residential real estate industry has faced various challenges from both domestic and international factors. Significant external factors include the impact of the slowdown in the Chinese real estate sector, which has led to a decrease in construction demand and resulted in a market glut of products, such as steel, being exported to other countries, particularly in Southeast Asia and Thailand. This has intensified price competition, causing some Thai operators to shut down their businesses. Additionally, domestic factors have pressured the real estate sector, such as the continuously rising household debt, which reached 89.6% of GDP in the second quarter of 2024, reducing consumer purchasing power. The rate of home loan rejections for amounts below 3 million baht surged to 70%. Furthermore, Thailand's transition to an aged society is another contributing factor, with data from the Department of Older Persons indicating that in 2023, 20% of the population was aged 60 and above, suggesting that population growth will not increase as rapidly as in the past.

According to the Real Estate Information Center (REIC), in the first half of 2024, the number of land allocation permits nationwide decreased by 14.7% compared to the same period last year. The northeastern region saw the most significant decline at 67.1%, followed by the southern region at 36.5%, while Bangkok and its surrounding areas experienced a 5.1% decrease. Overall, the total construction area permitted nationwide fell by 14.9% compared to the same period last year, with every region experiencing a decline, particularly Bangkok and its vicinity, which saw a 24.8% drop.

Moreover, a survey by the REIC in the second quarter of 2024 revealed that the primary reason consumers decided to purchase housing was the desire to own their own home, accounting for 32%. In contrast, investment for rental purposes accounted for 18%. The consumer group aged 25-34 had the highest proportion at 49%, while respondents with an average monthly income of 15,001-30,000 baht made up 35%, indicating a demand for housing among the working population, although they may still face barriers to purchasing due to the aforementioned factors.

The government has been making efforts to implement measures to stimulate the real estate sector, such as in April 2024, when it introduced a reduction in transfer fees and mortgage fees for homebuyers purchasing properties priced below 7 million baht to just 0.01%. Additionally, low-interest loan measures through the Government Housing Bank, such as the Happy Home loan project with a budget of 20 billion baht for homes priced below 3 million baht, aim to enhance access to credit. In September 2024, there were also measures for consolidating housing loans and personal loans (Debt Consolidation) from the Bank of Thailand, encouraging financial institutions to relax loan-to-value ratio conditions for debt consolidation cases, allowing them to exceed the set ceiling. However, service providers must ensure that the debt burden on borrowers after consolidation is lighter than before.

Regarding the transfer of condominium ownership by foreigners nationwide in the second quarter of 2024, there were 3,342 units transferred, a decrease of 6.2%, with a total value of 14.874 billion baht, down 17.7%. Chonburi had the highest proportion at 38.4%, followed by Bangkok at 36.4%.

In the second quarter of 2024, the most transferred condominiums to foreigners were priced below 3 million baht, totaling 1,737 units, accounting for 52% of all units, which has been the most popular price range for foreign ownership transfers since 2019. Additionally, there has been a notable increase in the proportion and number of units priced at 10 million baht and above in recent years, with a compound annual growth rate (CAGR) of 12% from the second quarter of 2019 to the second quarter of 2024, despite only accounting for 7% of foreign ownership transfers in the second quarter of 2024, but representing the highest value proportion at 32%, or 4.81 billion baht, with an average value of over 19 million baht per unit.

From the government’s perspective, allowing foreigners to lease properties in Thailand for up to 99 years to stimulate the real estate sector is something to watch closely. In the first six months of 2024, Chinese nationals accounted for the highest number of condominium ownership transfers nationwide, totaling 2,872 units, representing a significant 39.5%. Myanmar followed with 638 units at 8.8%, and Russia with 567 units at 7.8%. The average unit value for Chinese, Myanmar, and Russian nationals was 4.6 million, 5.1 million, and 3.3 million baht, respectively.

On the side of operators, there is a trend to focus more on high purchasing power groups. In the second quarter of 2024, the number of land allocation permits in Bangkok and its vicinity was 16,442 units, down 27.3%, but the value increased to 184.79 billion baht, up 43.8% compared to the second quarter of 2023.

In the future, the residential real estate sector is expected to continue, but operators may need to adjust their strategies to focus more on high purchasing power customers, which may lead to intensified promotional activities for completed units to reduce remaining stock. Meanwhile, those looking to buy homes with lower purchasing power will still face obstacles. Therefore, we may see a K-shaped recovery in the future if Thailand does not achieve higher purchasing power or remains trapped in this middle-income trap.

Nisakorn Songmanee | Partner - Audit Services

Thatsada Sangmanacharoen | Senior Consultant - Clients & Markets
Deloitte Thailand