BANGKOK, Thailand – The real estate market in Thailand over the past 1-2 years showed an initial optimistic outlook at the start of the year, expecting recovery. However, as time passed, the market didn’t recover as expected, largely due to several negative factors that continually impacted consumer confidence and purchasing power. Despite government support through measures to stimulate the economy within the real estate sector, the overall market still couldn’t bounce back as hoped.
One of the major factors affecting the slow recovery of the real estate market was the stringent approval process for residential loans from financial institutions. This was linked to decreasing purchasing power and rising household debt, which exceeded 90%. As a result, financial institutions have not loosened their lending policies, and the rejection rate for loans continued to rise steadily.
Another key issue that drove the rise in loan rejections was the constant increase in the cost of land and construction materials, which was not aligned with the declining purchasing power of consumers. This mismatch further contributed to the growing number of loan rejections over the past two years.
This situation caused consumers to delay their decisions on purchasing homes, waiting for an economic recovery. This delay has certainly impacted consumer purchasing power and confidence, but it is hoped that these factors will improve in the future, ultimately leading to a recovery in the housing market.
The increase in land and construction material costs has steadily driven up the prices of homes. However, the price rise may not have been as noticeable because developers have shouldered part of the increased costs in order to clear their inventory. Additionally, new housing developments have attempted to maintain their pricing by reducing the size of units or downgrading construction materials to better align with consumers’ diminished purchasing power.
Some real estate developers have focused on the high-end market, targeting higher-income buyers who remain unaffected by the economic downturn. The high-end market, especially the luxury segment, is still willing to pay a premium for products that meet their needs and lifestyles. As a result, the price increases in land and construction costs have had a lesser impact on the luxury housing market.
Recently, the Real Estate Information Center (REIC) of the Government Housing Bank (GHB) reported the housing price situation for the fourth quarter of 2024. The report revealed a continuous rise in the prices of new homes and condominium units that are currently on sale.
The price of new homes rose by 0.8% year-on-year (YoY), marking nine consecutive quarters of increases. Meanwhile, condominium prices rose by 3.6% YoY, continuing an upward trend for eight consecutive quarters. This increase is primarily due to higher costs of land, construction materials, and labor.
The rising costs of land and construction materials are driving up the prices of newly launched housing projects. However, it is expected that the introduction of low-interest housing loan products by financial institutions will stimulate the housing market in early 2025. The increased housing prices in the fourth quarter of 2024 are attributed to several factors:
- The index of new homes for sale in Greater Bangkok (the capital and surrounding provinces) in the fourth quarter of 2024 reached 131.4 points, a 0.8% increase compared to the same period last year (YoY). The index for Bangkok itself increased by 2.3%, while the index for the three surrounding provinces (Nonthaburi, Pathum Thani, and Samut Prakan) decreased by 1.0%. This decline was primarily due to price reductions in townhouses. However, when breaking down by home type, detached homes in the fourth quarter of 2024 saw a 2.1% increase in prices compared to the previous year.
- Townhouse prices increased by 0.3%. Additionally, the report found that promotional discounts for cash were offered at a rate of 29.6%, up from 21.0% in the previous quarter, which played a significant role in consumers’ purchasing decisions. The highest price increases for detached homes in Bangkok were in the Min Buri, Nong Chok, and Lat Krabang areas for homes priced above 10 million Baht.
The highest price increases for detached homes in the three surrounding provinces were in the Lam Luk Ka, Khlong Luang, and Thanyaburi areas for homes priced between 7.51 million and 10 million Baht. Townhouses in the Bangkok area saw the highest price increases in the Phra Khanong, Bang Na, Suan Luang, and Prawet areas, with prices between 5.01 million and 7.5 million Baht. In the three surrounding provinces, the highest price increases for townhouses were in the Bang Kruai, Bang Yai, Bang Bua Thong, and Sai Noi areas, with prices between 2.01 million and 3 million Baht.
The index for new condominiums in Greater Bangkok in the fourth quarter of 2024 stood at 159.9 points, an increase of 3.6% YoY. This increase reflects higher development costs, particularly land costs in areas along mass transit lines with heavy commuter traffic, such as the BTS Silom Line and the MRT Blue Line.
Condominium prices in Bangkok rose by 3.4%, while prices in the two surrounding provinces (Samut Prakan and Nonthaburi) increased by 4.2% YoY. The areas with the highest price increases for condominiums in Bangkok were Huai Khwang, Chatuchak, and Din Daeng, with prices between 3.01 million and 5 million Baht. In the two surrounding provinces, the highest price increases were in Samut Prakan, Phra Pradaeng, and Phra Samut Chedi, with prices between 2.01 million and 3 million Baht. Promotional discounts for condominiums were offered at a rate of 25.2%, up from 21.7% in the previous quarter, to encourage buyers to make quicker decisions, just like the housing developments.
Meanwhile, the construction cost index for standard housing (HCCI) in the fourth quarter of 2024 was 139.9 points, a 4.0% increase YoY, indicating a continuous rise in construction costs. This was due to higher material costs, such as sanitary ware, tiles, electrical and plumbing equipment, wood, and other materials. Sanitary ware saw a price increase of 12.0%, tiles by 5.6%, electrical and plumbing equipment by 3.7%, wood products by 2.2%, and other materials by 5.7%, largely driven by the high global oil prices and energy costs. Labor costs also rose by 4.0%.
The increasing construction costs have driven up the prices of newly built homes. At the same time, consumer purchasing power has declined due to low economic growth. As a result, state financial institutions, particularly the Government Housing Bank (GHB), are following government policies to offer low-interest loans to middle-income and lower-income groups, as well as young professionals who are just starting their careers and do not yet own homes. It is expected that these low-interest housing loan programs will help stimulate home-buying decisions and positively impact the housing market in early 2025.
