In 2021, the housing market in the Bangkok Metropolitan Region (BMR) will remain flat or see only mild growth, premised on: (i) the ongoing spread of COVID-19 and the effects of this on economic recovery, and (ii) steadily rising household debt that is undercutting consumer purchasing power and encouraging lenders to be more careful about the release of new credit. However, in 2022 and 2023, the outlook for the market should improve thanks to: (i) growth in the Thai economy that is forecast to reach 3.0-4.0% per year; (ii) greater investment in infrastructure megaprojects; (iii) government stimulus measures targeted at the real estate sector; and (iv) stronger demand for accommodation from overseas buyers investing and working in Thailand.
In 2021-2023, the number of new housing coming to market is expected to rise by 4.7% annually, with this split approximately equally between condominium and low-rise developments. Supply of the latter will steadily rise as developers look to meet growing real demand, while investors will also tend to work on a more diverse range of project types that will include mixed-use developments, wellness residences, housing for the elderly, smart homes and leasehold properties.
The real estate sector contributed 8% of Thailand’s GDP in 2020, which is significant to the national economy. A large amount of capital circulates within the economic system and supports rising employment and income. The sector is also has a large influence on the direction of related businesses such as construction, building materials, consumer electronics, furnishings/ decoration and finance.
The property sector consists of three principal segments: residential, commercial, and industrial. In Thailand, two-thirds of the property market (by value) is derived from residential transactions (source: World Bank). Developers of residential properties normally focus on Thai customers because Thai law stipulates that non-Thais may legally own only condominiums and only up to 49% of total salable area in any project. For detached housing and townhouses (also called rowhouses or shophouses), the ownership regulations for non-Thais are more onerous.
The housing market is split between self-built housing and housing projects. 40% of nationwide construction permits in the past 5 years are located in BMR (Fig. 1). This market had an annual value of around THB480bn but since 2012, developers have started to look beyond the Bangkok region. The shift in focus followed the major flooding in BMR and central region near the end of 2011 and the decision by the government in 2012 to increase spending on infrastructure in provinces. This prompted developers to place greater emphasis on investing in housing projects in provincial centers, the majority being low-rise housing due to far fewer constraints on access to land for development upcountry and land there is relatively cheaper. However, revenue growth has been limited due to volatile consumer purchasing power, which has translated into different impact on the market (Table 1), and this caused developers to switch their attention back to projects in the BMR.