In 2022, the real estate market became sluggish due to various factors, and the economy didn’t recover much even when the COVID-19 pandemic slowed down. Moreover, the high levels of household debt from the beginning to the middle of the year led to consumers’ lower purchasing power, a finding that is consistent with the latest DDproperty’s Thailand Consumer Sentiment Study indicating that only 25% of consumers have sufficient funds to buy a house or condominium.
Meanwhile, developers have shifted their focus towards landed properties to accommodate the behavioral change in consumer preference for bigger spaces. This was largely due to the pandemic forcing consumers to stay at home most of the time, which resulted in an increase in the demand for landed properties, both new projects and resale properties.
The Price Index has also increased due to higher construction material costs, higher minimum wages, and inflation.
Highlight
1. Looking Back at 2022
2. What to Expect in 2023
3. Should You Buy, Sell, or Rent Property in 2023?
4. Conclusion
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THAILAND PROPERTY MARKET OUTLOOK 2023
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Looking Back at 2022
The Price Index Has Been Decreasing for 3 Consecutive Years
Real estate prices have been decreasing since Q4 2019. Based on the latest DDproperty Thailand Property Market Index – Powered by PropertyGuru DataSense, the Price Index in Bangkok had increased to 82 points, or by 1% QoQ, but decreased by 3% YoY and by 22% from Q3 2019 (before COVID-19).
However, the prices of real estate in 2023 will likely increase due to inflation, higher minimum wages, and higher construction material costs, which are factors that will cause an increase in the Price Index.
The rental market has started to show positive signs as well, especially as the COVID-19 situation started to improve. However, DDproperty Thailand Property Market Index – Powered by PropertyGuru DataSense reports that the overall Rental Price Index in Bangkok has decreased by 3% YoY and by 14% vs. pre-pandemic.
Demand Growth for Buying and Renting
In Q3 2022, consumer demand decreased by 10% QoQ because of inflation and increased household debt, causing consumers to have lower purchasing power. But compared to the same period in the previous year, there was a demand growth of 16% YoY and 58% vs. pre-pandemic.
Rental demand has also shown positive growth, especially for condominiums (+167% YoY, +272% vs. pre-pandemic) and single-detached houses (+12% YoY, +67% vs. pre-pandemic). By contrast, rental demand for townhouses decreased by 6% YoY but increased by 51% vs. pre-pandemic.
What to Expect in 2023
Thai People are not Ready to Buy a Home
According to the latest DDproperty’s Thailand Consumer Sentiment Study report, 57% of consumers are planning to buy properties within the next year, while 7% will still choose to rent. 35% have no plans to buy or rent within this period.
However, only 25% of consumers have saved enough money to purchase a home now. 47% of consumers only have half of their savings target to make a purchase, while 22% have not started creating a savings plan for a home purchase.
This shows that many consumers intend to buy property in the near future, but that without financial planning, it would be difficult to do so.
Increase in Residential Property Prices
According to a report by the Real Estate Information Center (REIC), the overall costs for house construction have been increasing since the beginning of 2022. In Q3 2022, the Price Index for standard house construction increased by 6.2% YoY, the highest within the last 19 quarters.
The prices of residential properties are likely to increase by 5-10%, especially for new projects that will be launched in 2023. On the other hand, prices of ready-to-sell houses will remain the same, which presents a good opportunity for those who have resale properties to sell them.
Higher Home Loan Interest Rates
Even though the economy is recovering, the inflation rate is also increasing. It is expected that the Monetary Policy Committee will gradually increase the policy interest rate to 2% per year (currently at 1.25% per year) causing loan interest and deposit interest rates to increase, as well.
Every 1% rise in policy interest rate will cause home loan installment to increase by 7%, leading to higher monthly installments or longer payback periods. Also, financial institutes will cancel or decrease the number of years for fixed interest rates, which is why consumers should be more financially disciplined in the coming years.
EV Charger to Become a Common Feature in Every Project
Electric vehicles (EV) have become very popular, and developers will have to install EV chargers in their projects to accommodate consumers’ needs for this feature.
This aligns with the latest survey from DDproperty’s Thailand Consumer Sentiment Study that says 67% of consumers want an increased availability of EV charging points in both public and private car parks and 68% are willing to pay more for a property with EV-charging points.
43% of consumers are also interested in buying a home with a net zero feature, which cuts greenhouse gas emissions to as close to zero as possible. This shows that more and more consumers are paying attention to sustainable lifestyles.
Should You Buy, Sell, or Rent Property in 2023?
Conclusion
The economic recovery and the tourism industry’s rebound in the last quarter of 2022 are positive indicators that the real estate market will recover from its slump in 2023.
At the beginning of 2023, there will be new supplies in the market as developers and owners of landed properties start reselling their properties to accommodate demand from consumers with strong purchasing power and foreign investors.
It’s worth noting that 2023 will remain a challenging year for buyers as real estate prices and interest rates continue to increase. Bank of Thailand’s measures to relax Loan-to-Value or LTV, which were implemented to benefit consumers, have already ended.
On the other hand, new land appraisal prices are currently enforced, which means those who plan to buy real estate in 2023 need to be financially stable and observe financial discipline in order to do so.
Previous Property Market Outlook Reports:
Thailand Property Market Outlook 2022
For more insights and analysis, download the full report here:
Thailand Property Market Outlook 2021
For more insights and analysis, download the full report here: