Slow start but promising signs of recovery up ahead

DDproperty Editorial Team
Slow start but promising signs of recovery up ahead
Despite the lingering effects of the pandemic, the Bangkok real estate market is starting to show signs of recovery in the first quarter of 2023. According to the recent DDproperty Thailand Property Market Report, the demand index for residential property in Bangkok rose to 47% compared to the fourth quarter of 2019, a pre-pandemic period.
This is expected to result in a price increase in the second quarter of 2023. Buyers can leverage this opportunity to capitalise on the surge in property prices.

Bangkok’s residential properties for sale

The following is the report’s key points regarding Bangkok’s sale market for residential properties.
The overall cost of residential properties in Bangkok has gone down (at 76 points) by 7% compared to the previous quarter (QoQ) and by 9% compared to last year (YoY). However, the areas on the fringe and outskirts of the city that have access to the SRT (red line), MRT (blue line), and BTS (green line) train lines have seen an increase in property prices in the quarter.
Buyers may want to consider investing in areas with convenient transportation options, as the property values in these areas are likely to further rise.
Based on the residential property listings on DDproperty, condominiums make up 80% of Bangkok’s supply. Single-detached houses and townhouses are less common, accounting for 12% and 9% of listings, respectively.
Despite the aforementioned challenges, there isn’t a red alert sign for an oversupply of properties that could lead to a significant drop in property prices. However, full market recovery might not occur yet in the second half of 2023.

Property For Sale

Property for sale in Bangkok

Bangkok’s residential properties for rent

These are the report’s highlights about Bangkok’s rental market for residential properties.
The rental index of residential properties in Bangkok has remained steady from the previous quarter, but it increased by 1% YoY. The index for condominiums, in particular, increased by 1% QoQ.
Most rental properties in Bangkok have a monthly rate ranging from THB10,000 to 30,000. Also, the majority of available properties for rent are condominiums, which make up 95% of the total supply.

Property For Rent

Property for rent in Bangkok

This means that investing in condominiums for rental purposes could be a stable and potentially profitable option. However, buyers should also consider the high supply of condominiums in the market and the potential competition from other buyers looking to rent out their properties.
Buyers can take advantage of the higher rents in these areas and generate greater profits from their properties, especially towards the end of the year when industries start to recover from the pandemic and resume operations.
Thailand's economy after pandemic

Thailand’s economy

Understanding the broader economic trends in Thailand can help buyers make informed investment decisions related to Bangkok’s real estate market.

Growth trend

Thailand’s economy has shown signs of improvement and growth in 2022. The Fiscal Policy Office of the Ministry of Finance reported that the economy expanded by 3.0% in 2022, higher than the 1.5% growth observed in the previous year, 2021.
This growth was attributed to the increase in foreign tourist arrivals, which had a positive impact on the service sector, such as hotels, restaurants, and transportation. The rise in the number of tourists also boosted private consumption.
In 2023, Thailand’s economy is expected to continue its growth trend with an estimated expansion of 3.8%. While exports are not expected to grow significantly this year, the tourism sector is likely to drive economic growth.
The Kingdom of Thailand anticipates that around 27.5 million foreign visitors will come to the country in 2023, with the reopening of China being a significant factor. Since tourism is a significant contributor to Thailand’s economy, this increase in foreign visitors is expected to create more job opportunities and boost the country’s overall economic performance.

Labour market

Thailand currently has a tight labour market, which means that there is an abundance of job openings and a shortage of available workers. The unemployment rate in the third quarter was 1.23%, lower than the rates in 2020 (1.69%) and 2021 (1.96%).
With competition among employers high, households are unlikely to lower their asking prices further. As a result, workers may have more disposable income to spend on housing, which could increase demand for residential properties and drive up prices.
Additionally, a tight labor market can also lead to an increase in construction costs due to higher wages and material costs. This can make it more expensive for developers to build new properties or renovate existing ones, which could further drive up prices in the real estate market. Buyers, on the other hand, may find it more difficult to negotiate lower prices for properties.

Household debt

The Office of the National Economic and Social Development Council reported that household debt in Thailand increased by 3.5% in the third quarter of 2022. This growth rate is slightly lower than the 3.7% increase recorded in the previous quarter.
The rise in household debt and the cautious behavior of buyers could have an impact on the residential property market in Thailand. Buyers may be more reluctant to take on new loans, which could lead to a slowdown in demand for residential properties. This, in turn, could result in a decrease in property prices.

Political environment

The upcoming elections are expected to have a dampening effect on the demand for residential properties in 2023, as buyers feel uncertain about future economic policies.

Forecast

The market is expected to pick up in the second half of the year. Economists predict that the central bank may pause the tightening cycle, which could lead to a decrease in interest rates or an increase in money supply. This could make borrowing money cheaper, which could stimulate economic growth.
Additionally, the return of Chinese tourists to Thailand is also expected to boost the demand for residential properties, as the tourism sector plays a key role in driving economic growth in Thailand.

Conclusion

While the first half of 2023 may be slower, the second half of the year could potentially see an increase in demand for residential properties.
Buyers can take advantage of the market conditions in the first half of 2023 and acquire properties at lower costs. Then in the second half of the year, as demand for residential properties picks up, they can sell or rent out their properties at a potentially higher price and reap significant profits.
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