Bangkok condos face decline as Gen Z opts for renting, shifting focus to Gen Y
Bangkok and its surrounding provinces are experiencing a decline in condominium transfers as the younger generation, Gen Z, is opting to rent rather than purchase properties. The ttb analytics centre predicts a 12.5% drop in transfers this year. Experts advise developers to attract Gen Y buyers with high financial readiness.
In their recent analysis, ttb analytics pointed out that condo sales in Bangkok and adjacent provinces are under pressure due to the behavioural differences of Gen Z buyers. Primarily driven by lifestyle preferences and financial limitations, these individuals are leaning towards renting properties instead of buying. As a result, condo transfers are expected to shrink between 8.4% and 12.5%.
Property developers are urged to adapt their strategies towards smaller families of the Gen Y class, who are financially sound and eager to make property purchases. This generation offers a potential remedy for slowing condo sales and catering to the changing preferences of homebuyers. During the past year, property transfers hit a record high of 1.05 trillion baht, with 61.9% of the value linked to housing transactions in Bangkok and surrounding areas.
Interestingly, the market share of residential properties in Bangkok and adjacent provinces has been on a clear decline compared to the rest of the country. Bangkok and neighbouring locations have seen transfer values decrease from an average of 67% over the past five years to only 34% in 2023. Furthermore, the property sales market is facing structural challenges, pushing the sector into the ‘Generation Rent’ era. This, combined with the increase in transfer values, resulted in more individuals opting to rent instead of purchase.
There are two key drivers propelling the shift towards renting among the Gen Z population, aged between 14 and 28 years old. Firstly, the disconnect between the income levels of this generation and the pricing of condominiums in the central business districts is apparent. Secondly, the structure of the property market has increased the cost of newly built condos, with construction material prices rising by 16.3%. Consequently, renting becomes a more appealing option as it offers flexibility in case of job changes.
To counter this trend, ttb analytics suggests that property developers should focus on targeting Gen Y buyers. By shifting their strategy to cater to their preferences and financial capabilities, developers can restore stability to the property market. This includes offering condominium units like duplexes in the 5 to 10 million baht range for mid-to-high-end markets and above 10 million baht for the luxury market, targeting smaller families or childless couples within the Gen Y sphere.
