Covid-19 has accelerated Thailand’s property market disruption by 5 to 10 years

Real estate experts say the Covid-19 pandemic has accelerated a great disruption in Thailand’s property market that was supposed to take place over the next 5 to 10 years. Now, however, experts say it will arrive sooner. According to managing director of Chon Buri-based property developer, Ratanakorn Asset Co., Jugkarut Ruangratanakorn, there are 10 disruptive trends that will challenge the market in next year and beyond.

1.Economic, national, social and population structure

Thailand’s GDP growth has been lower than its potential for the past several years because of its slowing population growth. With no new resources, no foreign direct investments, no 5.0 industry to help boost economic growth and no new economy, the results definitely show.

Thailand’s society is also ageing, with a rising number of senior citizens, and a declining birth rate. As the average family size is decreasing, the marriage rate is lower, resulting in a large number of single people. This situation is resulting in a decreasing need to purchase a new home for a family. As the new generation prefers renting and moving to newer condos, the new trend is influencing the property market.

2. A higher debt burden and low education towards developing assets

Thai people are getting into debt faster and deeper at an increasingly younger age. Currently, the household debt ratio is 93%. And, most of that debt stems from consumption and education, not property or business ownership. Thus, those who have debts cannot build wealth, as they also don’t have any assets. Furthermore, many locals don’t understand how to create wealth. Instead, they want to live a fast lifestyle and spend most of their money on consumption.

As the pandemic has inflated assets worldwide, many governments have used quantitative easing to support their economies. The downfall of this move, is that is doesn’t create a real sector, demand or productivity, but increases asset values. For younger generations, assets and property acquisition signifies a long-term burden. And, with the rise in stay-at-home working, the internet has spurred a mentality that working mobility and residential relocation is an easier way to live. Rising costs in living also makes it harder to save money to buy property.

3. Experience and lifestyle

The new generation is more focused on their present lifestyles and experiences, rather than permanently holding assets. In the future, 2 groups will emerge: those who understand wealth creation and will be payees, and those who understand lifestyles, who will be payers. But the ratio between the 2 is uneven, with most becoming payers and not payees.

4. Property ownership follows all other ‘wants’

Owning a house or property will follow consumption, lifestyle, health and wellness, travel, education, and entertainment. This is due to most people having the perception that owning a home is a lifetime debt with payments lasting over 30 years.

5. Renting replaces buying

Renting will replace buying due the trends in desiring a convenient lifestyle. The ability to move, paired with smaller family sizes is a large, contributing factor. And, such potential buyers don’t want a long-term burden to hamper their already sluggish income growth due to the ailing economy.

6. Building and land taxes

Building and land taxes will burden potential property owners as such extra fees will dampen their purchasing powers. Those who want to invest in a property in the long run will see that higher property costs equate to higher taxes.

7. Regulations in property development

Property development regulations will also increase the cost of development. This results in higher household debts against a sluggish economic, population, and purchasing power growth. And, such regulations becoming a burden are not showing any signs of easing.

8. Other financial innovations vs. property

Digital assets, cryptocurrency, tokenisation, real estate investments, mutual funds, the bond and equity markets are starting to trump the property market. With these financial innovations, property ownership is no longer being held by a single owner. Thus, future investments will be in the holding of a unit trust, not an individual right of ownership. Those who have caught on to this trend will be defining the next era of property.

9. Location, location, location is no longer the answer

Despite having a great location, a project can still fail due to its price, product, design, and inability to meet consumer needs. Market trends and consumer behaviours are rapidly changing as each generation features different property purchasing preferences. And, the very definition of a ‘good location’ is constantly being redefined.

10. Sharing property

Co-working, co-living, multipurpose, timeshare and exchange programmes are defining the new area of property ownership. Now, these trends will yield more sharing choices for consumers instead of just owning a property alone.