Thailand’s property market slated to return to pre-pandemic levels by 2023
Experts are pointing to 2023 as the year in which Thailand’s property market is expected to return to pre-pandemic levels. The estimation is sooner than previously thought, with the easing of housing loan regulations and the country’s reopening speeding up the recovery.
Last month, the central bank relaxed mortage regulations to help revive the property sector, which accounts for 10% of the country’s GDP, while employing 2.8 million people. The sector was initially forecasted to return to normal in the years 2025 through 2027, but the Real Estate Information Centre acting chief, Vichai Viratkapan, says it could pick up sooner.
“The easing of mortgages and the country’s reopening will make the real estate business active again.”
He also noted that newly-sold housing units will fall by 35% this year but will double next year in 2022. The central bank says that the new easing of mortgage regulations would help increase the amount of mortgages by 50 billion baht per year. But, Vichai says the easing won’t curb the banks’ worries about lending to home buyers during a weak economy. He cites the property sector as facing higher costs as well as a shortage of migrant workers due to the Covid-19 outbreak.
The government is planning to reopen borders to such migrant workers from neighbouring countries in the near future, but no date has been set. Thailand’s finance minister recently predicted that the economy would grow by 1% this year and 4% next year. Last year saw a 6.1% economic slump due to the pandemic.
Real estate experts say the pandemic has accelerated a great disruption in Thailand’s property market that was supposed to take place over the next 5 to 10 years. 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.
SOURCE: Bangkok Post
