Housing demand falls, expect new stimulus packages

According to a report from the real estate sector, despite a slowdown in inflation, the residential real estate market has been inactive in the first months of 2023. Overall, demand for housing in Thailand has declined and consumer purchasing power remains weak, although the sector hopes to benefit from new government policies. Leading real estate website DDProperty says higher interest rates are a major hurdle for home buyers, which led to a 2% drop in housing demand in the second quarter of this year.

The latest DDProperty Outlook report showed that real estate prices remain flat and the home price index declined for all property types. The government's new economic stimulus plan is expected to provide clarity and provide significant help to the economic recovery as well as stimulate consumer spending. These factors are expected to contribute to the recovery of the real estate market in the second half of this year.

CEO of Think of Living and DDProperty, Vittaya Apirakviria, said consumer interest in buying a home, especially among the middle and lower classes, may decline due to uncertain economic trends.

"Unfavorable factors include higher interest rates, increased costs associated with buying a home and stricter criteria for loan approvals. This will increase their liabilities, so homebuyers may need to review their financial preparedness and plan ahead to cope with the financial demands," he said.

For low-income home seekers, Wittaya offered a secondary real estate market or secondary housing market, offering an alternative in the form of original home prices for those who want to become current homeowners. Wages in Thailand are not the only factor influencing the decisions of potential investors. Low-rise, central and suburban apartments are in demand. However, DDProperty notes that compared to the pre-pandemic period, single-storey houses are showing growth with a 6% increase in the price index, while townhouses are down 5% and apartments are down 20%.

Real estate consultant CBRE Thailand says local buyers have shown a preference for low-rise housing, preferring low-density development, more spacious and adaptable spaces.

In response to this trend, CBRE anticipates that developers will be more active this year in launching low-rise projects that focus on real demand. "Buyers today know what they want," said Artitaya Kasemlawan, head of residential sales (projects) at CBRE Thailand, adding that important factors on the buyers' list include functional space, privacy, open green spaces, well-being and technology. And for luxury and super-luxury, the list includes anything that meets modern requirements, such as a space that can be adapted as a home office or a parking lot with an EV charger.

CBRE expects developers to continue to launch apartment projects in downtown and suburban areas, and one interesting trend is mixed-use projects with residential and commercial elements. In downtown, CBRE expects developers to continue to focus on their move-in ready housing before considering launching new projects in the second half of the year. CBRE predicts that 50,000 new apartments will be built in the suburbs and downtown areas, compared to just 7,000 in the city center.

Wittaya of DDProperty added that all stakeholders are hoping for clarity on the government's new economic stimulus plan, which will contribute to the continued recovery of the Thai economy. "We hope the new policies will focus on increasing the cost of living and stimulating consumers' purchasing power to get back on track. At the same time, real estate developers and consumers are looking forward to policies related to the real estate sector that will make the process of buying a home in Thailand easier despite rising interest rates," Wittaya said.

Thai PBS Business Desk