How Thailand's Real Estate Market Has Changed Over the Past 10 Years
Over the last decade, Thailand's real estate market has evolved significantly. This transformation has been largely driven by urban development, an increase in housing projects, and developers competing for the attention of potential buyers.
What challenges did the market face, and how has it adapted? In this article, we will explore the changes that have taken place and what we can expect in the next 10 years.
CONTENT:
- A Look Back at the Past 10 Years
- Lifestyle Shifts
- Government Efforts to Stimulate the Real Estate Market
- 5 Factors Contributing to Thai Real Estate Growth in the Next 10 Years
- Property Prices Outpacing Economic Growth and Salaries
- Developers Limiting New Project Launches
- Characteristics of the Current Housing Sector
- The Future of Thai Real Estate
A Look Back at the Past 10 Years
The rapid growth of Thailand’s real estate market, especially the construction of condominiums, began with the introduction of high-speed transportation, particularly electric trains. This led to increased demand for both housing and investment opportunities.
Lifestyle Shifts
Over the past 10 years, Bangkok, Thailand’s capital, saw the construction of numerous condominiums and townhouses along the subway lines, providing housing for the city’s working population. The expansion of the electric train network made land and housing prices soar, pushing lower-income residents to relocate to suburban areas where housing was more affordable but less densely developed.
Land prices have risen by an average of 8% per year, while consumer incomes have only increased by 3% annually. As a result, many residents cannot afford spacious homes and are living in smaller condominium units, some as small as 21 square meters.
Government Efforts to Stimulate the Real Estate Market
The development of Thailand’s real estate sector was driven by government policies in partnership with the Central Bank of Thailand. While these measures helped support long-term housing, they also resulted in rising household debt. According to the Office of the National Economic and Social Development Board (NESDB), mortgage debt now accounts for about 33% of total household debt.
Key government strategies by year:
2011-2012:
- Tax cuts for first-time homebuyers on properties valued under ฿5,000,000 ($148,500).
- Special interest rate loans for low-income buyers.
- Developers began expanding to regional areas like Chonburi, Khon Kaen, and Chiang Mai.
2015-2016:
- Housing loans for low- and middle-income earners through the Government Housing Bank (GHB).
- Reduction of property transfer fees and mortgage registration fees.
- Income tax exemptions for property purchases up to ฿3,000,000 ($89,100).
2018-2019:
- Tax incentives for first-time homebuyers on properties valued up to ฿5,000,000 ($148,000).
- The Bank of Thailand introduced stricter lending limits, reducing the loan-to-value (LTV) ratio to 80%.
In the past decade, more Thais have been purchasing homes, with housing debt rising across all age groups. Most first-time buyers are between the ages of 31 and 40.
5 Factors Contributing to Thai Real Estate Growth in 10 Years
According to the Non-profit Analytical Center for Thailand’s Socio-Economic Development Policy, the «S-shaped curve» has played a significant role in driving demand for real estate.
Between 2007 and 2017, five S-shaped curves have influenced the growth of Thailand’s real estate market:
S-curve 1: Urbanization Growth In 2007, rental housing in Thailand totaled 18.08 million households, with 5.76 million located in urban areas and 12.31 million in rural regions. By 2017, urban rental housing had increased to 9.99 million households, while rural households dropped to 11.39 million. As Thailand’s population continues to age, this trend is expected to worsen, and the aging population is likely to reduce housing demand in the next decade, posing a potential risk to the real estate market.
S-curve 2: Real Estate Growth Along Railway Lines The introduction of electric trains has created a steep growth curve in real estate. As a result, the price of condominiums along public transportation routes has risen significantly.
S-curve 3: The Tourism Sector Over the last decade, the number of foreign tourists in Thailand has grown from 14 million to 37 million. However, Thailand’s tourism industry faces challenges related to environmental concerns and resource limitations, which could affect growth if not managed properly.
S-curve 4: Trading Growth From 1999 to 2008, trade volume grew by an average of 15.8% per year. However, in the past decade, this growth has slowed to an average of 6.4% per year.
S-curve 5: Real Estate Sales to Foreign Buyers Selling real estate to foreign buyers, particularly from China and the U.S., has been a major driver of Thailand’s housing market growth.
Real Estate Prices Outpacing Economic Growth and Salaries Over the past five years, prices for single-family homes, townhouses, and condominiums have grown faster than wages and the economy. This trend worsened in 2019 due to economic downturns, high household debt, and stricter housing loan regulations, leading to an oversupply of unsold properties.
Limiting New Project Launches by Developers When property sales decline, developers limit the launch of new projects and focus on selling existing properties, particularly those priced below ฿3,500,000 ($103,900). Discounts and special offers are frequently used to attract buyers.
Current Housing Market Trends Condominiums dominate the market, accounting for 91% of all properties, with the majority priced under ฿3,500,000 ($104,000). In Bangkok, districts such as Wattana, Khlong Toei, and Huai Khwang have the highest concentration of condominiums, while townhouses are found in Wattana, Lat Phrao, and Prawet. Detached houses are more common in suburban areas such as Prawet, Khlong Sam Wa, and Sai Mai.
In 2022, real estate projects in central and suburban areas will continue to develop, focusing primarily on horizontal expansion.
The Future of Thai Real Estate According to TDRI, the factors driving real estate growth may slow down in the next 10-20 years. However, several sectors will continue to benefit:
- Transportation: The government plans to expand road and rail networks, including increasing motorway length from 200 km to 6,000 km and railway length from 4,000 km to 7,900 km, which will stimulate real estate development along these routes.
- Tourism: Focus on boosting the tourism potential of northeastern provinces.
- Foreign Buyers: Foreign purchasing power remains a crucial factor for market growth, but the enforcement of property ownership laws must be strengthened.