The residential market has yet to recover, with the downturn expected to extend until next year due to a lack of consumer confidence, say property developers.
Pornarit Chounchaisit, president of the Thai Real Estate Association, said the market weakness is driven by a lack of confidence among both homebuyers and banks in mortgage lending.
“Some large developers say mortgage rejection rates have surged to 70%,” he said. “Some occupations that previously secured loans are now being rejected, such as freelance architects.”
Banks view the property market as sluggish and expect fewer new projects, reducing demand for architectural services, said Mr Pornarit.
Even salaried employees at some types of companies, such as IT startups, are facing greater difficulty securing mortgages as banks become more cautious amid weaker venture capital investment, with startup closures also leaving some office rental space vacant.
He said the lack of confidence was largely a matter of sentiment. Despite economic growth, consumers remain reluctant to make costly purchases such as homes when confidence is weak.
The US-Iran war, which has repeatedly shifted between escalation and de-escalation, is likely to hamper a recovery in the residential market during the second half, said Mr Pornarit.
“Lack of confidence is a global issue as geopolitical conflicts have also affected foreign demand,” he said.
Previously, when domestic sales were weak, developers could rely on foreign buyers. However, now the international market has also become quiet, said Mr Pornarit.
Although many view Pattaya and Phuket as markets that can still perform relatively well, he said Pattaya’s investment buyers were becoming more cautious.
Pattaya has attracted buyers seeking rental income, but they now need to consider the large amount of new hotel supply expected to enter the market, he said.
Meanwhile, Phuket has attracted strong foreign demand, luring Bangkok-based developers of all sizes to launch condominium and villa projects targeting these buyers.
However, the market has started to slow amid the government’s crackdown on nominee ownership, said Mr Pornarit.
“The market slowdown will carry over into next year because it is a result of this year,” he said. “Many listed developers can sustain operations for no more than a year.”
PRESSURE BUILDING
Some developers may only be able to survive until the end of this year and will need to downsize to reduce fixed costs, said Mr Pornarit.
Developers carrying large amounts of unsold inventory, particularly completed units held for more than three years, are facing growing pressure from holding costs.
These include land and building taxes, charged at 0.03% of the appraised value for unsold residential units held by developers for more than three years.
The tax burden also rises with each new land revaluation, as appraised values are generally adjusted upwards. Developers must also cover common-area fees, financing costs and maintenance expenses.
“These costs have to be reflected in selling prices, but raising prices is difficult when sales are already weak,” Mr Pornarit added. “Customers are also demanding discounts as the market slows.”
Kessara Thanyalakpark, managing director of SET-listed Sena Development, said the housing market was weaker in the third quarter, particularly this month.
“The housing market has yet to recover,” she said. “The growth in residential transfers in the second quarter may have given the impression that the market had recovered, but this was not the case.”
“The second-quarter figures were boosted by clearance sales, which cannot be used to justify a recovery in the market,” said Ms Kessara.
To help potential homebuyers find homes in their preferred locations and price ranges while enabling developers to reach qualified buyers and clear inventory, the Thai Real Estate Association has joined the Bangkok Metropolitan Administration (BMA) to develop a housing platform.
Initially aimed at BMA officers, the BKK Housing Matching platform has now been expanded to the general public and added a rent-to-own programme to make homeownership more accessible.
As of Sept 2, the platform had 3,912 users, 50 developers and 289 housing projects. A total of 60 units had been booked through the platform, four of which had already been transferred to buyers.