Market in Depth

Thailand's housing market is slowing sharply

Lalaine C. Delmendo | August 10, 2021

Thailand's housing market is slowing sharply, amidst a struggling economy caused by the COVID-19 pandemic. The economy is depressed – exports are down, and tourism has almost stopped. Both demand and construction activity are falling, and house prices are static or falling, in real terms.

Covid has, temporarily, wiped out tourism. In Q1 2021, only 20,172 tourists arrived, down 99.7% from 6.69 million tourists a year earlier. During 2020, there were only 6.7 million foreign tourists in the country, a sharp decline from almost 40 million arrivals in 2019.

Thailand's tourism-reliant economy slumped by 6.1% during 2020, its biggest fall in more than two decades, mainly due to lack of tourists and a sharp decline in exports amidst the COVID-19 pandemic. Then in Q1 2021, Thailand's economy shrank further by 2.6% from a year earlier, its fifth consecutive quarter of y-o-y decline - but the smallest contraction since Q1 2020. Because of this, the National Economic and Social Development Council (NESDC) has recently downgraded its 2021 growth forecast to 1.5% - 2.5%, from its earlier projection of 2.5% - 3.5%.

The average price of single-detached houses in Thailand rose by 1.2% during the year to May 2021, sharply down from the previous year's 5.9% growth and the lowest y-o-y increase since August 2017, according to the Bank of Thailand (BoT). When adjusted for inflation, prices actually fell by 1.2%. However the mid and low-income detached housing sector has been buoyed by low interest rates.

By property type:
  • Condominium prices increased by a miniscule 0.1% (fell by 2.3% in real terms) in May 2021 from a year earlier, a sharp slowdown from a y-o-y rise of 7.9% in May 2020.
  • Townhouse prices rose by 1.4% (but declined 1% in real terms) during the year to May 2021, a slowdown from the previous year's 5.5% y-o-y increase.

Land prices seem to be more resilient. The land price index rose by 8.4% (5.8% in real terms) y-o-y in May 2021, following annual growth of 5.6% in 2020, 1.7% in 2019 and 2.8% in 2018.

Residential construction is hampered by the pandemic. Nationwide condominium registrations plummeted by 33.6% to 17,618 units in the first four months of 2021 as compared to the same period last year. In Bangkok Metropolis, condo registrations fell by 41% over the same period.

New housing units in the capital also fell 18.1% y-o-y to 26,670 units in Jan-Apr 2021.

Property transactions are falling. In the first four months of 2021, land and building transactions totalled THB 267.81 billion (US$8.24 billion), down by 11.7% from a year earlier and by from 19.4% two years ago, according to the BoT, following annual declines of 5.3% in 2020 and 6.7% in 2019.

Demand, particularly from foreigners, is expected to remain subdued during the remainder of the year, after the discovery of more transmissible COVID-19 variants forced many countries to reimpose curbs. In June 2021, the government announced new restrictions in Bangkok and surrounding area, amidst surging infections.

Investors from Mainland China and Hong Kong make up almost half foreign demand for residential condos in the country. People from the US, Singapore, Taiwan, Japan and the UK are also big investors.

“CBRE believes the Bangkok residential market will remain sluggish in 2021 as COVID-19 has put pressure on both domestic and foreign buyers, prolonging purchasing decisions,” said CBRE in its 2021 market outlook report. “Limited new launches will be focused mainly on the midtown/suburban areas and affordable segments as price becomes more realistic.”

Analysis of Thailand Residential Property Market »

Rental Yields

Bangkok property - yields moderate

Rental yields in Bangkok average around 5.0%. The apartments included in our survey are located in Bangkok´s upscale residential areas which includes Sukhumvit Road, and Silom - Sathorn.

Round trip transaction costs are low in Thailand. See our Property transaction costs analysis for Thailand and Property transaction costs in Thailand, compared to the rest of Asia.

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Taxes and Costs

Income taxes in Thailand are high

Rental Income: Nonresidents pay tax on income derived from property located in Thailand at progressive rates.

Gross rent is subject to 15% withholding tax, which can be credited to the actual income tax due.

Property Tax: The House and Land Tax, levied on rental properties, is payable annually at a flat rate of 12.5% of the assessed annual rental value of the property.

Capital Gains: Gains derived from the sale of immovable property are taxed at standard income tax rates.

Inheritance: Inheritance tax is levied at a flat rate of 5% for direct descendants. Inheritance of the spouse is exempt from taxation.

Residents: Residents are taxed on their worldwide income at progressive rates.

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Buying Guide

Buying process is complicated in Thailand

Total round-trip costs are moderate at around 9.90% to 11.90% of the property value, inclusive of the realtor’s commission of from 3% to 5%. There are complications surrounding the computation of the buying costs; stamp duty and specific business tax are based on the assessed value or declared value, whichever is higher. Buyer and seller each pay for their own separate lawyer.

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Landlord and Tenant

The landlord can call the police in Thailand

Given the absence of formal legislation, Thailand is pro-landlord.

Rent: The contract prevails on issues regarding the rent, rent adjustments, and notices.

Tenant Security: If the tenant refuses to leave after the contract and/or the notice to vacate expires, the police can be called upon to forcibly remove the tenant. However, landlords are not allowed to take abandoned appliances and furniture as compensation for unpaid rent and damages.

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Economics: coronavirus pandemic hits Thailand’s economy

The National Economic and Social Development Council (NESDC) has recently downgraded its 2021 growth forecast to 1.5% - 2.5%, from its earlier projection of 2.5% - 3.5%.  Thailand’s economy had slumped by 6.1% during 2020, its biggest fall in more than two decades, mainly due to lack of tourists and a sharp decline in exports amidst the COVID-19 pandemic.

Only around 250,000 to 1.2 million foreign tourists are expected this year, according to Kasikorn Research Center’s recent projections, sharply down from nearly 40 million foreign arrivals in 2019, who spent THB 1.91 trillion (US$58.7 billion) or about 11% of the country’s GDP that year.

Thailand exchange rate
But there’s not only bad news. Exports are now improving, thanks to booming auto exports. In the first five months of 2021, exports went up by 10.8% from a year earlier, following a decline of 6% during 2020, according to the Ministry of Commerce.

“Exports are now a main engine driving the economy,” said Thai Commerce Minister JurinLaksanawisit.

Recently, the Bank of Thailand raised its 2021 export growth forecast to an 11-year high of 17.1%, up from its earlier projection of a 10% growth.

The Thai baht (THB) weakened against the US dollar by 4.6% since January 2021 to reach an average exchange rate of THB 31.453 = USD 1 in June 2021, as multiple waves and new variants of COVID-19 globally delay the much-awaited recovery of tourism. The baht gained further by 8.7% against the US dollar from the onset of the pandemic in April 2020 to January 2021, following a 19.2% gain from 2015 to 2019.

Flawed democracy
After winning the March 2019 elections, in July 2019 Prime Minister Prayuth Chan-o-cha formally resigned as the head of the military government. He declared that the country would now function as a normal democracy.

“Thailand is now fully a democratic country with a constitutional monarchy, with a parliament whose members are elected,” Prayuth said. “All problems will be addressed normally based on a democratic system with no use of special powers.”

However Thailand is really a hybrid of democracy and authoritarianism. True, the junta, which had given itself sweeping powers without oversight, was dissolved with the inauguration of the new Cabinet. But Prayuth was retained as prime minister with the backing of military-appointed Senate and pro-military parties in the parliament who were elected during the March 2019 general election, which was marred by irregularities, and was held under a new constitution enacted by the junta aimed at disadvantaging established political parties and keeping any single party from winning a clear majority.

Thailand GDP inflation
Most of the powerful cabinet positions are held by former members of Prayuth’s military government. In fact, Prayuth also serves as defense minister in the new government.  The military also keeps its power of arbitrary detention, which was used in the past to silence critics. Also, the new constitution ensures that members of the National Council for Peace and Order (NCPO), the official name of the military junta that governed the nation, will not be held accountable for any rights violations committed during its rule.

Prayuth is now facing a growing public anger and increased protests amidst surging coronavirus infections and a dismal economy. Protesters in Bangkok in June 2021 demand his resignation and the removal of 250 military appointees from the parliament.

Just recently, more power has been handed to Prayuth “temporarily in order to suppress the [pandemic] situation and protect the people”. A decree transferred ministerial powers covering 31 laws to Prayuth’s direct control, including control over immigration, health and procurement, and several areas of defence and cybersecurity, raising concerns among human rights advocates.

Thailand’s military seized power from an elected government in May 2014, the 12th military coup since the end of absolute monarchy in 1932. Led by the present prime minister, Prayuth, the coup came after several months of protests against the ruling Pheu Thai party and former PM YingluckShinawatra.

After dissolving the government and the Senate, the NCPO vested both executive and legislative powers in its leaders, and took control of the judicial branch. A nationwide martial law and curfew were declared; political gatherings were banned; opposition leaders and activists were arrested; and media and internet censorship was imposed.