Thailand's Residential Property Market Analysis 2024

New real estate stimulus measures recently approved by the government are expected to support Thailand's housing market amid the decline in domestic buyer activity and stagnating development.

This extended overview from the Global Property Guide covers key aspects of the Thai housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents:

• Housing Market Snapshot
• Supply Highlights
• Demand Highlights
• Mortgage Market
• Rental Market
• Socio-Economic Context

Housing Market Snapshot

In Q2 2024, the Housing Price Index for single detached houses in Thailand demonstrated a limited 2.60% (1.81% inflation-adjusted) year-on-year growth, as reported by the Bank of Thailand (BOT). A slightly stronger increase of 3.12% (2.32% inflation-adjusted) was recorded in the segment of townhouses.

Industry experts project the price levels to continue increasing gradually, especially for newly constructed projects, in line with the increasing costs of construction materials and labor against the backdrop of elevated land prices and borrowing costs.

Thailand's house price annual change:

The capital region, including Bangkok and its vicinity, showed a more pronounced growth in prices than the rest of the country, with the highest year-on-year increase of 3.85% (3.21% inflation-adjusted) registered in single detached houses, followed by townhouses (3.58%, 3.04% inflation-adjusted), and condominium units 3.03% (2.23% inflation-adjusted).

House Price Indices by major regions:

Data source: Bank of Thailand (BOT).

The nationwide economic slowdown, coupled with the cancellation of the pandemic-related loan-to-value limits ease and increased mortgage interest rates, caused a decline in registered transfers of residential property rights throughout Thailand. The total number of units transferred in 2023 decreased by 6.6% year-on-year year, while the total value of units transferred decreased by 1.7%. In Q1 2024, only 72,954 transfers of residential property rights were registered, demonstrating a 13.8% year-on-year drop and the lowest figure in the last 25 quarters, according to the Real Estate Information Center (REIC). The total value of units transferred dropped to THB 208.7 billion (USD 5.8 billion) - the lowest in the last 19 quarters.

In contrast to the general dynamic, foreign demand continued to expand, exceeding the pre-pandemic levels. REIC reported a 25% year-on-year increase in the number and a 23.5% increase in the value of condo units transferred to foreign buyers in 2023. In Q1 2024, 3,938 condominium units with a total value of THB 18,013 million (USD 497.7 million) were transferred to foreigners, representing 4.3% and 5.2% year-on-year increases in value and volume, respectively. Most of the foreign demand originated from China, followed by Russia, the US, and Myanmar.

The mortgage market expansion in the country has been on a decelerating trajectory for several periods. According to REIC, THB 121.5 billion (USD 3.4 billion) in new mortgage loans to individuals were issued in Q1 2024, a 20.5% year-on-year drop likely brought on by the reduced ability of the households to apply for loans and strict approval criteria established by the financial institutions. At the end of July 2024, the average minimum retail rate (MRR) for domestic commercial banks was registered at 8.02%, up from 7.80% in July 2023 and 6.73% in July 2022. The average interest rate for the first 3 years of the term across various home loan programs in popular commercial banks was most recently recorded between 3.30% and 3.72%.

As the home-purchasing capabilities of households are curbed by insufficient savings and difficulty in obtaining loans, the share of those opting to rent appears to be growing, pushing the rental rates up. In Q1 2024, the real estate website DDproperty reported a 28% year-on-year increase in the rental price index for low-rise properties and a 22% growth for units in high-rise developments.

Residential rents substantially outpace purchase prices manifested in the rental yields' growth. According to the research carried out by Global Property Guide in June 2024, gross rental yields for residential units in Thailand averaged 6.27%, up from December 2023. The performance of regional submarkets varied from 7.05% in Sattahip to 6.36% in Phuket, and 5.07% in the capital city of Bangkok.

According to local experts, weak demand and deteriorating market sentiment made developers hesitant to engage in new projects, which led to a slowdown in residential construction activity. A little over 271,00 residential units received construction permits throughout the country in 2023, demonstrating a 1.9% year-on-year decline, while the number of new housing units offered for sale stagnated at about 140,000 (0.5% increase).

To stimulate market activity and promote economic growth, Thailand's Cabinet recently approved new real estate stimulus measures including reduced transaction fees for houses worth up to THB 7 million (about USD 193,000), with ownership transfer fees and mortgage registration fees cut to 0.01% from the previous 2% and 1%, respectively. The government will also expand home loans from state banks, offer tax breaks for some property developers, and tax deductions for people who want to build their houses.

Outside of the new stimulus measures, positive expectations for the housing market in Thailand are tied to further macroeconomic recovery, as well as the growing tourism sector's contribution to household incomes. In the first half of 2024, the Ministry of Tourism and Sports reported 17.5 million foreign visitors, almost 35% above the comparable period last year. The vast majority of international tourists arrived from Asia and the Pacific (nearly 73%), followed by Europe (about 21%) and the Americas (over 4%). Key country markets of origin were China, Malaysia, India, Korea, and Russia. Overall, the sector is projected to return to pre-pandemic levels in mid-2025.

Supply Highlights:

New Deliveries Stagnate as Decline in Demand Slows Development Activity

After an uptick in 2022, residential construction activity in Thailand is slowing down. According to the data collected by the National Statistical Office of Thailand (NSO), a total of 271,347 residential units received construction permits throughout the country in 2023, demonstrating a 1.9% year-on-year decline. Similarly, the area of buildings granted permits decreased by 1.8%. The majority of permits (89%) were allocated to detached houses, while condominiums accounted for less than 1% of newly authorized units.

More recently, the NSO reported 68,052 residential construction permits granted during Q1 2024, translating into a 6.8% year-on-year drop. At the same time, the area of granted units decreased by 6.7%.

Data Source: National Statistical Office of Thailand (NSO).

Regional performance varied. The Southern region of Thailand recorded 8.9% year-on-year growth in the number of permits issued, a more modest positive dynamic was also observed in the Central region with a 1.5% year-on-year increase. Conversely, other territories saw a decline in the number of units permitted, with Bangkok and its metropolitan area experiencing the most significant drop of 7.9%.

Building permits issued for new residential construction, by region:

The number of new housing units coming to market is stagnating. According to the latest data published by the Real Estate Information Center (REIC), 140,316 newly launched units were offered for sale in 2023, demonstrating a marginal increase of 0.5%. A similar pattern was observed in the total number of units offered for sale, which also grew by 0.5% to 429,201 units.

In terms of the regional split, most of the new units were launched in the Bangkok metropolitan region, however, year-on-year growth in the area was recorded as negative at -11.9%. Decreases in new housing were also apparent in the Northern, Central, and Western regions of the country.

Residential units offered for sale:

Vichai Viratkapan, acting director-general of the REIC, quoted by The Bangkok Post, attributes the overall slowdown in construction to weak demand and deteriorating market sentiment, making developers hesitant to engage in new projects. At the same time, the sector's recovery potential is closely linked to the general economic rebound and government stimulus. "If the economic recovery is as robust as expected and the property measures have a strong impact on home demand, developers may begin expanding their business and making new investments in the second half of the year," Vichai stated.

Demand Highlights:

Declining Domestic Buyer Activity and Robust Foreign Demand for Condos

The nationwide economic slowdown, coupled with the cancellation of LTV limits ease (previously introduced during the pandemic as a temporary relief measure) and increased mortgage interest rates, caused a decline in registered transfers of residential property rights throughout Thailand. REIC reports that the total number of units transferred in 2023 decreased by 6.6% year-on-year (compared to post-pandemic growth of 14.3% in 2022). Low-rise unit transfers experienced a more substantial 9.4% drop, while for condominium units the indicator increased only marginally by 0.9%.

In the total value of units transferred, the year-on-year decrease was less sizable - 1.7%, compared to a 12.8% upturn in 2022. The value of low-rise units transferred declined by 4.4%, while the value of condominium units demonstrated an increase of 5.6%. As for the regional distribution, falls in both the number and the value of units transferred were registered across all provinces, except for Chonburi and Phuket, where a substantial proportion of buyers is represented by foreigners.

The decline in buyer activity continued in 2024. According to the REIC's latest press release, only 72,954 transfers of residential property rights were registered in Q1 2024, demonstrating a 13.8% year-on-year drop and the lowest figure in the last 25 quarters. The number of low-rise units transferred decreased by 18.9% year-on-year, while the number of condominiums registered a marginal drop of 0.6%. The total value of units transferred dropped to THB 208.7 billion (USD 5.8 billion) - the lowest in the last 19 quarters.

In an attempt to stimulate market activity and promote economic growth, in April 2024, the Cabinet approved new real estate stimulus measures proposed by the Ministry of Finance. The measures include reduced transaction fees for houses worth up to THB 7 million (about USD 193,000), with ownership transfer fees and mortgage registration fees cut to 0.01% from the previous 2% and 1%, respectively. The government will also offer home loans worth THB 30 billion from state banks, tax breaks for some property developers, and tax deductions of up to THB 100,000 for people who want to build their houses. Pornchai Thiraveja, head of the fiscal policy office at the Ministry of Finance, was quoted by Reuters to say: "With the measures, the economy this year will grow a little over 4%", adding the stimulus would lift growth by 1.7-1.8 percentage points.

Note: 2024 figures are REIC forecast, base-case scenario.
Data Source: Real Estate Information Center (REIC).

Transfers of residential property rights by province:

Opposite to the general market dynamics, foreign demand remained robust, exceeding pre-pandemic levels. REIC reports 14,449 condominium units transferred to foreign buyers in 2023, representing a 25.0% year-on-year increase. The value of transferred units was recorded at THB 73,160 million (USD 2.1 billion) translating into a 23.5% year-on-year uptick. Chonburi province accounted for 41.1% of total units transferred, overtaking the typical leader Bangkok Metro area with 38.0%.

Most of the foreign demand originated from China (45.8% of the total units transferred), followed by Russia (8.7%), the US (4.4%), and Myanmar (3.9%). As for the property characteristics, 49.4% of units were priced up to THB 3 million (about USD 86,000), while the most popular size category (50.3% of transfers) was 31-60 sqm units.

Data Source: Real Estate Information Center (REIC).

Transfers of residential property rights in condominiums to foreign buyers:

The positive dynamic for this category of buyers carried on into 2024, supported by strengthening the tourism sector and easing travel requirements. According to the REIC data, 3,938 condominium units with a total value of THB 18,013 million (USD 497.7 million) were transferred to foreigners in Q1 2024, representing 4.3% and 5.2% year-on-year increases in value and volume, respectively.

With foreign demand continuing to drive Thailand's housing market amidst falling participation of the local population, the Cabinet resurrected the previously rejected proposal of more welcoming ownership policies for non-resident buyers. In June 2024, Deputy Prime Minister Phumtham Wechayachai, cited by Realty Plus, announced that the Ministry of the Interior had been asked to examine the feasibility of extending the duration of foreign property rights from 50 to 99 years and increasing the current quota for foreign ownership of condominiums from 49% to 75%. The authorities still deliberate on these prospective measures, including the possibility of adding special conditions such as restricting owner voting rights of foreigners and foreign legal entities that would acquire properties beyond the 49% limit.

Mortgage Market:

Continued Slowdown in Residential Lending Due to High Interest Rates and Reduced Household Purchasing Power

In Q1 2024, the total value of outstanding housing loans to individuals maintained by the financial system of Thailand reached TBH 4.96 trillion (USD 136.9 billion), showing a 3.8% year-on-year increase compared to Q1 2023 - the slowest growth rate in 25 quarters, according to the Real Estate Information Center (REIC) latest data.

About 55% of the market is represented by mortgages from commercial banks, and the rest is made up of loans issued by state enterprises such as Government Housing Bank (GHB) and Government Savings Bank (GSB), as well as other financial institutions.

Previously, the mortgage market expansion in the country has been on a decelerating trajectory for several periods already, slowing from an average annual growth of 9% in the decade between 2008 and 2018 to 5.8% in 2021, 5.4% in 2022, and 4.4% in 2023. The trend is primarily driven by the slowdown in the commercial banks' segment, which only showed an annual growth of 4.4% in 2021, 3.1% in 2022, and only 1.3% in 2023, according to the BOT data.

Data Sources: Bank of Thailand (BOT), Government Housing Bank (GHB), Real Estate Information Center (REIC).

This slowdown is also illustrated by the new disbursement dynamic. REIC reports THB 121.5 billion (USD 3.4 billion) in new mortgage loans to individuals issued in Q1 2024, a drop of 31.5% quarter-on-quarter and 20.5% year-on-year, likely brought on by the reduced ability of the Thai people to apply for loans and strict approval criteria established by the financial institutions. The center's baseline scenario forecasts around THB 678 billion (USD 18.7 billion) in new housing loans by the end of the year, unchanged from 2023 levels, while the worst-case scenario allows for an 8% drop.

The BOT data on new mortgages issued by commercial banks shows that, on average, about 74% of pure new loans (excluding refinancing) in the last two years were obtained to purchase low-rise individual housing, while 26% were taken to purchase units in high-rise buildings.

Data Source: Bank of Thailand (BOT).

Along with several consecutive hikes in the BOT policy rate, most recently raised to 2.5% in August 2023, minimum retail rates (MRR) set by individual banks and generally serving as a baseline for specific mortgage products have also been growing. Based on information published by the BOT, at the end of July 2024, the average MRR for domestic commercial banks was registered at 8.02%, up from 7.80% in July 2023 and 6.73% in July 2022.

Typically, banks offer a discounted fixed rate for the first three years of a loan term, switching to a floating rate tied to MRR from the fourth year. According to the data accumulated by the real estate website DDproperty, as of August 2024, the lowest average interest rate for the first 3 years across various home loan programs is between 3.30% and 3.72% in popular commercial banks, and 2.60% and 2.95% in state-owned GHB and GSB, respectively.

Selected banks' end-of-month Minimum Retail Rate (MRR):

In their assessment of the mortgage market prospects in 2024, GHB lists high interest rates, strict approval processes on the side of the financial institutions, and high rejection rates, as well as the overall high level of household debt in the country as key risk factors.

According to the Housing Finance Association, cited by The Bangkok Post, the current average rejection rate of housing loan applications exceeds 50%. The surge in rejection rate that followed the pandemic is primarily attributed to the growing number of non-performing loans and the weakened debt repayment capability of potential homebuyers, especially those in the lower-income segments purchasing homes priced below TBH 3 million. As a result, banks are focusing on the middle to upper-income segment, specifically targeting would-be buyers of homes with a minimum price of TBH 5 million and a respective monthly income requirement of THB 50,000."In the aftermath of the pandemic, incomes have risen marginally or remained stagnant in contrast to a significant uptick in house prices, the cost of living, and interest rates. This scenario is undermining the purchasing power of lower-income [would-be] homebuyers," said Alongkot Boonmasuk, secretary-general of the Housing Finance Association, quoted by The Bangkok Post.The positive expectations for the residential lending market in Thailand are currently tied to the potential for interest rate reduction prompted by the macroeconomic recovery, as well as the growing tourism sector's contribution to household incomes and the recently introduced real estate stimulus measures, including mortgage registration fee cut for properties priced up to THB 7 million.

Rental Market:

Rising Rental Prices Push Yields Up

According to the 2010 Census conducted by the National Statistical Office, the homeownership rate in Thailand in 2010 was estimated at 78.9% (down from 82.4% recorded during the previous Census of 2000). At the same time, 16.5% of residents rented accommodation for a fee, and 4.3% rented free of charge.

The percentage of homeowners appears to have been decreasing. The Consumer Sentiment Survey, carried out by the real estate website DDproperty revealed a decline in the number of consumers planning to buy a home within the next year, dropping from 53% in H2 2023 to 44% in H1 2024. At the same time, the percentage of those opting to rent has increased from 9% to 14%. This shift is largely attributed to insufficient savings for a home purchase indicated by the respondents.

In parallel, rental prices are trending up. DDproperty reports substantial year-on-year increases in rental price indices for both high- and low-rise residential segments in Q1 2024 at 22% and 28%, respectively.

Data Source: DDproperty.

With the growth in residential rents substantially exceeding that in sales prices, rental yields are increasing. According to the research carried out by Global Property Guide in June 2024, gross rental yields for residential units in Thailand averaged 6.27%, 0.48 percentage points up from 5.79% reported in December 2023. Regional performance varied, with the highest yields of 7.05% registered in Sattahip, followed by Samut Prakan (6.75%) and Phuket (6.36%). Gross rental yields in the capital city of Bangkok were recorded at 5.07%.

Average gross rental yields by submarket:

Socio-Economic Context:

Macroeconomic Recovery Slowed Down by External Factors

Thailand's economic rebound from the COVID-19 pandemic and multiple shocks in 2022 is continuing, however, the speed of the recovery in the past year was dragged down by the increase in commodity prices, faster-than-expected monetary policy normalization in advanced economies, and the slowdown in China, according to the IMF analysis. The country's real GDP showed a moderate 1.9% growth in 2023, expected to pick up pace in the next two years, reaching 2.6% in 2024 and 3% in 2025, according to the BOT projections, which generally match the respective 2.7% and 2.9% currently forecasted by the IMF.

Owing to the base effect of energy and food prices, gradual monetary policy tightening, and the extension of energy price subsidies, nationwide inflation, measured by the Consumer Price Index (CPI), has eased from 6.1% in 2022 to 1.20% in 2023 and was mostly recently reported at 0.83% in July 2024. The BOT expects the annual headline inflation level to reach 0.6% in 2024 before accelerating to 1.3% in 2025. The IMF also foresees a mild acceleration driven by the boost in demand, with annual inflation levels of 0.7% in 2024 and 1.2% in 2025.

Data Source: International Monetary Fund (IMF).

The tourism industry remains the main driver of the country's economic recovery, bolstering activities in the service sector, employment, and private consumption. As travel restrictions were lifted, the number of foreign tourists arriving in Thailand rebounded from less than 500 thousand visitors in 2021 to over 11 million in 2022, and over 28 million in 2023. In the first half of 2024, 17.5 million international tourist arrivals were reported by the Ministry of Tourism and Sports, which is almost 35% above the comparable period last year. Average accommodation occupancy in H1 2024 was at 72.6%, up from 68.6% last year and nearly reaching the 73% pre-pandemic benchmark of H1 2019. Overall, the sector is projected to return to pre-pandemic levels in mid-2025.

In 2024 to date, the vast majority of foreign tourists arrived from Asia and the Pacific (nearly 73%), followed by Europe (about 21%), and the Americas (over 4%). Key country markets of origin were China (19.7%), Malaysia (13.9%), India (5.9%), Korea (5.3%), and Russia (5.3%).

Data Source: Bank of Thailand (BOT), Tourism and Sports.

Supported by the revival of tourism, Thailand's labor market continues to improve in both service and manufacturing sectors. Unemployment and underemployment have declined substantially from their peaks in 2020-2021. The nationwide unemployment rate was most recently reported by the BOT at 0.93% in June 2024, down from the annual levels of 1.93% in 2021, 1.32% in 2022, and 0.98% in 2023.

Data Source: Bank of Thailand (BOT).

Overall, Thailand's economic outlook is balanced, with several external and domestic risks outlined by the IMF and World Bank projections. The country's economy is subject to external risks including an abrupt global slowdown, hikes in commodity prices, tighter-than-expected global financial conditions, and deepening of geo-economic fragmentation. Domestically, elevated private sector debt poses a threat to financial stability, while over-reliance on tourism increases Thailand's vulnerability to external shocks.

Sources:

1. Bank of Thailand (BOT)
   1. Residential Property Price Indices: https://app.bot.or.th/
   2. Thailand's Macro Economic Indicators: https://app.bot.or.th/
   3. Property Indicators: https://app.bot.or.th/
   4. Tourism Indicators: https://app.bot.or.th/
   5. Real Estate Loan Report: https://app.bot.or.th/
   6. Labor Force Survey: https://app.bot.or.th/
   7. Interest Rates in Financial Market (2005- present): https://app.bot.or.th/
   8. Daily Interest Rates of Commercial Banks: https://www.bot.or.th/
   9. Annual Report 2023: https://www.bot.or.th/
   10. Summary of Economic and Inflation Forecasts: https://www.bot.or.th/
2. National Statistical Office of Thailand (NSO)
   1. Construction site data processing (TH): https://www.nso.go.th/
   2. 2010 Population and Housing Census: https://www.nso.go.th/
3. Real Estate Information Center (REIC)
   1. Housing market situation in Q1 and market direction in 2024 (TH): https://www.reic.or.th/
   2. Real Estate Situation Nationwide (TH): https://www.reic.or.th/
   3. Report on the situation of transfer of ownership of condominiums by foreigners (TH): https://www.reic.or.th/
4. International Monetary Fund (IMF)
   1. Country Overview: Thailand: https://www.imf.org/
   2. Thailand: 2023 Article IV Consultation-Press Release and Staff Report: https://www.imf.org/
5. World Bank
   1. MPO Thailand: https://thedocs.worldbank.org/
6. Ministry of Tourism and Sports
   1. Tourist Statistics: https://www.mots.go.th/
7. Government Housing Bank
   1. Annual Reports: https://www.ghbank.co.th/
   2. Reference Loan Interest Rates: https://www.ghbank.co.th/
8. Government Savings Bank
   1. Loan Interest Rates: https://www.gsb.or.th/
9. Government Public Relations Department
   1. Economic stimulus measures through the real estate sector and preparations to support the implementation of Thailand's transformation into a world-class industrial city (TH): https://www.prd.go.th/
10. DDproperty
    1. Thailand Property Market Report Q1 2024: https://www.ddproperty.com/
    2. Home Loan Interest Rates 2024 For All Banks (TH): https://www.ddproperty.com/
    3. MRR MLR MOR Rate Update (TH): https://www.ddproperty.com/
    4. Thailand Consumer Sentiment Study H1 2024: https://www.ddproperty.com/
11. Reuters
    1. Thailand sees more than 4% growth this year on property measures, ministry says: https://www.reuters.com/
12. Bangkok Post
    1. Mortgage Rejection Rate Soars After Pandemic: https://www.bangkokpost.com/
    2. Residential Developers Getting Cold Feet: https://www.bangkokpost.com/
    3. Developers Take a Hit as LTV Easing Ends: https://www.bangkokpost.com/
13. Realty Plus
    1. Thailand Plans To Ease Property Rules For Foreigners: https://www.rprealtyplus.com/