Surprisingly, Thai house prices continue to rise modestly, despite falling demand. The average price of single-detached houses in Thailand rose by 3.6% in Q3 2022 from a year earlier, following year-on-year growth of 5.2% in Q2 2022, 4.2% in Q1 2022, 2.4% in Q4 2021, and 2% in Q3 2021, according to the Bank of Thailand (BoT). However, when adjusted for inflation, prices actually declined 2.6% over the same period.

Thailand’s house price annual change

On a quarterly basis, nationwide house prices were more or less steady, in both nominal and real terms, in Q3 2022.

In Bangkok and vicinities, the prices of single-detached houses rose by 3.2% during the year to Q3 2022 but declined by 3% when adjusted for inflation. In other regions, house prices increased by 4.5% (but dropped by 1.8% in real terms).

By property type, in Bangkok and vicinities:

• Condominium prices fell by 2% (-8% in real terms) in Q3 2022 from a year earlier, in stark contrast to the y-o-y rise of 11.4% seen in Q3 2021.
• Townhouse prices rose by 4.3% (but declined 2% in real terms) during the year to Q3 2022, following the previous year’s 3.2% y-o-y increase.

Land prices are now falling. The land price index dropped slightly by 0.7% (-6.7% in real terms) in Q3 2022 from a year earlier, following y-o-y growth of 4.3% in Q2 2022, 4.6% in Q1 2022, 12.7% in Q4 2021 and 8.5% in Q3 2021.

Property transactions are falling sharply. In the first three quarters of 2022, the total value of land and building transactions recorded nationwide fell by nearly 35% y-o-y to THB560.65 billion (US$15.96 billion), based on figures from the BoT. All regions registered falling transactions.

Yet with the strong rebound in tourism, demand, particularly from foreigners, is expected to improve in the coming months. Effective October 1, 2022, the government removed all Covid-related restrictions and offered a longer length of stay from 30 days to 45 days for tourists from countries entitled to visa exemption, and from 15 days to 30 days for those eligible for a visa on arrival (VOA).

From January to October 2022, there were a total of 7.16 million foreign tourist arrivals in Thailand, based on figures from the Ministry of Tourism and Sports, after an almost nonexistent tourism sector in the past two years. The government targets about 7 to 10 million visitor arrivals this year.

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.

The overall economy continues to improve. In the third quarter of 2022, Thailand’s tourism-reliant economy grew by 4.5% from a year earlier, accelerating from y-o-y expansions of 2.5% in Q2 and 2.3% in Q1, mainly driven by robust domestic spending, a rebound in tourism, and strong international trade, according to the Office of the National Economic and Social Development Council (NESDC). Because of this, the NESDB recently revised upwards it 2022 GDP growth forecast for Thailand from 2.7% to 3.2% to at least 3.2% - a huge improvement from the 1.5% growth in 2021 and 6.2% contraction in 2020.

Brief house price history

From 2011 to 2018, nationwide house prices rose by 37.6% (26.2% in real terms). Surprisingly, house prices continued to rise robustly by 4.6% (5.5% in real terms) y-o-y in 2020, despite the Covid-19 pandemic.

Though, house price growth slowed to 1.3% (0.1% in real terms) last year.

SINGLE-DETACHED HOUSE PRICES, ANNUAL CHANGE (%)
Year	Nominal	Inflation-adjusted
2012	2.7	-0.3
2013	7.9	5.6
2014	8.4	6.3
2015	4.6	5.6
2016	1.3	1.1
2017	1.8	1.1
2018	5.3	4.2
2019	0.9	0.2
2020	4.6	5.5
2021	1.3	0.1
Sources: Bank of Thailand (BoT), Global Property Guide

Property transactions continue to fall

In the first three quarters of 2022, the total value of land and building transactions recorded nationwide fell by nearly 35% y-o-y to THB560.65 billion (US$15.96 billion), based on figures from the BoT.

All the regions of Thailand continue to register falling transactions in the first three quarters of 2022 as compared to the same period four years ago. Regional data were not available in the past three years due to pandemic-related restrictions.

• In the Central region, which makes up almost two-thirds of demand, transactions fell by a huge 36.5% to THB 351.99 billion (US$10.02 billion) in the first three quarters of 2022 from the same period in 2018.
• In the Eastern region, transactions dropped 42.3% to THB57.73 billion (US$1.64 billion) over the same period.
• In the Northeastern region, transactions fell from four years ago by 17.4% to THB 58.25 billion (US$1.66 billion).
• In the Northern region, transactions fell by 22.2% to THB 52.33 billion (US$1.49 billion) in the first three quarters of 2022 as compared to the same period four years ago.
• In the Southern region, transactions dropped 26.9% to THB 40.35 billion (US$1.15 billion) over the same period.

Interest rates rising; mortgage lending growth decelerating

Mortgage lending growth is noticeably slowing, amidst rising interest rates. As of Q3 2022, the total value of property credits outstanding rose by just 2.3% to THB 3.43 trillion (US$98.08 billion) as compared to a year earlier, according to figures released by the central bank. Property credits outstanding had been growing by an annual average of nearly 12% in 2004-2015, before slowing to an average growth of 5.4% every year in 2016-2021.

In Q3 2022:

• Real estate development credit: THB 725.45 billion (US$20.73 billion), up by a meager 0.1% from the previous year
• Personal housing credit: THB 2.71 trillion (US$77.37 billion), up 2.9% from a year earlier

In September 2022, the Bank of Thailand raised its benchmark interest rate by 25 basis points to 1.0%, following another 25 basis points rate hike in August, in an effort to rein in inflationary pressures. It was the highest level since February 2020.

The size of Thailand’s mortgage market grew to about 20.9% of GDP in 2021, up from 18.2% of GDP in 2019 and 14.2% of GDP a decade ago, thanks to the continuous increase in property loans outstanding in recent years.

In 2016, the government launched the “Baan PrachaRath” program, mandating state-owned banks to provide a total of THB 70 billion (US$2 billion) soft loans to both housing developers (pre-finance) and low-to-middle income homebuyers (post-finance).

Then in 2018, the Government Housing Bank (GH Bank) launched the one million-unit low-cost housing project, giving low-income households the opportunity to buy affordable houses. By the end of this year, GH Bank’s total mortgage loans outstanding are estimated to have reached THB 280 billion (US$8 billion).

GH Bank, the country’s largest retail mortgage lender, accounted for about 32% market share of the banking sector’s mortgage loans outstanding by end-2021. In H1 2022, GH Bank issued new loans amounting to THB 135 billion (US$3.86 billion), up 27.1% from a year earlier. This represents almost 60% of the bank’s 2022 new loan target of THB 226 billion (US$6.47 billion).

As of the end of the first half of 2022, GH Bank’s total outstanding housing loans had already reached THB 1.53 trillion (US$43.67 billion) – an increase of 4.7% from the same period last year.

BoT plans to restore mortgage limit

The Bank of Thailand’s plan to restore the loan-to-value (LTV) limit to mortgage loans will hurt the housing market, especially the condominium market, which is still recovering from the impact of the Covid-19 pandemic, according to the Thai Condominium Association.

“The condominium market will likely remain in a slump next year as more than 90% of purchases are by domestic buyers,” said Athip Pichanon, honorary president of TCA. “Next year will also bring several negative factors that could drag the market down even further, including rising interest rates and construction costs that could jump up by 10%.”

Wichai Wiratkaphan, director of GH Bank’s Real Estate Information Centre, seems to agree: “Implementing LTV too early will disrupt the growth of the condo market since only buyers with high purchasing power will be able to afford properties.”

Recently, the BoT revealed that it would restore LTV rules by end-2022 to prevent household debt from rising rapidly. The LTV regulations have been eased since October 2021 to reduce the adverse effects of the pandemic on the housing market. These include:

• The LTV limit has been lifted to 100% from 70%-90%. Banks are allowed to offer an additional 10% for expenses on furniture and interior decor;
• Those buying a second home valued at less than THB 10 million (US$286,356) can take out loans with a downpayment of 10% if they have serviced their first home loan for at least two years, down from the previous three years.
• For those buying a second home valued more than THB 10 million (US$286,356), homebuyers need to settle a 10% downpayment for the first loan, down from 20%.

Residential construction activity showed mixed results

Nationwide condominium registrations fell by 3.8% to 38,687 units in the first three quarters of 2022 from a year earlier, following a 41.8% decline during the full year of 2021, according to the BoT. Despite the aggregate fall, condominium registrations in the city center are actually rising strongly again.

In the first three quarters of 2022:

• In Bangkok Metropolis, condominium registrations rose by 30.4% y-o-y to 25,493 units, in sharp contrast to the 56.4% fall seen during 2021.
• In other provinces, condominium registrations dropped 36.1% y-o-y to 13,194 units, after falling by 12.6% last year.

In contrast, land development licenses in the country increased 28.4% to 60,845 units in the first three quarters of 2022 from a year earlier. Most of these licenses are located in other provinces. In Bangkok Metropolis, land development licenses rose strongly by 53.8% y-o-y to 9,555 units over the same period.

New housing units in Bangkok Metropolis also increased slightly by 2.2% y-o-y to 63,541 units in Q1-Q3 2022, according to figures from BoT. Over the same period:

• New housing project releases: down 5.8% y-o-y to 19,274 units
• Apartments and condominiums: up 5.2% y-o-y to 28,469 units
• Self-built housing: up 7.6% y-o-y to 15,798 units

The third phase of one million-unit housing project is set to commence

In November 2022, the GH Bank sought approval from the Finance Ministry and the cabinet for the rollout of the third phase of the one million-unit low-cost housing scheme, with an estimated budget of around THB 20 billion (US$570 million).

The program seeks to build affordable detached, semi-detached houses and condominiums to be sold to low income-earners at a ceiling price of THB 1.5 million (US$42,830) per unit, up from THB 1.2 million (US$34,263) in the second phase and THB 1 million (US$28,553) in the first phase.

In this phase, borrowers are offered a fixed rate of 3% and a repayment period of up to 40 years.

The GH Bank is expected to extend housing loans to homebuyers starting January 2023.

The GH Bank’s total actual approved mortgage loans this year are estimated to reach THB 280 billion (US$8 billion) by end-2022, up from the initial target of THB 226 billion (US$6.45 billion). The GH Bank’s non-performing loans are also expected to fall by 4.4% to THB 59 billion (US$1.68 billion), from THB 65 billion (US$1.86 billion) last year.

Rental yields: larger apartments yield more

Rental yields in Bangkok are good, ranging from 5.0% to 8.0%, based on Global Property Guide research conducted before the pandemic. Over the past three years, we’ve seen yields on medium-sized apartments (120 sq. m.) rise significantly. The apartments included in our survey are located in Bangkok’s upscale residential areas which include Sukhumvit Road, Silom, Sathorn, Riverside, Rama III, and Central Lumpini.

In most countries major cities, smaller apartments earn higher rental yields than bigger apartments. That’s not true in Bangkok. A 60-square meter (sq.m.) apartment in Bangkok’s central location earns gross rental yields of around 5.6%, while a 120-sq. m apartment also centrally located, earns gross rental yields of around 8.0%.

Yields have risen at the luxury end of the market, though since the Covid-19 pandemic, they have fallen for the very large sizes, such as 250 sq. m.

Foreign homeownership rules

Foreigners cannot buy land in Thailand, only condominium units and apartments. Foreigners cannot make up more than 40% of the condominium’s unit owners. However, a foreigner can buy a whole building, minus the land on which it is built.

In recent years, minor changes in Thai law have allowed nonresidents to further explore the Thai real estate market. A foreigner can have a 30-year renewable lease, under which the buyer registers at the Land Office an option to renew the lease contract indefinitely, for further 30-year periods.

There are serious drawbacks to this lease arrangement, however. Lease renewals cannot be registered, and are not effective against a purchaser of the property. And the lessee cannot (without the lessor’s consent) sublease, sell or transfer his or her interest.

Another option is to set up a private limited company with mixed Thai and foreign ownership, the foreign ownership being 49% or less. Companies are allowed to own land. The foreign national can control the company by using a legal power of attorney from the Thai shareholders, handing control to the foreign directors, or through assigning greater voting rights to the foreign partner/s. This is an effective and time-tested route, most commonly taken by foreigners. The help of a lawyer is very important.

Foreigners can also invest at least THB40 million (US$1.15 million) in a Board of Investment-approved project. They will then be allowed to purchase up to 1 Rai (1,600 square meters) of land.

Improving economic conditions, recovering tourism

In the third quarter of 2022, Thailand’s economy grew by 4.5% from a year earlier, accelerating from y-o-y expansions of 2.5% in Q2 and 2.3% in Q1, mainly driven by robust domestic spending, a rebound in tourism, and strong international trade, according to the Office of the National Economic and Social Development Council (NESDC).

In Q3 2022:

• Private consumption rose by 9% from a year earlier
• Fixed investment increased by 5.2% y-o-y
• Government spending fell slightly by 0.6% y-o-y
• Net exports contributed positively as exports rose by 9.5% y-o-y while imports grew by 8.2%

“The Thai economy has been expanding since the fourth quarter of 2021 until the third quarter of this year,” said NESDC Secretary-general Danucha Pichayanan. “Almost all indicators increased, including consumption and spending by the private sector, exports, and investments as well as tourism that expanded after the country fully reopened.”

As such, the NESDB recently revised upwards it 2022 GDP growth forecast for Thailand from 2.7% to 3.2% to at least 3.2%. This is a huge improvement from the 1.5% growth in 2021 and 6.2% contraction in 2020.

Tourism continues to recover. From January to October 2022, there were a total of 7.16 million foreign tourist arrivals in Thailand, based on figures from the Ministry of Tourism and Sports, after an almost nonexistent tourism sector in the past two years due to travel restrictions and lockdowns imposed around the world. The government targets about 7 to 10 million visitor arrivals this year.

Thailand’s economy relies heavily on tourism. Before the pandemic, tourism accounted for about 11% of the country’s GDP and around 20% of total employment, according to the BoT. In 2019, Thailand’s inbound visitors breached 39 million, the country’s highest number of arrivals to date.

Nationwide unemployment fell to 1.23% in Q3 2022, from 1.37% in the previous quarter and 2.25% a year earlier, according to BoT figures.

Inflationary pressures seem to be moderating. Overall inflation stood at 5.55% in November 2022, a slowdown from 5.98% in the prior month and from the 14-year peak of 7.86% recorded in August 2022, amidst the central bank’s interest rate hikes.

The Thai baht (THB) weakened against the US dollar by more than 16% in the past two years, reaching an average exchange rate of THB 36.394 = USD 1 in November 2022 from THB 30.446 = USD 1 in November 2020, as multiple waves and new variants of COVID-19 globally delay the much-awaited recovery of tourism. This partially offsets the nearly 20% gain in the value of the bath against the US dollar from January 2016 to December 2019.

Flawed democracy; Prayuth retained as prime minister

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 country’s present prime minister, Prayuth Chan-o-cha, the coup came after several months of protests against the ruling Pheu Thai party and former PM Yingluck Shinawatra.

After dissolving the government and the Senate, the National Council for Peace and Order (NCPO), the official name of the military junta that governed the nation, 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.

Then after winning the March 2019 elections, in July 2019 Prime Minister Prayuth 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 a 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.

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 NCPO will not be held accountable for any rights violations committed during its rule.

Prayuth has faced increased public anger and protests in recent years, amidst the government’s difficulty in containing the coronavirus infections, and dismal economic conditions. Protesters in Bangkok in June 2021 demand his resignation and the removal of 250 military appointees from the parliament. But the call failed to produce any real result.

Then just recently, the Constitutional Court received a petition from opposition lawmakers on a legal term limit for PM Prayuth, triggering a fresh political crisis and street protests. As such, the court released a temporary suspension for Prayuth on August 2022, while it hears the petition from the opposition.

The country’s constitution stipulates a term limit of 8 years for a prime minister. With this, the opposition contends that Prayuth has overstayed his tenure, which started when he seized power in a military coup in 2014. However, Prayuth’s supporters argued that the term limits cannot be applied retrospectively, with the new constitution becoming effective only in April 2017. As such, they insist that Prayuth’s term officially began in 2017.

In October 2022, the court’s ruling was released, and the verdict was in favor of Prayuth, giving him two more years to serve as PM, if he is reelected during the May 2023 general elections.

Sources:

• Property Indicators (Bank of Thailand): https://www.bot.or.th/content/dam/bot/documents/th/statistics/attachment-files/indicators.pdf
• Thailand Real Estate Market Outlook 2022 (CBRE): https://www.cbre.es/insights/reports/thailand-real-estate-market-outlook-2022
• Bangkok property - yields moderate (Global Property Guide): https://www.globalpropertyguide.com/Asia/Thailand/Rental-Yields
• Interest Rates in Financial Markets (Bank of Thailand): https://www.bot.or.th/English/Statistics/FinancialMarkets/InterestRate/Pages/StatInterestRate.aspx
• Thailand Drops Plan to Allow Foreigners Buy Land After Backlash (Bloomberg): https://www.bloomberg.com/news/articles/2022-11-08/thailand-nixes-plan-to-allow-foreigners-buy-land-after-backlash
• Government Housing Bank seeks approval 3rd phase of “1 Million Home” project (Thai PBS World): https://www.thaipbsworld.com/government-housing-bank-seeks-approval-3rd-phase-of-1-million-home-project/
• Thailand to ease COVID-19 curbs on some construction projects (Reuters): https://www.reuters.com/world/asia-pacific/thailand-ease-covid-19-curbs-some-construction-projects-2021-07-04/
• Fitch Affirms and Withdraws Government Housing Bank´s ´AAA(tha)´ National Ratings (Fitch Ratings): https://www.fitchratings.com/research/banks/fitch-affirms-withdraws-government-housing-bank-aaa-tha-national-ratings-06-10-2022
• GH Bank releases new loans of 1.35 billion baht, growing by 27%, announces the interest rate freeze (News Directory): https://newsdirectory3.com/gh-bank-releases-new-loans-of-1-35-billion-baht-growing-by-27-announces-the-interest-rate-freeze/
• Restoring mortgage limit will delay Thai property market recovery: Condo Association (The Nation Thailand): https://www.nationthailand.com/thailand/40021599
• The Bank of Thailand is easing loan-to-value (LTV) regulations (Global Top Group): https://globaltopgroup.com/the-bank-of-thailand-is-easing-loan-to-value-ltv-regulations/
• Thailand inflation rate (Trading Economics): https://tradingeconomics.com/thailand/inflation-cpi
• The Thai Economy in Q3/2022 and the Outlook for 2022-2023 (Office of National Economic and Social Development Council): https://www.nesdc.go.th/nesdb_en/article_attach/article_file_20221121085936.pdf
• Thailand’s economy maintains growth momentum, GDP expands 4.5% in Q3 (The Nation Thailand): https://www.nationthailand.com/thailand/economy/40022287
• Tourist arrivals in Thailand surge 43% to 3.1 million in October (Thai PBS World): https://www.thaipbsworld.com/tourist-arrivals-in-thailand-surge-43-to-3-1-million-in-october/
• Thailand Open for Business as Tourism Sector Continues Rebound (Voa News): https://www.voanews.com/a/thailand-open-for-business-as-tourism-sector-continues-rebound/6829164.html
• Tourism Statistics 2022 (Ministry of Tourism and Sports): https://www.mots.go.th/news/category/655
• Thailand: Will Prayuth´s ruling spark a new political crisis? (DW): https://www.dw.com/en/thailand-will-prayuth-chan-ocha-ruling-unleash-a-new-political-crisis/a-63296828
• Thai court may rule on prime minister´s term limits (DW): https://www.dw.com/en/thai-court-asked-to-rule-on-pm-term-limits-as-bangkok-braces-for-protests/a-62894812