Thailand’s house prices rising modestly, buoyed by recovering demand

Thai house prices continue to rise modestly, amidst improving property demand. The average price of single-detached houses in Thailand rose by 3.6% in Q3 2023 from a year earlier, following year-on-year growth of 3.3% in Q2 2023, 4.8% in Q1 2023, 4.9% in Q4 2022 and 3.6% in Q3 2022, according to the Bank of Thailand (BoT). When adjusted for inflation, prices were up by 3.3% over the same period.

Thailand’s house price annual change

Quarterly, nationwide house prices rose slightly by 0.3% (0.2% inflation-adjusted) in Q3 2023.

In Bangkok and vicinities, the prices of single-detached houses rose by 4.1% during the year to Q3 2023 and increased by 3.8% when adjusted for inflation. In other regions, house prices increased by a more modest 2.6% (2.3% in real terms).

By property type, in Bangkok and vicinities:

  • Condominium prices rose by 4.8% (4.5% in real terms) in Q3 2023 from a year earlier, in stark contrast to the y-o-y fall of 2% seen in Q3 2022.
  • Townhouse prices rose by 3.7% (3.4% in real terms) during the year to Q3 2023, following the previous year’s 4.3% y-o-y increase.

Land prices are also rising modestly. The land price index in Bangkok and vicinities increased by 3.8% (3.5% in real terms) in Q3 2023 from a year earlier, following a slight y-o-y decline of 0.7% in the same period last year.

Thailand Residential Property Price Indices in Bangkok graph

Property demand is showing signs of improvement. In the first ten months of 2023, the total value of land and building transactions recorded nationwide rose strongly by 26% y-o-y to THB 779.5 billion (US$22.38 billion), in stark contrast to the nearly 29% decline recorded during 2022. All the regions of Thailand registered increasing transactions over the same period.

With the strong rebound in tourism, demand, particularly from foreigners, is expected to continuously improve in the coming months. From January to November 2023, there were a total of 24.84 million foreign tourist arrivals in Thailand, almost triple the 8.82 million arrivals seen in the same period last year, based on figures from the Ministry of Tourism and Sports. But this is still far lower than the annual average of 37.85 million foreign tourist arrivals recorded from 2017 to 2019 before the Covid-19 pandemic.

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.

In the third quarter of 2023, Thailand’s economy grew by 1.5% from a year earlier, a slowdown from y-o-y expansions of 1.8% in Q2 and 2.6% in Q1, weighed by the fifth straight quarter of fall in government spending, according to the Office of the National Economic and Social Development Council (NESDC).

Overall, the Thai economy is projected to grow by a modest 2.5% during the full year of 2023, at par with the prior year’s 2.6% expansion. The country’s economy expanded by just 1.5% in 2021, after a pandemic-induced contraction of 6.1% in 2020.

Brief house price history

From 2011 to 2019, nationwide house prices rose by 40.2% (26.7% 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) in 2021, amidst a decline in demand.

During 2022, house prices increased by 4.4% but declined by 1.5% in real terms, amidst heightened inflationary pressures.

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
2022 4.4 -1.5
Sources: Bank of Thailand (BoT), Global Property Guide

Property transactions are rising

In the first ten months of 2023, the total value of land and building transactions recorded nationwide rose strongly by 26% y-o-y to THB 779.5 billion (US$22.38 billion), based on figures from the BoT. This is in stark contrast to the nearly 29% decline recorded during 2022.

All the regions of Thailand registered increasing transactions in the first ten months of 2023 as compared to the same period last year.

  • In the Central region, which makes up about 60% of demand, transactions rose by 17.7% to THB 457.95 billion (US$13.15 billion) in the first ten months of 2023 from the same period last year.
  • In the Eastern region, transactions surged 63% y-o-y to THB104.23 billion (US$2.99 billion) over the same period.
  • In the Northeastern region, transactions increased 25% y-o-y to THB 79.4 billion (US$2.28 billion).
  • In the Northern region, transactions rose by 26.4% to THB 72.97 billion (US$2.09 billion) in the first ten months of 2023 as compared to the same period last year.
  • In the Southern region, transactions soared 46.3% to THB 64.96 billion (US$1.87 billion) over the same period.

Thailand Nationwide Land and Building Transactions graph

Rental yields are moderately good

Rental yields in Bangkok are moderately good, at an average of 5.79% in Q4 2023, slightly down from 6.07% in Q2 2023, based on Global Property Guide research conducted in December 2023.

Just like in most countries, smaller apartments in Thailand also earn higher rental yields than bigger apartments.

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.

In Q4 2023:

  • In Bangkok, gross rental yields for apartments ranged from as low as 2.19% to as high as 9.52%, depending on location and property size. The city average yield stood at 4.88%.
  • In Pattaya, apartments earn rental yields between 3.24% and 10.04%, with a city average of 6.25%.
  • In Phuket, apartments earn gross rental yields of around 5.45% to 6.45%, with a city average of 5.87%.
  • In Nonthaburi, rental yields ranged from 5.6% to 7.41%, with a city average of 6.25%.
  • In Samut Prakan, rental yields ranged from 3.07% to 7.35%, with a city average of 5.79%.
  • Sattahip apartments offer gross rental yields between 3.9% and 7.43%, with a city average of 5.72%.
  • Huan Hin apartments offer rental yields of around 4.94% to 5.58%, with a city average of 5.26%.
  • In Chiang Mai, apartments earn gross rental yields of 5.5% to 7.28%, with a city average of 6.32%.

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.

Interest rates rising; mortgage lending growth decelerating

Mortgage lending growth is noticeably slowing, amidst rising interest rates. As of October 2023, the total value of property credits outstanding rose by just 1.8% to THB 3.5 trillion (US$100.44 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 and to just 2.1% in 2022.

As of October 2023:

  • Real estate development credit: THB 717.78 billion (US$20.61 billion), down slightly by 0.9% from the previous year
  • Personal housing credit: THB 2.78 trillion (US$79.83 billion), up by a modest 2.6% from a year earlier

In November 2023, the Bank of Thailand decided to keep its benchmark interest rate unchanged at 2.50%, following eight consecutive rate hikes since August 2022, to rein in inflationary pressures. It was the highest level since April 2013.

Bank of Thailand Policy Rate Percentage graph

The size of Thailand’s mortgage market stood at about 20% of GDP in 2022, almost unchanged in the past three years but up from 18.2% of GDP in 2019 and 14.5% of GDP a decade ago, thanks to the continuous increase in property loans outstanding in the past 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. As of December 21, 2023, GH Bank was able to grant new loans higher than its target for 2023, which was set at THB 235.48 billion (US$6.76 billion), despite increasing interest rates.

As of the end of Q3 2023, GH Bank’s total outstanding housing loans had already reached THB 1.65 trillion (US$47.37 billion) – up by 3.74% since the end of last year.

Thailand Property Credit Outstanding graph 1

Bank of Thailand restored the mortgage limit

The Bank of Thailand restored the loan-to-value (LTV) limit to mortgage loans to 70% to 90%, effective January 1, 2023. However, the Thai Condominium Association raised concerns that this move will hurt the housing market, especially the condominium market, which is still recovering from the impact of the Covid-19 pandemic.

“The condominium market will likely remain in a slump in 2023 as more than 90% of purchases are by domestic buyers,” said Athip Pichanon, honorary president of TCA. Pichanon also noted that 2023 “also brings 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.”

The BoT revealed that it restored LTV rules 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$287,120) 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$287,120), homebuyers need to settle a 10% downpayment for the first loan, down from 20%.

Developers take a hit by the restoration of LTV limits

The expiration of the easing of LTV limits had an immediate impact on developers. In fact in Q1 2023, two-thirds of listed developers saw a year-0n-year decline in residential sales revenues.

According to the Stock Exchange of Thailand, of the 30 developers engaged in residential development in the country, 2o experienced a y-o-y fall in residential sales revenues, including Areeya Property (-39%), Ananda Development (-13%), AP Thailand (-13%), Britannia (-12%), and Frasers Property Thailand (-11%), among others.

“Despite campaigns and promotions, homebuyers were impacted by the expiration of the loan-to-value limits easing,” said Vichai Viratkapan, acting director-general of the Real Estate Information Center (REIC).

“Since the easing of LTV limits has ended, obtaining home loan approvals has become much more challenging. Homebuyers who intended to have a second mortgage now need to acquire additional funds to cover the down payment.”

Condominium registrations falling again

During 2022, condominium registrations nationwide reached 55,236 units – up by 10.3% from a year earlier but still far below the annual average of 95,000 units registered from 2012 to 2021. 

Yet condo registrations are falling again this year. In the first ten months of 2023, there were a total of 32,349 condo units registered in Thailand, sharply down by 27.9% from the same period last year, according to BoT figures.

In Jan-Oct 2023:

  • In Bangkok Metropolis, the number of condominiums registered fell by 25.8% y-o-y to 22,482 units.
  • In other provinces, condominium registrations plunged 32.2% y-o-y to 9,867 units.

Thailand Condominium Registration graph

Residential construction activity showed mixed results

Land development licenses in the country increased 10.5% to 77,369 units in the first ten months of 2023 from a year earlier, following a 34.7% growth during 2022. Most of these licenses are located in other provinces. 

In Bangkok Metropolis, land development licenses rose by 8.7% y-o-y to 10,577 units in Jan-Oct 2023. Likewise, in other provinces, licenses increased by 10.7% y-o-y to 66,792 units over the same period.