The residential market in northern provinces will slump further this year as the coronavirus hits key economic drivers and banks impose stricter rules on home loans, according to local developers.
Prat Wongwan, president of the Chiang Mai Real Estate Association, said the economic slowdown and lower confidence among homebuyers will lead to a continued drop in the Chiang Mai property market.
"More than half of Chiang Mai's GDP is from the tourism industry, which is stumbling," Mr Prat said. "Many job seekers today are those who used to work in the hotel business."
He said housing sales and transfers in the province began slowing last year because of the US-China trade war.
Many Chinese buyers were unable to get units transferred as moving funds from China to Thailand became more difficult than usual.
Yotsawat Rungkhanawuti, president of the Phitsanulok Real Estate Association, said the province this year will see a market slowdown with lower purchasing power and weaker demand in line with other markets nationwide.
"As the virus spread in Thailand, some homebuyers browsed housing projects online and decided to make purchases," Mr Yotsawat said. "Many of them were rejected for mortgages because banks have become more cautious than before the pandemic."
Vichai Viratkapan, acting director- general of the Real Estate Information Center (REIC), said the absorption rate of residential supply in Chiang Mai for all types of residences will face a big drop from 2.5-4.2% per month in 2019 to 1.1-1.6% this year.
"Developers should be more wary of launching new supply this year, as market sentiment will be unfavourable due to the pandemic and a large volume of unsold supply remains," Mr Vichai said.
The REIC predicts that unsold supply in Chiang Mai will rise to 9,343 units by the end of 2020, higher than the five-year average of 8,694 units and up from 9,149 units worth 35.42 billion baht as of the end of 2019.
Of the 2019 amount, 2,615 units worth 10.7 billion baht were completed and ready to transfer.
The number of residential units being transferred in Chiang Mai this year is estimated at 12,156 units worth 23.14 billion baht, down 7.9% and 14.6% respectively from 2019.
The figure will mark consecutive decreases since 2018 and the lowest level in five years, Mr Vichai said.
In Chiang Rai, total supply soared to 3,009 units in the second half of 2019 from 1,927 units in the first half, as newly launched supply and unsold units was large. Nearly 98% consisted of low-rise houses.
Mr Vichai said homebuyers' purchasing power in Chiang Rai was lower in the second half of 2019, indicated by sales pivoting from single detached houses to townhouses.