Ten disruptive property trends emerge
The pandemic accelerated trends in the sector
Covid-19 has catalysed and accelerated a great disruption in the property market which was expected to take place over the next five to 10 years, but will now arrive sooner.
There are 10 disruptive trends that will challenge the property market in 2022 and beyond, according to Jugkarut Ruangratanakorn, managing director of Chon Buri-based property developer Ratanakorn Asset Co:
1.National, economic, social and population structure
Thailand's GDP growth has been lower than its potential for several years because its population growth is low. There are also no new resources, no foreign direct investments, no new economy nor 5.0 industry to help boost economic growth.
Thailand is also becoming an ageing society with a rising number of senior citizens, yet a declining birth rate. The size of the average family is getting smaller, with a lower marriage rate and a higher number of single people.
As a result, there will be no need to have a new home for a family. The new generation prefers renting and moving to newer ones. Thailand is becoming a society of low birth rates with growing numbers of senior citizens. This will influence the property market.
2. Debt burden and attitude towards assets
Thai people are getting into debt faster and deeper at a younger age. The household debt ratio is currently at 93%.
Most debts come from consumption and education, not from business or property ownership. Those who have debts without holding any assets cannot build wealth.
Despite capitalism, most local people do not understand wealth and how to create it. They want lifestyles and spend largely on consumption, but are not interested in holding assets.
The pandemic has inflated assets around the world. Governments have been using quantitative easing (QE) to support the economy. This does not create a real sector, real demand or real productivity, but increases the value of assets.
For the new generation, assets and property are a long-term burden, not wealth. With the Internet of Things, they can work from anywhere and stay anywhere. They think of working mobility and residential relocation as an easier way to live, so they do not need to buy a home.
With rising costs of living, saving money for property purchases is also harder.
Jugkarut Ruangratanakorn, managing director of Chon Buri-based property developer Ratanakorn Asset Co.
3. Lifestyle and experience
The new generation focuses on lifestyle and experiences rather than holding assets permanently.
In the future, there will be two tribes: those who understand wealth creation will be a payee, and those who understand lifestyle will be a payer. Most people will be a payer and very few will be a payee.
4. House is one of the four requisites
The importance of owning a house will come after consumption, health and wellness, lifestyle, entertainment, travel, education, mobile phone and car. People have a perception that a home is a lifetime debt with payments of 30-35 years.
5. Rent and buy
Renting will replace buying due to the convenience of moving, smaller family sizes, and different costs without debt and obligations. Buying a home with a mortgage loan means buyers must carry a long-term burden, while income growth is insecure amid a sluggish economy.
Even though a monthly payment for a home loan is the same amount as that for a rental home, some people still prefer renting as it has no long-term commitment.
6. Land and building tax
The land and building tax will impose a burden on property owners and dampen the purchasing power of those wanting to invest in property in the long run. The higher the cost of property ownership is, the higher the price of property will be.
7. Property development regulations
The regulations related to property development will raise costs of development. As a result, development and land costs and household debts get higher against a slowdown in economic growth, population growth, and purchasing power growth. This problem will become more severe.
8.Property versus other financial innovations
Property is disrupted by digital assets, cryptocurrency, tokenisation, real estate investment trusts (REIT), mutual funds, the equity market and bond market. With these financial innovations, property ownership is no longer held by a single owner.
Property investment in the future will be the holding of a unit trust, not a right of ownership any more. Those who understand this concept and opt for these financial innovations can define the next era of property.
9. Location is not a final answer
Despite a good location, a project could still fail because its product, price, design and development do not meet consumer needs.
Market trends and consumer behaviours see a rapid change as each generation has different preferences for property purchases. The factor that defines a good location consistently changes according to each generation's mindset. The shorter generation gap also means those trends will move faster.
For example, family tradition in the past saw the favourite children inheriting land for agriculture, while the least favourite children got beachfront land. But nowadays, the expensive plots are the latter. To sum up, location is the choice of each era.
10. Sharing economy and co-property
With co-living spaces, co-working spaces, multipurpose spaces, timeshare and exchange programmes, people will have more sharing choices instead of just owning a property.