Home prices set to surge in 2022

Home prices set to surge in 2022

Inflation, labour shortage pressure the housing market

Higher inflation, a labour shortage and the rising prices of fuel and construction materials will drive new home prices higher this year. (Bangkok Post file photo)
Higher inflation, a labour shortage and the rising prices of fuel and construction materials will drive new home prices higher this year. (Bangkok Post file photo)

Higher inflation, a labour shortage and the rising prices of fuel and construction materials will drive new home prices higher this year after the housing price index kept declining since the first quarter of 2020.

Phanid Maneerattanaporn, director of construction and business development of homebuilder Landy Home (Thailand), said costs of housing construction this year will definitely rise.

"It will be a challenging year for homebuilders as the demand side is strong but the supply side or construction costs are worrying," he said. "We need to manage costs the best to finish the units at the price we agreed with customers earlier."

He said a higher consumer price index affects living costs and wages.

Prices of several construction materials like cement and steel rose, while fuel prices soared 50% after economic activities worldwide resumed.

According to the Bureau of Trade and Economic Indices, the Ministry of Commerce, the construction materials price index last year rose 8% from 2020, the highest increase since 2008 which saw a jump of 17.2% from 2007. In 2020, the index had declined by 1.8% from 2019.

Since July 2008, when the index hit a historic high at 125.7, the monthly index was the second highest in November last year at 116.

Chain of pressure

"Global supply chain crisis is another problem with no end in sight. Many exported materials are obstructed by shipping delays or supply shortages, resulting in a domino effect," said Mr Phanid.

Workers in the construction sector were also of a limited number as those from neighbouring countries were not able to enter Thailand.

Due to this problem, labour costs will spike as Thai workers who were the company's main workforce were sought by property developers and contractors to replace foreign workers, he added.

"Housing prices will rise," he said. "We have to weigh the price with customers' affordability, trying to balance it and control costs," he said.

Prateep Tangmatitham, chairman of SET-listed developer Supalai Plc, said new home prices will increase this year due to rising construction materials prices, particularly steel which saw a rise of 30%, cement and transportation costs.

"Costs of housing development excluding land costs will likely increase by 3-4% this year," he said. "When combined with higher labour wages and fuel prices, housing prices will be 2% higher."

Surachead Sainuch, director of operations at homebuilder Seacon, said prices of construction materials rose across the board as well as the cost of living and labour wages.

"In total, costs for home construction will be hiked up by 5-10%, leading to higher prices of new homes."

Consecutive rise

The Bureau of Trade and Economic Indices reported in December last year that iron and steel products saw the highest increase at 28.7%, followed by concrete (5.6%), aluminium, asphalt and sand (4.2%), electricity and water supply equipment (3.8%) and cement (3%).

According to the Real Estate Information Center (REIC), the housing construction cost index has kept escalating since the fourth quarter last year but with a marginal increase.

REIC acting director-general Vichai Viratkapan said the impact of the pandemic on consumer confidence made developers decide to use marketing campaigns to lure homebuyers last year.

With attractive promotions and discounts, the price index of low-rise houses available for sale in Bangkok, Nonthaburi, Pathum Thani and Samut Prakan saw a consecutive drop since the fourth quarter of 2020 to 126.8 in the fourth quarter last year.

Condos were the worst hit with a consecutive drop since the third quarter of 2020.

"Promotions were more attractive with a longer free stay for one to three years from earlier offers of up to two years," he said. "This campaign attracted those wanting to buy a home but had other expenses to manage."

The most popular campaign luring low-rise homebuyers in the fourth quarter last year was freebies which accounted for 44.4%. They included air conditioners, furniture, curtains, water pumps and water tanks.

They were followed by cash discounts (28.8%) and a waiver of expenses being paid on transfer date like transfer fees and common area expenses (26.7%).

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