Kasikorn Research Center has warned developers to be more cautious about launching new residential supply due to increasing amounts of unsold inventory, rising costs, and a declining population.
There are several challenges affecting the residential market, consisting of subdued purchasing demand derived from a slow recovery in purchasing power, soaring household debt, and persistently high interest rates on loans that are likely to continue to increase.
Due to these challenges, the centre suggested developers take a cautious approach when considering an investment in new residential projects.
Vichai Viratkapan, acting director-general of the Real Estate Information Center, said there were a total of 321,848 residential units worth a combined 1.44 trillion baht offered in Greater Bangkok and 27 major provinces nationwide.
Of this amount, 291,384 units worth 1.3 trillion baht remained unsold as of the end of June 2023, which rose by 2.4% and 4.2%, respectively, from the corresponding period last year.
The number of units newly sold in the second quarter of 2023 dropped by 27.7% to 57,516 units worth roughly 259 billion baht, a decline of 24.1%.
"The property market in the first half continued to grapple with various challenges. These encompassed the ongoing economic recovery, which had yet to reach full potential," said Mr Vichai.
He added that homebuyers' purchasing ability was also being impacted by rising interest rates, higher household debt levels exceeding 90% of GDP, and increased residential prices.
Kasikorn Research Center forecast that the number of residential units transferred in Greater Bangkok would decrease by 7.8% in 2023.
However, if various factors remained stable, transfers might have a growth of around 1.2% to 4.6% in 2024.
According to the centre, there was an imbalance between residential supply and demand in Greater Bangkok, resulting in an accumulation of unsold residential units of over 200,000 units for a period of more than six years, which might take up to three years to be sold.
The centre said developers should exercise caution when launching new projects, especially those with units priced at 3 million baht and above, as they currently had an unsold inventory of roughly 50% of the total units available for sale.
Besides, units priced at 10 million baht and above had a growing proportion of unsold units primarily due to several developers concentrating on development within this price range, resulting in a higher inventory of unsold units and a slowdown in sales volume.