Residential price index rises in Q1 in omen for higher costs

Residential price index rises in Q1 in omen for higher costs

After falling for three consecutive quarters, the residential price index inched up in the first quarter of 2022, which was seen as a warning of an upward trend in housing prices based on the cost-push effect, according to the Real Estate Information Center (REIC).

REIC acting director-general Vichai Viratkapan said the price index for both new low-rise houses and condos available for sale in Greater Bangkok in the first quarter of 2022 rose to 127.3 and 151.7 from 126.8 and 151.2 in the fourth quarter of 2021, respectively.

"They increased for the first time since the second quarter of 2021," he said. "This possibly suggests that residential prices will be higher because of rising material prices, wages and land prices."

By location, the price index of low-rise houses in Bangkok was 126.2, up 0.3% quarter-on-quarter but down 0.7% year-on-year, while that of Nonthaburi, Pathum Thani and Samut Prakan was 128.4, up 0.6% and down 0.5%, respectively.

By category, the price index of single detached houses was 125.8, up 0.7% quarterly and down 0.5% yearly. The index for townhouses was 129.0, up 0.2% and down 0.9%, respectively.

The price index of condos in the first quarter this year was 151.7, up 0.3% from the fourth quarter of 2021, but down 0.3% year-on-year.

"Prices of new condos in Greater Bangkok will rise, following new construction costs, after unsold inventory with lower construction costs was largely absorbed from the market last year," said Mr Vichai.

However, comparing the price index of both low-rise houses and condos on a yearly basis, the first quarter of 2022 still saw a drop for five and six consecutive quarters, respectively.

"Developers evaluated that real demand buyers still had limited purchasing power because of the sluggish economy, affected by two years of a pandemic and negative factors from the Russia-Ukraine conflict," he said.

Mr Vichai said consumers this year face higher inflation and soaring living costs, limiting economic growth as many think tanks downgraded their outlook for Thai growth from a range of 3.5-4.5%.

He said a key factor causing the six consecutive quarters of declines in the condo price index is shrinking demand from foreign buyers, particularly Chinese, who face difficulty travelling to Thailand. Other factors include lower demand from investors and speculators because of the economic slowdown in the post-pandemic period, the Russia-Ukraine war, and lending curbs, said Mr Vichai.

According to the REIC, the most popular campaign in the first quarter was cash discounts, which tallied 46% for low-rise houses and 54% (including free-stay offers for 1-2 years) for condos, compared with 29% and 28% in the fourth quarter last year, respectively. Second was freebies at 28% for low-rise houses and 24% for condos, down from 44% and 45%, respectively, then a waiver of expenses on transfer dates like transfer fees or common area fees.

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