Residential property market remains tepid this year

Residential property market remains tepid this year

Though Thai GDP growth is forecast at 2.8-3.2% this year, the residential market may post marginal gains as demand remains weak, according to the Real Estate Information Center (REIC).

Vichai Viratkapan, the centre's acting director-general, said the number and value of housing transfers nationwide this year would grow by 1.8% and 3.9%, respectively, to 373,360 units worth 1.09 trillion baht.

"This forecast is based on an inflation rate of 1-2% and an annual average minimum retail rate of six major banks at 6.8-7%, including the reduction of transfer and mortgage fees currently offered," he said.

Any growth will be driven by low-rise houses, which are expected to expand by 4.4% to 270,219 units worth a combined 786 billion baht, an increase of 5.9% from 2023, said Mr Vichai. Condos are forecast to decline 4.6% to 103,141 units valued at 301 billion baht, a dip of 1% year-on-year.

"If economic growth is lower than expected, 2024 will be the second consecutive decrease in housing transfers in terms of both unit numbers and value," he said.

In the worst-case scenario, REIC predicted the number of housing transfers nationwide would contract by 8.4% to 336,024 units valued at 979 billion baht in 2024, down by 6.5%. Condos would also weaken, dropping 14.1% to 92,827 units worth 271 billion baht, a decrease of 10.9%.

Low-rise houses would decline by 6% in this scenario to 243,197 units worth 708 billion baht, representing a decrease of 4.7%, according to the centre.

"Sales of expensive, low-rise houses will remain robust as demand is less affected by negative factors, unlike units in the middle to lower-priced segment, where demand is weak," said Mr Vichai.

Last year the number of housing transfers nationwide totalled 366,825 units worth 1.05 trillion baht, representing declines of 6.6% and 1.7%, respectively. The largest dip was for low-rise houses, falling 9.4% to 258,735 units worth 742 billion baht, a decrease of 4.4%, noted the REIC. The number of condo transfers totalled 108,090 units worth 305 billion baht, a rise of 0.9% and 5.6%, respectively.

Sales of residential units priced 5 million baht or less declined across the board, except for second-hand units priced 3-5 million, which grew 13.1%, said the centre.

"Purchasing power in the middle to lower-end segment, for units priced 5 million baht and lower, has weakened since last year and should continue in 2024," he said.

This momentum began in the fourth quarter of last year, when new mortgages fell 14.8% to 177 billion baht. This year-on-year decline was the largest since the third quarter of 2019 (-16.2%), said the REIC.

Sales of units priced higher than 5 million baht grew, especially second-hand condo units.

"Buyers chose second-hand condos because there is little new supply in certain locations and the size is larger than for new units," said Mr Vichai.

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