The story about a large Chinese family in Henan paying US$140 (about 5,000 baht) a day to stay in a hotel suite for over 200 days rather than buy a house has gone viral on social media.
The family of eight gave up their apartment and took a hotel room as their home because it was much more affordable and worry-free.
That news was discussed widely on social media, not least because the state of the world economy is resulting in a large number of people in various parts of the world finding it almost impossible to own their houses.
This so-called “Generation Rent” – young adults who opt to rent rather than own homes due to factors such as high property prices, economic challenges, or a preference for flexibility – has been growing in number and expanding from the United Kingdom, Germany and the Netherlands to various parts of the world including Asia.
In many Asian and Southeast Asian countries, cultural and economic factors influence housing trends. While homeownership is still a significant goal in these regions, renting is becoming more common, especially among younger generations facing not just high property prices but also the near impossibility of obtaining a mortgage.
Japan, Singapore and South Korea are three countries in Asia where generation rent numbers are notable. Thailand will likely follow suit thanks to the current situation and changing lifestyle of the young generation.
There’s a saying in Thai, “a small bird builds a small nest” which means that one should buy the right-size house to fit one’s budget.
Thai seniors like to teach their offspring to follow that path to avoid big debts. However, even a small house can be a big burden. Some young people also believe owning a house makes them less flexible in their choice of where to live.
The recent Thailand Consumer Sentiment Study by leading real estate firm DDproperty underlines that economic challenges and high-interest rates affect consumers’ financial liquidity.
The study finds only 24% have adequate savings while 54% have only saved half the money for their desired houses.
Applying for a loan is also tough and the interest rate is now the highest it has been in 10 years. More than half (56%) of potential buyers cite income and unstable jobs as obstacles.
As many as 32% have poor financial records that make getting a mortgage impossible.
DDproperty found two-thirds (64%) of home buyers are now renting houses because they don’t have adequate savings to put down a deposit on a house. Another 41% believe that houses are too expensive, and therefore they prefer to keep cash for liquidity. So one of outstanding trends of the DDproperty Thailand Property Market Outlook 2024 is the expansion of the Generation Rent.
Apart from freeing them up from a long-term loan, renters want more flexibility in case they want to relocate. Many find renting houses or apartments helps them save money, just like that eight-member family in China.
This means, of course, that the demand for rental residences is increasing across all types of property. The most recently cited growth rate is 147% over the pre-pandemic in 2019.
Condominium units in particular are experiencing the highest rise at 185%, indicating that the condo is the solution for those wanting to avoid getting into debt. The demand for rental single detached houses and townhouses has risen by 11%.
Renting along BTS, MRT a boon
The rental prices of residential properties in Bangkok have soared by 9% compared to the same period last year, with the highest rental index going to apartments at 10%.
On the other side of the coin, rents for townhouses and single houses have decreased by 2%.
The rental market in Bangkok is predominantly composed of condominiums, the type of property for which there is the most demand.
Notably, certain locations near the Skytrain, the subway and commercial areas in Bangkok have seen even higher rent rises.
The young generation prefers living along the train route. Pathumwan district saw a significant increase of 16% year on year and Bang Sue recorded 12% growth.
The rental prices of condominiums in Bangkok generally fall between 10,000 to 30,000 baht, a price range considered suitable for the target market. Of all the units, 50% are in this price range.
Apart from the growing Generation Rent, the recovery of Thailand’s tourism sector has also played a significant role in driving the rental demand.
Foreign visitors often want temporary housing options, further driving the demand for rental properties. This has contributed to the overall growth of the rental property sector this year.
By Veena Thoopkrajae
