Housing demand remains but buyers hesitant
The third wave of Covid-19 continues to dampen the housing market and leads to changes in the type of property sought
Just when Thais thought the “Work From Home” lifestyle had more or less faded from view, the third wave of Covid-19 struck in April, bringing Thailand back to square one and forcing people not just to work at home but also to spend most of their time there. Not surprisingly, this has prompted property developers to adjust to different norms.
Developers are continuing to focus on building low-rise housing projects to meet the changing consumer demands of the post-outbreak period. And they are not wrong: consumers are turning their attention to low-rise housing to support working at home and keep a distance from society.
“The home of the future will need to be more diverse, as much as a living environment as a place of work. Home design should support the work-from-home lifestyle, internal spaces should be more flexible and open for frequent rearrangements. It should also be easier to maintain,” said Somprawin Manprasert, chief economist and head of the research division at Krungsri Research.
As might be expected from the continued work-from-home trend, DDproperty Thailand Property Market Index has found that the single detached house price index continues to grow, with the price index rising 8% in the past two years. Conversely, the condominium price index has dropped 8% in one year, and 12% over the past 2 years.
Although condominiums account for most of the total supply of housing in Bangkok at 88%, growth is very modest, only 10% higher than the previous quarter. This is opposed to a 12% increase in the supply of single-family homes and the same increase in townhouses from the previous quarter. The change in available properties reflects the developers’ focus on low-rise projects rather than high-rise condominiums.
KResearch projects that the number of newly launched residential projects in the Bangkok Metropolitan area will range from 72,000 to 75,000 units in 2021. “The market remains under pressure amid the sheer number of unsold housing units is leading many developers to be cautious about launching more housing estates,” the research said.
The current wave of the pandemic is expected to wipe out hundreds of struggling restaurants following the government’s decision to restrict dining in and operating hours in the “dark red” zones, Bangkok among them, where the virus has been spreading quickly since early April.
Suburbs better served by infrastructure
In terms of location, more people looking for homes in the suburbs thanks to more light rail connections, both current and planned.
This has resulted in a greater distribution of housing projects in areas outside the CBD and outer Bangkok which have high potential for further development. This is reflected by the upwards trajectory of prices in a number of locations such as Thaweewattana District, where the price index increased 13% from the previous quarter.
The under-construction light red line train has also boosted the price index of Taling Chan district by 6% compared to the previous quarter.
The single-detached houses has the highest price index at 3% due to the benefit of the light red line train which is scheduled to open in November this year.
The Mor Chit -Khu Khot service which came online at the end of last year has also helped boost demand as well as the price index. The train connects 3 provinces- Bangkok, Samut Prakan and Pathum Thani; resulting in a 10% increase in the price index from the previous quarter in the Bang Khen area.
Demand there, but few purchases
The third wave of the pandemic has worsened housing demand in Bangkok’s low-priced segment despite the extension of property tax incentives, a recent survey by DDproperty.com found.
The new wave of infections has resulted in many being uncertain about their job stability right now. Many still want to make sure that their jobs are solid before buying so have adopted a wait-and-see stance, an industry expert said.
“The measures are insufficient to drive growth, and the property market will continue to lag in line with lower purchasing power. Although real demand remains, financial capacity is lacking,” said Kamolpat Swaengkit, country manager of property website DDproperty.com.
Even with several government relief packages, the economy remains depressed from the latest outbreak. “Although the government has extended property tax incentives for new housing units priced at 3 million baht or lower from the end of last year to the end of this year, the purchasing power of the middle classes and low-end consumers remains insufficient,” said Kamolpat.
The property website’s reports the biggest increase in housing supply in Bangkok came from units priced between 1-3 million baht.
Furthermore, the government measures have not stimulated consumer purchasing power as expected.
She said that the would-be homebuyers are saving for other necessities instead of buying a house. The latest survey by Suan Dusit Poll on Thai families in the Covid-19 era also suggests this trend. The poll says 75.4% of consumers regarded debt as the biggest problem, while 44% saw income and expense as a big concern.
KResarch said that Thai consumers’ purchasing power has yet to return to normal and is expected to remain at a level close to that of 2020. Worries over job security still prevail. The booking rate in the Bangkok Metropolitan Region in 2021 would be in the range of approximately 71,000 to 76,000 units, representing a decline of 5.3 % to a slight growth of 1.3 %. At the same time, the transfer of property ownership within the Bangkok Metropolitan Region is projected to remain at a stable level close to that of the previous year, approximately 185,000 to 189,000 units, or a contraction of 1.1 % to slight growth of 1.1 %.