Residential Business Insights in 6 Key Provinces: Key Highlights from the Executive Summary
**The report, validated by Thai Bank, contains several interesting insights about the Thai economy and business. Continue reading for more details.
Residential Business Outlook in 6 Key Provinces (2023-2025)
From 2023 to 2025, the residential business in six key provinces is set to gradually recover, supported by several factors:
- Economic Recovery: The improving Thai economy provides a positive backdrop for the residential market.
- Infrastructure Investments: Ongoing government infrastructure projects will boost economic activity, benefiting the housing sector.
- Tourism Rebound: The tourism industry is expected to recover, with foreign tourist numbers likely returning to pre-COVID-19 levels by 2025.
- Government Stimulus: Measures like reduced transfer and mortgage fees, along with promoting Thailand as a “second home” for foreign buyers, will further support market recovery.
However, challenges remain:
- Stricter Lending Criteria: High household debt may lead banks to tighten lending standards.
- Rising Costs: Project development costs are expected to increase due to higher construction material prices, stable energy costs, labor shortages, and rising interest rates. These factors could make consumers more cautious about taking on long-term debt.
Krungsri Bank’s Key Research Insights
Krungsri Research predicts steady growth in new housing projects across the six main provinces, with an annual increase of about 6.5% from 2023 to 2025. This will result in approximately 19,000 to 23,000 new units per year, which is still lower than the average of 36,000 units per year seen in 2018-2019. Additionally, housing sales are expected to grow by about 4.0% annually, with around 33,000 units sold each year.
In other provinces, the housing market remains highly competitive, driven by a mix of local entrepreneurs and larger publicly listed companies expanding into provincial markets. Consumers often prioritize the reliability of developers, which puts pressure on smaller businesses in terms of marketing, funding, and operating costs.
For residential condominium projects in these areas, the focus is mainly on low-rise buildings (not exceeding eight floors). The market is competitive, with large companies competing against local entrepreneurs. The global economic slowdown has led to lower profit margins and potential market share losses for smaller businesses.
With foreign investors and tourists not yet fully returning, there are additional challenges in managing foreign ownership transfers. This has led to intense competition as companies strive to increase their market share.
Residential Business Growth in Key Provinces
The residential sector has seen strong growth in six key provinces: Chiang Mai, Chonburi, Rayong, Nakhon Ratchasima, Khon Kaen, and Phuket. In 2022, these areas accounted for 22% of the total construction permits issued nationwide and 34% of permits issued in provincial areas.
This growth is driven by supportive government policies, infrastructure investments, and the development of the Eastern Economic Corridor (EEC), all of which create job opportunities and boost the economy.
Increasing population density due to migration and urbanization has raised per capita income, especially in Rayong and Chonburi. This economic growth is fueling the development of commercial and residential real estate projects, with a focus on low-rise buildings that benefit from lower land prices.
High-Rise Housing Demand in Popular Tourist Cities
High-rise housing is booming in tourist hotspots like Chonburi, Chiang Mai, and Phuket due to strong demand for both living spaces and investment opportunities. In 2022, these areas experienced a rise in foreign tourists and income. This, combined with factors like recovery from past floods and market saturation in Bangkok, has increased competition and pushed up land prices. Major developers are focusing on condo projects in these cities, resulting in a high number of construction permits.
These provinces show strong growth potential due to their current underdevelopment:
- Chiang Mai: Mostly attracts Thai buyers.
- Phuket: Popular with investors from China and Hong Kong.
- Chonburi and Rayong: Benefit from the Eastern Economic Corridor (EEC), attracting investors from China and Europe.
- Nakhon Ratchasima: Serves local residents.
- Khon Kaen: Appeals to government officials and high-end buyers from Pak Chong looking for vacation or retirement homes.
In these areas, condo buyers include people looking to live, study, work, invest, or rent.
Sales and Market Trends Overview
Total sales jumped 44.6% YoY to 36,776 units, driven by a 42.0% increase in low-rise home sales to 25,887 units. Chonburi led the market, with strong demand also seen in Rayong and Chiang Mai. Condominium sales rose 51.1% YoY to 10,889 units, with Chonburi, Phuket, and Chiang Mai leading in sales, supported by government efforts to attract foreign buyers.
Despite this recovery, sales remain below pre-COVID-19 levels, which averaged around 13,000 units. Unsold units decreased by 20.1% YoY to 63,072 units, with Chonburi having the highest number of unsold units, followed by Rayong and Chiang Mai. In the condominium sector, Chonburi and Phuket had the most remaining units.
Key Trends and Challenges in Real Estate Investment
Trends:
- Expansion: Major central sector entrepreneurs are investing more in provincial and tourist cities due to rising land prices in Bangkok, which increased by up to 40% from 2019 to 2022.
- Low-rise Housing: There is a growing focus on low-rise projects to meet demand from industrial workers and retirees, with a trend towards luxury living and branded residences, particularly in Phuket.
- Innovation: Development of mixed-use projects, including smart homes with modern technology, is rising to meet diverse customer needs.
Challenges:
- Economic Impact: Slow recovery in purchasing power may affect demand, particularly among middle- and lower-income buyers.
- Foreign Market Uncertainty: The global economic slowdown and geopolitical issues like the Russia-Ukraine war impact foreign investment and purchasing power.
Regulations and Stimulus:
- Appraisal Prices: The Treasury Department has delayed the new appraisal price announcement to January 2023.
- Loan-to-Value Ratio: Temporary relaxation allows full collateral value borrowing for loans until December 2022.
- Thailand Elite Card: Promotes condo purchases with a value of at least 10 million baht through a special membership program.
- Long-Term Visas: 10-year visas for wealthy individuals, retirees, and specialists to boost foreign investment.
- Bank of Thailand Guidelines: New down payment requirements for housing loans effective January 2023.
For further information about Phuket’s luxury investment, don’t hesitate to contact us. You can reach us via WhatsApp at +66 (0) 93-578-6028 (EN/RU/TH), send us an email at info@cm-topestate.com, or visit our website at www.cm-topestate.com. We are always available to assist you
