Thailand’s real estate market set to return to pre-pandemic levels by 2023
Immovable Experts say the pandemic accelerated a big disruption in the Thai real estate market that was expected to occur over the next 5-10 years. However, experts say it will come sooner. According to the managing director of Chon Buri-based real estate developer Ratanakorn Asset Co., Jugkarut Ruangratanakorn, there are 10 disruptive trends that will test the market next year and beyond.
1. Economic, national, social and demographic structure
Thailand’s GDP growth has been below potential in recent years due to slowing population growth. Without new resources, without foreign direct investment, without Industry 5.0 to help stimulate economic growth, and without a new economy, the results clearly show it.
Thai society is aging as well, with a growing number of older people and a declining birth rate. As the average family size decreases, the marriage rate is lower, resulting in a large number of single people. This situation translates into a decrease in the need to buy a new home for a family. As the new generation prefers to rent and move to newer condos, the new trend is influencing the real estate market.
2. A higher debt burden and low education to develop assets
Thais get into debt faster and deeper at a younger and younger age. Currently, the household debt ratio is 93%. And, most of that debt comes from consumption and education, not from owning or owning a business. So, those who are in debt cannot create wealth, because they also have no assets. In addition, many locals do not understand how to build wealth. Instead, they want to live a fast-paced lifestyle and spend most of their money on consumption.
As the pandemic has inflated assets around the world, many governments have used quantitative easing to support their economies. The downside to this move is that it does not create real industry, demand or productivity, but increases the value of assets. For the younger generations, acquiring assets and real estate is a long-term burden. And, with the increase in working from home, the internet has stimulated a mindset that job mobility and home relocation are an easier way to live. The rising cost of living also makes it more difficult to save money to buy a property.
3. Experience and lifestyle
The new generation is focusing more on their current lifestyles and experiences, rather than permanent assets. In the future, 2 groups will emerge: those who understand wealth creation and will be the beneficiaries, and those who understand lifestyles, who will be the payers. But the relationship between the two is uneven, with most becoming payers and non-payers.
4. Real estate ownership follows all other “desires”
Owning a home or property will follow consumption, lifestyle, health and wellness, travel, education and entertainment. This is because most people feel that owning a home is a lifelong debt with payments lasting over 30 years.
5. Rental replaces purchase
Leasing will replace buying due to the trend towards a convenient lifestyle. The ability to move, associated with smaller families, is an important and contributing factor. And, these potential buyers don’t want a long-term burden to hamper their already slow income growth due to the economic crisis.
6. Property and real estate taxes
Property and property taxes will weigh on potential homeowners, as these additional charges will reduce their purchasing power. Those who wish to invest in a property for the long term will find that higher real estate costs equate to higher taxes.
7. Regulations on real estate development
The regulation of real estate development will also increase the cost of development. This translates into an increase in household indebtedness in the face of sluggish economic, demographic and purchasing power growth. And, such burdensome regulations show no signs of easing.
8. Other financial innovations vs real estate
Digital assets, cryptocurrency, tokenization, real estate investments, mutual funds, bond and stock markets are starting to trump the real estate market. With these financial innovations, the property is no longer owned by a single owner. Thus, future investments will be made in the holding of a mutual fund, and not in an individual property right. Those who understand this trend will define the next era of property ownership.
9. Location, location, location is no longer the answer
Despite being ideally located, a project can fail due to its price, product, design, and inability to meet the needs of consumers. Market trends and consumer behaviors are changing rapidly as each generation presents different property buying preferences. And the very definition of a “good location” is constantly being redefined.
10. Share ownership
Coworking, co-living, multi-use, timeshare and exchange programs define the new realm of homeownership. Now, these trends will provide more sharing choices for consumers instead of just owning a property alone.