KKP reveals that the trend of Thai real estate has slowed down after the population has decreased, along with 4 factors that pressure secondary cities - purchasing power shrinks! interest rates - soaring debt The real estate market in Bangkok and large provinces continue to continue due to demand from immigration

KKP Research by Kiatnakin Phatra Financial Group Assess that the real estate sector Thailand is likely to slow down in the future. It is one of the businesses that will be directly affected by the aging society and shrinking population starting in 2030, according to UN projections.

However, the real estate sector in Bangkok and its vicinity, including major provinces, will continue to expand in line with the trend of increasing population migration to big cities. Make the direction of real estate Thailand is more differentiated between major cities and smaller cities. by the growth of the real estate sector In the future, it is likely to be concentrated only in Bangkok, its vicinity and major provinces.

Slowing down as the population decreases

Population and population density in the area It is considered the main factor driving the real estate sector. As a result, the demand for both the housing market and Commercial sectors such as shopping centers, offices and warehouses are on the rise. That is, the age range between 25-54 years old has passed its peak since 2015 and has started to decrease. While the overall population of Thailand will begin to decrease in 2030, which will cause the real estate sector affected by more severe demographic changes.

factors that pressure growth

In addition to the demographic factor, the real estate sector began to show signs of slowdown since the mid-2010s, not only due to the changing demographic structure. But it also came from 4 other domestic factors that began to change direction and pressure the growth of the real estate sector, namely

1. The expansion of urban areas in the provinces, or Urbanization, slows down according to industrial and service sectors that may not grow as well as in the past due to Deglobalization

2. The purchasing power of Thai people shrinks from revenues that grow slowly according to economic conditions While house prices continue to rise faster.

3. Interest rates that may remain high for a long time It will be a factor that reduces purchasing power and increases debt burden for housing buyers.

4. The level of household debt is already very high nowadays and it is likely that Thailand is about to enter a downturn in the credit cycle. As a result, borrowing rules may be tighter and the borrower's ability to take on additional debt is reduced.

The big city survived

Even the real estate sector Thailand as a whole will slow down. But real estate in Bangkok and large provinces can still continue with support that is different from the overall picture of Thailand, namely

1. Moving to a big city reflected by the number of households in Bangkok and its vicinity expanded at 5.6% per year, or five times more than the national average.

2. Expansion of electric train routes in big cities

3. purchasing power from foreign countries That plays a greater role in the growth of real estate sales in Thailand and is expected in the future to have additional opportunities from the government sector that tends to relax and open up more foreigners to work in the country. to compensate for the decreasing population in the country

However, KKP Research also estimates that reliance on foreign purchasing power Especially from China, which accounted for more than half. There may be long-term risks from 1 Chinese wealth tends to decline as the Chinese economy may not grow as fast as in the past2 Thailand may not be the first choice in Asia. If focusing mainly on price competition and 3 Capital Control from the Chinese government to block the outflow of Chinese capital

Secondary cities stagnate as households shrink

The real estate sector in secondary cities and rural areas may be sluggish. There is a risk of falling house prices. Demand for housing in smaller provinces contracted as more households moved to larger cities. This is reflected by the number of households in the Northeast and the North that have begun to shrink at 1.2% per year. At present, the number of home supply numbers is starting to exceed the number of households. in the opposite direction to Bangkok and the vicinity where the number of houses in the market is still insufficient to meet the demand in the market

KKP Research estimates that the problem of "oversupply of houses" in the provinces will be more pressured by continued contraction in demand as the number of households decreases and real estate loans. in the provinces that tend to decrease as a whole As a result, it is likely that there will be more houses left in the future and pressure on house prices to decrease, similar to Japan and China that have experienced a contraction in rural house prices.

economic slowdown

Although the role of the real estate sector on the Thai economy will be limited But letting the real estate sector slow down continuously It may affect other sectors in the economy. Both in the real economy through related businesses in the real estate sector and the financial sector through banking and bond markets. which increases the risk to asset quality because Mortgage accounts for more than 30% of total retail lending and the real estate sector is one of the most funded through bond markets. If there is a severe slowdown, it may have a continuous effect on the financial market.

Source:https://www.bangkokbiznews.com/property/1080386

Date 26/07/2023