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14 Jan 2022

Econ Digest

Residential market, in 2022: A challenging for developers to stay afloat

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        It is expected that most real estate developers will struggle to keep their businesses afloat in 2022 despite a number of supporting factors, including the extension of property transfer and mortgage fee cuts and relaxation of loan-to-value (LTV) regulation. Although home purchases are expected to improve in 2022 over those reported for 2021 due to more proactive marketing campaigns and attractive promotions, the recovery in the housing market will primarily hinge on the COVID-19 pandemic – for if there were to be a new wave that spans a long period, more time would be required for economic activity and households’ purchasing power to fully recover, thus pressuring home sales and investment.

        KResearch takes a cautious view on housing purchases, especially in the first half of 2022, as we expect that home purchases will continue to slow down although improvements may be seen during the second half of 2022 if the COVID-19 situation eases. KResearch, therefore, projects that the number of home ownership transfers in the Bangkok Metropolitan Region (BMR) will reach approximately 168,000-177,000 units, an increase of 1.8-7.3% during 2022, as opposed to a contraction of 16.1% estimated for 2021, while home sales in the Bangkok Metropolitan Region are estimated to be around 63,000 – 69,000 units, an increase of 0.0%-9.5%, against a contraction of around 3.5% projected for 2021.

        As for new residential projects in 2022, KResearch expects that new home purchases will grow at a meagre pace as the related activity has not returned to normalcy yet amid intense competition in the market while real estate developers are experiencing liquidity squeeze and rising business costs. In addition, the number of unsold units in the Bangkok Metropolitan Region remains high at around 200,000 units. It is expected that the number of unsold units will remain unchanged during 2022 at  211,000 – 223,000 units, compared to around 227,000 units reported for 2021, especially homes costing below 3 million Baht each, which account for up to 55.4% of the total unsold units. They are largely condominium units, followed by townhouses. KResearch is of the view that the number of new residential units to be launched in the Bangkok Metropolitan Region will reach around 60,000-66,000 units in 2022, which would be lower than the pre-pandemic levels and our prior estimate of only 56,000 units. New residential units for 2022, particularly low-rise detached houses, will likely target middle-to high-income earners, with high purchasing power. Meanwhile, more condominium projects costing around 3 million Baht per unit will be introduced, but not as many as seen before the COVID-19 pandemic. Those condominium projects will likely be located in communities rather than along the city's electric train routes seen before.

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Econ Digest