Residential Market may not resume growth in the second half of 2020

        In 1H20, indicators for the housing market in Bangkok and its surrounding areas have shown decline in line with the business environment. New home purchases fell by approximately 75% YoY on average during the first 5 months of 2020, while the number of home ownership transfers dropped 3.4% YoY due to a number of factors, particularly the COVID-19 pandemic, which stalled the economic activities and marketing plans of residential businesses.

        Looking into the remainder of 2020, KResearch views that house purchases should improve compared to 1H20, stemming from the potential for a gradual recovery in domestic economic activities. Moreover, there are still positive factors in the residential market, such as the reduction of home ownership transfer fees and mortgage fees for homes under THB3 million (scheduled to expire on December 24, 2020), as well as proactive marketing campaigns by residential developers. However, given that economic conditions tend to affect the business sector and household purchasing power extensively, new home purchases in the Bangkok and its surrounding areas may not resume growth in 2020. It is expected that 62,000-67,000 new homes will be purchased in 2020, shrinking by 37.9-32.9 percent YoY, while the number of home ownership transfers will be at about 140,000-145,000 units, shrinking by 29.3-26.8 percent YoY.   

        With the slowdown in demand for homes, many residential developers have scaled back their investment pending the economic recovery. This move, while likely to have an impact on earnings in the short term, is seen as balancing supply and demand and stabilizing operators’ home inventories in the residential market. For 2020, it is expected that approximately 68,000 -72,000 new homes will be built in the Bangkok and its surrounding areas, declining 42.8-39.5% YoY.