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1 Jun 2021

Real Estate and Construction

Home Purchases in Bangkok Metropolitan Area Projected to Contract for Third Consecutive Year during 2021 (Current Issue No.3228)


It is expected that home purchases in the Bangkok Metropolitan area during 2H21 will improve over a sharp plunge reported for 1H21 if the COVID-19 pandemic can be contained by July, and if vaccination rollouts are on track, and there are new economic stimulus measures introduced by the government. However, sales of residential properties in 2H21 may be lower than those seen in 2H20 because the overall consumer purchasing power has not fully recovered, in particular that of the key low to middle-income segments, and the fact that prospective foreign home buyers have been inhibited by travel restrictions.

Aside from eroding consumer purchasing power, we at KResearch are of the view that residential property developers will continue to experience numerous challenges during 2H21. These include difficulties in releasing unsold inventories, which may in turn affect their investments in new projects. This means that they will have to compete in marketing high levels of unsold homes in all segments to a fewer number of prospective home buyers. Other challenges are higher business costs and a shortage of construction workers. Rising business costs are expected to be driven by higher land and construction material prices, especially iron, which is a key raw material for the residential property business. New infections found in numerous construction camps have also caused a shortage of construction workers. Last but not least, residential property developers will be grappling with rising financial costs and limited funding sources as financial institutions have become more cautious about lending. The fact that many real estate developers have turned to the capital market for fund mobilization that was needed to redeem at least THB 70 billion worth of debentures and bills of exchange, which are scheduled to reach maturities during the remainder of 2021, will likely induce them to increase returns in order to attract more investors, plus explore new fund mobilization channels such as asset-backed initial coin offering (ICO).     

Given this, KResearch is of the view that home purchases in the Bangkok Metropolitan area will reach approximately 56,000—58,000 units in 2021, a contraction of 14.2-11.2 percent. Meanwhile, homes available for sales under new residential projects in 2021 are projected to shrink for the third consecutive year at 24.7-20.6 percent or equivalent to only 55,000-58,000 units. However, close attention must be paid to the government's economic stimulus measures as they may help reinvigorate the residential property business, going forward, plus the COVID-19 situation and vaccine rollouts as these factors may support the economic recovery during 2H21. ​

Real Estate and Construction