Real Estate Prices in Thailand to Decline or Fall Flat – Best Time to Buy Property

September 24, 2019

For the first time in more than 10 years, real estate prices in Bangkok will either decline or remain flat later this year. According to analysts, the recent economic slowdown and new provisions for land and building taxes, which will be implemented in 2020, are the reason behind this price fluctuation.

Falling Real Estate Prices in Thailand

CBRE Thailand's managing director for property consultation services, Aliwassa Pathnadabutr, said more and more landowners with sufficient land stock are attempting to sell their plots.

SET-listed developer Origin Property's chief executive, Peerapong Jaroon-ek, noted how a handful of landowners have gone back to the company to continue pending land deals.

Mr Peerapong said that many plots have been offered to Origin Property. He added: "A plot on Surawongse Road used to be priced at 700,000 baht per square wah. Now it is offered at 500,000 baht."

Some landowners offered leasehold options to cut back on costs especially taxes.

Increasing Taxes & New Appraisal Prices

Tax rates for unoccupied land are estimated to be around 0.3 to 0.7 per cent, increasing 0.3 per cent every three years. Taxes could reach 2 million baht per year for a one-rai unoccupied plot on Bangkok’s CBD. All data verified by the Land and Buildings tax.

As prices for Thailand real estate become more negotiable, Bangkok land prices all throughout 2019 may decline up to 10 per cent from 2018 if not remain flat. Ms Aliwassa said the last time this happened was way back 2009 after the Hamburger crisis.

CBRE asserted that Thailand's latest recorded average increase in land prices was between 2 and 3 per cent per year. Meanwhile, average land prices in Bangkok were between 5 and 6 per cent. In the past years, however, Bangkok land prices grew beyond 10 per cent each year.

New appraisal prices for real estate in Thailand will have a validity of four years beginning 1st January 2020.

Based on current appraisal prices by the Treasury Department, the average land increase in Bangkok is approximately 2.45 per cent. Thailand, on one hand, has an overall increase of 8.34 per cent.

Ms Alwassa shared: "Last year landowners were able to ask any price, but they are more flexible this year."

According to her, 2019 will be a "transitional period." While the past several years were all about selling land and property in Thailand, this year onward is the start of a "buyers' market."

Foreign Investors Driven Away By Immigration Requirements

The economic slowdown did affect the residential sector since market growth has heavily relied on foreign buyers.

Foreign demand and property purchases in 2018 reached a record-breaking 92 billion baht. Chinese buyers contributed 43 per cent of such purchases. But as the Chinese market slowed down, so did the condo sector.

According to Ms Aliwassa, the "TM30 immigration reporting requirements created problems for foreigners." As a result, many foreign investors abandoned the Thai condo market.

There are speculations that the condo market slowdown will continue until 2020. There are no signs telling otherwise.

She added: "Property incentives can help." However, they should be used for the right target markets. There should be incentives for those immune to "the new lending curbs" and can apply for loans.

Property incentives are not just 1 to 2 million baht housing units. Developers should note that most of their target buyers have high household debts. This means getting a new mortgage loan could be difficult for them.

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Source: [1]

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