Thai Property Sector Faces Crisis as Debt Burden Soars

 

Thailand's property sector is teetering on the brink of collapse as soaring household debt and tightening credit conditions create a perfect storm threatening the industry's survival, according to leading experts.

 

The nation's household debt has reached a staggering 90% of GDP in the first quarter of 2025, totalling 16.2 trillion baht. Housing loans alone account for 37.9% of this figure - approximately 6 trillion baht - whilst non-performing loans from the household sector exceed 200 billion baht, with another 575 billion baht in loans on the verge of default.

 

Against this backdrop, Thailand's economic growth remains anaemic, with projections of just 2% for 2024 and a mere 1.5% for 2025.

 

The sluggish economy has prompted financial institutions to adopt increasingly cautious lending practices, with the "Responsible Lending" index contributing to a sharp contraction in approved loans.

 

Dr Vichai Viratkapan, an independent academic specialising in housing and urban development, warned of the severity of the situation. 

 

"The loan rejection rate has surged by over 45%, leading to a 20-30% quarterly drop in new housing sales," he said.

 

Property transfers have declined by 5-10% from Q1 2023 to Q1 2025, with condominiums - which must be constructed before transfer - particularly affected. 

 

The combined impact of dwindling sales, fewer mortgage approvals, and sluggish transfers is severely hampering developers' income and cash flow.

 

 

Corporate Bond Crisis Deepens

Both listed and unlisted developers are now struggling with corporate bond repayments. 

 

First-half 2025 reports indicate that one developer defaulted on 300 million baht, whilst five others sought extensions on debts totalling 7.86 billion baht. 

 

With 95 billion baht in corporate bonds due to mature this year, rollovers are proving increasingly difficult.

 

The situation has created what experts describe as a "tiger in trouble" scenario, characterised by negative liquidity, eroding investor confidence, and a rapidly escalating debt burden. Without swift intervention, they warn this could become an "economic time bomb."

 

Dr Vichai has outlined a comprehensive survival strategy requiring coordinated action from developers, government, and financial institutions.

 

Property developers are urged to implement six immediate measures:

Immediate cash flow management : Clear existing inventory through promotions, discounts, extended payment plans, or rent-to-own schemes

Asset conversion : Bundle projects into Real Estate Investment Trusts (REITs) or use assets as loan collateral

Financial planning : Conduct conservative assessments and prepare for debt restructuring if necessary

Cost rationalisation : Delay new projects and focus resources on completing existing developments

Bond restructuring : Convert short-term debts into longer-term arrangements

Business diversification : Expand into ventures providing recurring income

 

 

 

 

Government Intervention

The government is called upon to implement six support measures:

Liquidity boost : Provide short-term soft loans through state banks, using unsold properties as collateral

Tax relief : Reduce land and building taxes for unsold units over three years old, with savings passed to buyers

New home incentives : Offer temporary tax benefits for new properties over second-hand ones

Mortgage insurance : Guarantee up to 20% of housing value for high loan-to-value borrowers

Employment creation : Generate jobs and income whilst addressing household debt through special projects

"Homes for Thais" pause : Temporarily halt the government housing programme to redirect demand

 

 

 

Financial Institution Support

Banks and lenders are urged to:

Relax lending criteria : Update conservative assessment guidelines for modern customer profiles, including freelancers and online merchants

Promote low-interest offers : Back fixed-rate products for 3-5 years to stimulate the market

Provide developer funding : Step in where corporate bonds remain unattractive to investors

Accelerate NPL management : Promptly address non-performing loans

Encourage non-bank lenders : Increase market competition and buyer choice

 

 

 

Urgent Action Required

Industry experts emphasise that coordinated action from all three sectors is essential to prevent a complete market collapse. 

 

By combining enhanced liquidity, stimulated purchasing power, restored confidence, and effective debt management, the crisis could potentially be transformed into an opportunity for long-term sustainability.

 

"If action isn't taken now, the property market may simply grind to a halt," Dr Vichai warned.

 

The property sector's troubles reflect broader economic challenges facing Thailand, with the combination of high household debt, slow growth, and tight credit conditions creating an increasingly precarious situation that demands immediate and decisive intervention.