Thai Real Estate on the Brink of Collapse Amid Unprecedented Crisis

 

Thailand's property market is facing a "severe crisis" in 2025, with industry-wide home loan growth projected to turn negative for the first time in the country's history.

 

This downturn is being fuelled by a potent mix of sluggish purchasing power, a massive housing oversupply, and structural issues that are proving to be more challenging than the impact of the COVID-19 pandemic.

 

According to Chayawadee Chai-anant, a spokesperson for the Bank of Thailand (BOT), the real estate market "looks worse than before," suggesting that the challenges facing the sector are growing in both severity and complexity.

 

The primary driver behind this slump is a shift in consumer behaviour. Data from industry discussions show that people are increasingly worried about their future income, leading them to be more cautious with spending and investment, particularly for high-value assets like property.

 

This has resulted in fewer home purchases and a more protracted decision-making process, directly contributing to a noticeable drop in sales and home loan applications.

 

Financial institutions are also playing a significant role. Banks have become much stricter with loan approvals, a change that now extends beyond low and middle-income earners to include higher-income brackets.

 

This is because banks are taking a more cautious approach to risk assessment in light of the deteriorating economic outlook.

 

"Banks are being stricter because they have to be more careful to protect their businesses from potential risks," Chayawadee explained. "This is a fundamental principle of risk management. Banks are now being careful with high-income groups, just as these individuals are becoming more cautious themselves."
 

 

 

Yuttachai Teyarachakul, managing director of personal financial services at UOB Thailand, described the current situation as the "worst in a century" for the housing market. For the first time ever, the industry as a whole is not seeing growth in home loans.

 

He predicts that the volume of new loans will be "negative" this year, a historic first for the sector.

 

Faced with this grim forecast, banks are shifting their strategies, increasingly focusing on the second-hand property market, where homes are often around 30% cheaper than new builds in similar locations.

 

The current crisis is considered to be more difficult than the COVID-19 downturn. While the pandemic was a temporary, situational problem, today's issues are structural, with a significant housing oversupply and a fundamental lack of purchasing power, particularly for homes priced under 4 million baht.

 

The problems, once concentrated in the lower-end of the market (homes under 3 million baht), are now spreading to properties in the 3-5 million baht range and even starting to affect the 10 million baht sector.

 

This, according to Dr Amonthep Chawla of CIMB Thai Bank, signals a broader economic slowdown affecting all income levels.

 

A major concern is the potential for a "price war," similar to the one seen in the car market last year. This could force developers to compete fiercely by slashing prices, with potentially devastating consequences.

 

The impact of a property price war would be far greater than in the car industry, as it could erode the "wealth effect"—the feeling of security and prosperity that homeownership provides, which encourages people to spend.

 

 

 

"The housing market's impact would be more severe than the car market," Dr Amonthep warned. "It would not only disrupt the market but also collapse the lending and liquidity systems. The crisis in China right now, where home prices are sliding, is making people hesitant to spend, causing the economy to decline continuously."

 

Meanwhile, Payong Srivanich, president of Krungthai Bank (KTB), noted that more homeowners are converting their property into cash to meet financial needs.

 

Similarly, Dr Kobsak Pootrakool of Bangkok Bank (BBL) highlighted a continuous rise in non-performing loans (NPLs) within the sector.

 

Both observations underscore the financial strain on households, which has made banks extremely wary of issuing new loans.

 

The path to recovery will not be easy, and it could take one to two years for the property sector to rebound, a process that is entirely dependent on a broader economic recovery.