At the ThaiBev Building in Bangkok, a discussion on "The Future of Thai Real Estate: Information for Public and Private Sector Planning" was held. The event was organized by the International Real Estate Federation (FIABCI-Thai) and the Thai Real Estate Research and Appraisal Center. Dr. Sophon Pornchokchai, a renowned Thai real estate expert, served as the organizer of the event and also participated as a speaker.
Dr. Pratheep Tangmatitham, Chief Executive Officer of Supalai Public Company Limited, discusses the evolving trends in the real estate business, drawing from his extensive 48 years of experience in the industry.
He highlights that the future trajectory of the Thai real estate sector hinges on four key factors: the economy, society, environment, and legal framework.
1. Economy: The current trend is influenced by inflation resulting from currency depreciation. Consequently, people are compelled to seek housing further away from city centers due to the high prices of detached houses in urban and suburban areas. This has led to a growing demand for condominiums priced at 1 million baht or slightly more than a million baht, reflecting shifting consumer preferences.
2. Society: Thailand has had a declining birth rate, leading to smaller families and an aging population. Rising living costs contribute to this trend, prompting families to have fewer children, from an average of 3 to 2, and sometimes down to just 1 child. Consequently, there's a preference for smaller living spaces such as 2-bedroom condominiums that cater to the needs of smaller families.
3. Environment: The government initiatives aimed at increasing green spaces through tree planting. However, challenges such as PM2.5 dust pollution underscore the need for continued efforts to ensure a healthy environment.
4. Legal: The government must support the real estate market, both domestically and internationally. This involves revising city planning laws, particularly the Floor Area Ratio (FAR), which determines the maximum building size relative to land area.
Amendments to these regulations are necessary to foster a conducive environment for real estate development.
The maximum building area that can be constructed is determined by multiplying the FAR value by the land area size. Consequently, the construction of condominium buildings in the alleys within the Bangkok Metropolitan Administration's jurisdiction was initially restricted to a height of no more than 8 floors. However, this regulation is being revised to permit heights of up to 12 floors in certain areas due to specific conditions. The Bangkok Metropolitan Administration has undergone significant changes. For instance, the Ramintra Road area has an FAR of 4, whereas the Surawong area boasts an FAR of 10, despite Ramintra's advanced development. Ramintra features an operational electric train and spacious sidewalks. Consequently, adjustments have been made to the construction area, with setbacks of 6 meters from the original boundary of 3 metres.
"I once proposed to the Metropolitan Municipality and city planning department, but it was argued that firefighting equipment could not reach beyond the 12th floor. I would like to point out that modern firefighting techniques now include the use of drones, which effectively extinguish fires even at greater heights. The fire can indeed be managed."
"In the foreign market, Thailand's stringent land ownership regulations and tax laws deter foreign investment in our real estate sector. For instance, we impose a specific business tax of 3.3% and a transfer tax of 2%, totaling 5.5%. In contrast, countries like the United States, England, and Australia impose only a 4% tax. In Dubai, for instance, where they sell 100-story buildings to foreigners, a significant influx of capital is observed, benefitting both the economy and the citizens. It's noteworthy that up to 80% of the property owners are foreigners," noted Dr. Pratheep.
Mr. Khajonsit Songsansern, Chief Executive Officer of Siamese Asset Public Company Limited (a company listed on the stock market for 4 years), discussed the future of the real estate business, highlighting two key areas that will play increasingly important roles: the intersection of real estate with tourism and with aging societies.
Regarding tourism, Mr. Khajonsit suggested that the government should implement measures to reduce taxes and interest rates on loans for individuals with savings or those looking to invest. For instance, civil servants receiving retirement payments of 7-8 million baht could invest in condominiums for rental purposes, potentially yielding additional monthly income ranging from 40,000 to 50,000 baht. Furthermore, incentives should be introduced to encourage foreigners to purchase properties, particularly condominiums, with the possibility of future legislation imposing higher taxes, akin to Singapore's additional tax rate of 60%, which could contribute to government revenue aimed at assisting the less fortunate.
Addressing the challenges posed by an aging society, Mr. Khajonsit suggested that the government should also intervene by implementing tax and interest rate policies. He cited an example of Siamese Asset's collaboration with Suan Dok Hospital in Chiang Mai to develop a project focused on building hospitals and accommodations for the elderly in Taling Chan, Bangkok.
"The future of the real estate business should prioritize energy conservation and mitigation of environmental pollution," stated Mr. Khajonsit. "For instance, Siamese Asset has implemented numerous projects integrating solar panels and emphasizing green spaces. Additionally, we produce air conditioning systems designed to eliminate PM2.5 dust particles. Through these initiatives, Siamese Asset has achieved a remarkable energy saving rate of 40%, utilizing only 60% of energy compared to traditional methods, where other establishments may consume 100%," he added.
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Mr. Chayaphon Hanrungroj, Chairman of the Executive Committee at Altitude Development Co., Ltd. (awaiting listing on the stock exchange), emphasized the future trajectory of the Thai real estate sector. He underscored the importance of government promotion and support for private sector entrepreneurs, as well as consumers, particularly those with middle incomes, who represent a substantial portion of society.
Furthermore, Mr. Hanrungroj highlighted the significance of the middle class as the largest taxpayer in the country. He noted that the middle class also plays a pivotal role in societal dynamics, contributing to the establishment of status and family, which in turn aids in population growth. This contribution is particularly crucial in light of the significant decline in birth rates observed in this era.
"A group that has long been overlooked is the middle class. If the government provides substantial promotion and support, it could significantly bolster the purchasing power of this demographic, effectively enhancing the fourth factor in the form of real estate."
"In the real estate sector, growth amounts to approximately 9.8% of GDP. Achieving a growth rate of 10% of GDP would surpass the impact of distributing over 500,000 million baht by the government to stimulate GDP. Therefore, success in this endeavor would essentially equate to the government directly benefiting the people through the real estate industry," Mr. Chayaphon emphasized.
"The Chairman of the Executive Committee at Altitude Development highlighted a comparison between the Thai real estate market and foreign counterparts like China. He pointed out that while China cannot directly distribute money to its citizens, it channels funds into real estate, resulting in a substantial 25% of China's GDP being attributed to the real estate sector. In contrast, Thailand's real estate sector, if boosted to 10 or 15% of GDP, could significantly impact GDP growth.
"However, in the international market, the Thai real estate sector is experiencing oversupply. The chairman questioned why the government hasn't taken steps to address this issue by implementing laws to incentivize foreign investment in real estate. Such measures, he argued, could yield positive outcomes across various sectors in the country," stated Mr. Chaiyaphon.
Dr. Sophon Pornchokchai, Chairman of the Thai Real Estate Research and Appraisal Center at Agency For Real Estate Affairs Co., Ltd., provided insights into Thai real estate trade data and analyzed trends for 2024 and beyond as following:
In 2023, the Bank of Thailand reported that the value of the real estate market amounted to approximately 1 trillion baht, equivalent to 5% of GDP, encompassing all buildings. In comparison, in countries like England and the United States, real estate contributes around 3% to GDP, with the exception of Florida, where it constitutes 20%.
Regarding unoccupied buildings in Bangkok, there were 617,000 units in 2023, a significant increase from approximately 400,000 units in 1998 and 350,000 units in 1995. Nationally, there were approximately 1,300,000 completed but unoccupied units, constituting 4.7% of the total housing stock.
Dr. Sophon noted that many vacant houses are eventually resold as ready-to-sell properties. Currently, there are approximately 1,500,000 such units, with around 400,000 units owned by entrepreneurs across the country.
In Bangkok alone, there are 230,000 units, making the second-hand real estate market the largest market segment. Newly completed houses primarily come from major operators such as Supalai Public Company Limited, which operates in Bangkok and 40 other provinces, followed by Pruksa Real Estate and Land and Houses Public Company Limited.
In provinces without major projects, such as Ang-Thong, Singburi, and Chainat (excluding Nakhonsawan Province), investments are limited. Supalai Public Company Limited has made some investments in Nakhonsawan Province.
House prices have steadily increased over the years. For instance, in 1997, the average house price was approximately 1.5 million baht. By 2023, the average price had risen to 5.4 million baht.
Currently, affordable housing options are scarce. For example, The Forestier project sells detached houses for 300 million baht per unit, indicating a trend among entrepreneurs to focus on luxury projects.
Looking back at the real estate market from 2020 to 2021, the COVID-19 situation resulted in stagnation. However, from 2022 to 2023, the market showed signs of improvement, with further positive trends expected in 2024 to 2025. Notably, 462 projects were launched during this period, predominantly in locations with high potential, while areas with less potential saw fewer openings.
In 2022, the market experienced growth, attributed in part to Regent Company offering condominiums priced below 1.5 million baht per unit. However, in 2023, Regent Company did not initiate construction, although other companies pursued horizontal construction projects.
The growth trend is expected to continue in 2024, with single houses and townhouses taking approximately 36 months to sell, and condominiums taking around 26 months.
Approximately 35,000 housing units have been completed, accounting for 15% of the total. The National Housing Authority completed entire projects before selling, holding a market share of approximately 80% among 10 major public companies, including AP, Pruksa, B-Land, and Land and House.
The remaining 20% of the market share belongs to other publicly listed companies, while companies not registered account for 20%, primarily consisting of larger firms like Regent Company and Kanda Company. Property shares range from 5-7%, with smaller companies collectively holding 15-13%. These figures were summarized by the Thai Real Estate Research and Appraisal Center.
Walai Chuthammathat Executive Editor
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