This article on “Luxury houses at risk of oversupply in 2023” comes to Dot Property from Lazudi.
The direction of major real estate developers for most new projects broke a record for the past few months in the first quarter of 2023. This reflects the confidence and opportunity to drive sales and revenue, especially luxury housing projects with prices ranging from 10-300 million baht. In contrast to information from the Real Estate Information Center (REIC) which stated that the real estate market in 2023 is expected to remain negative due to high household debt issues. There is also the rise in interest rate direction LTV measures that affect purchasing power and will result in negative sales and house transfers.
REIC Acting Director-General Wichai Viratakaphan said that although the real estate market was more active this year from the launch of new projects. However, from the factor assessment that affects the market, it was found that this year the number is still in a negative direction from the household debt issue that was as high as 86-87% of GDP. The interest rates also rose to 0.75-1 percent, so the purchasing ability has decreased. According to REIC, it is expected that in 2023, the real estate market index (Residential category) is likely to slightly decline from 2022, with demand for houses and condominiums in 2023 gradually dropping.
Khun Wichai added that from the data of houses priced at more than THB10 million, the transfer of ownership in 2022 has 2.5 percent of the total market of 100,269 units, which is considerably small, accounting for only 18.7 percent of the market value of THB529,121 million.
The reason that real estate developers are trying to enter this market is partly because they want to expand it for better performance. This range of pricing will have a higher profit.
Additionally, at present, lower housing projects face the problem of being rejected for credit. However, customers in the luxury group have no credit problems, and some even buy in cash. However, the market for houses priced from THB10 million or more is a niche market with limited demand. Therefore, developers trying to launch this at the same time can cause oversupply issues. This is because not every location or brand can succeed in the launch of projects, so developers should be extra cautious.
As for the target group, those buying houses priced at THB10 million or more are part of the new generation who sell products online or work in the crypto business. Other target groups are wealthy people who want to live close to the city. Originally, they prefer to purchase a penthouse, but they begin to switch to buying housing with more functionality and usable spaces.
The government should focus on vulnerable groups by setting up a fund to help the group gain access to first home loans. So, it is hoped that the Thai government will help with this issue. And most importantly, the government should grant a long-term visa or LTR visa to foreigners who plan to stay in Thailand for work or retirement to encourage them to buy real estate in Thailand. So now we have to wait and see how it will be for the THB10 million housing industry this year.