Bangkok’s housing market set to shrink as economy slows, with new units down 10% and values down 9% this year

A cautious slowdown in Bangkok’s housing market is expected to persist as macroeconomic pressure weighs on demand, with new residential launches set to fall sharply in 2024 before a modest recovery in 2025, according to the Siam Commercial Bank’s Economic Intelligence Center (SCB EIC). The forecast points to a continuing contraction in both the supply of units and the overall market value, while lenders tighten mortgage lending and developers recalibrate their project mix toward higher-end offerings to weather the downturn. This landscape underscores how entrenched financial headwinds, from inflation to stricter credit standards, are shaping buying behavior and investment strategies in Thailand’s biggest property market.

Economic backdrop and housing market outlook

The Greater Bangkok housing market is navigating a challenging macroeconomy that dampens buyer enthusiasm and slows project launches. SCB EIC projects a 10% year-on-year decline in the number of new residential units in Greater Bangkok for 2024, signaling that supply side is contracting as developers pull back in response to weak demand and tighter financing conditions. The forecast for 2025 shows a further gradual contraction of 1-3%, indicating that the market may continue to shrink rather than rebound in the near term. This dual-year trajectory—stronger declines in 2024 followed by a more modest retreat in 2025—reflects a broader pattern of cautious activity across the sector as economic momentum remains tepid.

When measured by value, the picture is less severe but still negative. SCB EIC estimates a 9% drop in the total value of new residential units in 2024, a figure that conveys the scale of reduced activity even as unit volumes fall. In 2025, the market is expected to stabilize somewhat, with value growth forecast in a narrow range of 0-2%, suggesting a soft landing rather than a robust rebound. The divergence between the fall in units and the milder dip in value underscores pricing dynamics at play: slower construction activity and subdued demand keep prices under pressure, but selective pricing power may persist in segments with stronger fundamentals.

Several structural factors are driving this downturn. A sluggish overall economy limits disposable income and willingness to commit to large, long-term purchases such as new homes. Rising living costs compound the pressure on households, eroding purchasing power and forcing many buyers to reassess affordability. Elevated household debt levels further constrain debt capacity, while higher interest rates increase the cost of borrowing for potential buyers. To compound the challenge, mortgage approvals have grown tighter, raising the hurdle for households seeking financing. Together, these factors suppress demand, particularly in the lower- to middle-income segments that typically represent a large share of first-time buyers.

The outlook for 2024 also includes a notable decline in newly launched units. SCB EIC forecasts a 28% year-on-year drop in new launches for the year. This sharp slowdown in new product introduction reflects developers’ reactions to the weak demand signal and tighter credit environment, as well as a strategic recalibration toward risk management and margin preservation. Looking ahead to 2025, the expectation shifts toward a partial recovery in launches, but with a 2-4% contraction rather than a return to pre-downturn levels. This implies that even as the market stabilizes, supply will remain constrained relative to the peak activity seen in stronger years, limiting near-term upside for developers and buyers alike.

In response to these conditions, property developers are recalibrating their project portfolios. The focus is increasingly on mid- to upper-market projects, where the purchasing power appears more resilient. This strategic pivot aims to align product offerings with buyers who retain better credit standing and greater willingness to invest in higher-priced homes, thereby supporting project profitability even as overall demand remains tepid. The shift toward higher-end segments is also consistent with developers’ desire to protect margins in an environment of rising costs and stricter financing hurdles, and it reflects a broader trend across the sector toward premiumization when the market environment allows.

Within the broader market context, mortgage market dynamics and consumer behavior interact in complex ways to shape the year-ahead outlook. The tightening in mortgage approvals reduces the pool of eligible buyers and elongates the decision-making process for potential purchasers. At the same time, a portion of buyers who were previously on the fence may delay purchases further as they await clearer signs of price stabilization or improvements in financing conditions. The interplay between supply discipline from developers and demand discipline from buyers creates a market environment that is likely to remain cautious through much of the next year.

Saudi-style, the Bangkok area’s growth engines and urban development patterns also influence housing demand. As a major metropolitan hub, Bangkok’s housing market is sensitive to employment trends, household income distribution, and shifts in consumer confidence. While economic fundamentals remain fragile, pockets of strength in high-income segments and suburban belt growth can provide lifelines for certain project types, especially those with features attractive to upscale buyers or investors seeking rental yields. However, these pockets may not be sufficient to offset the broader headwinds that weigh on the market as a whole.

In sum, the 2024 backdrop for Greater Bangkok’s residential market is characterized by a mixed but predominantly cautious trajectory. The combination of fewer new launches, contracting unit sales, and a narrowing window of affordability keeps the market in a cautious stance. The anticipated stabilization in 2025, with a modest contraction for new launches and a shallow recovery in market value, suggests that the industry will continue to navigate a delicate balance between supply discipline, demand constraints, and evolving financing conditions. Buyers, developers, and lenders will need to adapt to this gradual, nuanced recovery path as they plan for the coming years.

Mortgage lending trends and bank responses

A central feature of the current cycle is the tightening of mortgage lending standards and the adjustment of lending costs by major banks, which is reshaping borrowing dynamics and homebuyer behavior. In response to the tighter market conditions and softer demand in the housing segment, large local banks have announced across-the-board reductions to lending interest rates, including the minimum retail rate (MRR) used for housing loans. Among the institutions involved, Bangkok Bank (BBL) currently offers the lowest MRR among the major banks, at 7% per year, signaling a competitive posture intended to preserve lending volumes in a cooling market.

The reductions in minimum retail rates are scheduled to take effect on November 1. The new MRRs for other major lenders are set as follows: Krung Thai Bank (KTB) at 7.445%, Kasikornbank (KBank) at 7.180%, Siam Commercial Bank (SCB) at 7.175%, Bank of Ayudhya (Krungsri) at 7.275%, and TMBThanachart Bank (ttb) at 7.705%. These revisions reflect a broad effort by banks to sustain housing loan activity in an environment where demand growth remains constrained and risk appetite has shifted toward higher-quality, lower-risk borrowers. By adjusting the pricing of housing credit, lenders aim to balance the need to support homebuyers with the imperative to manage risk in a more challenging macro backdrop.

Beyond pricing, banks’ lending portfolios reveal notable shifts in consumer credit dynamics. SCB, the fourth-largest bank in terms of assets and the industry leader in housing loans, reported a mortgage loan portfolio of 779 billion baht as of September 2024. This figure marks a sequential decline of 15.5% quarter-on-quarter, a 39% drop year-to-date, and a 38.5% decrease year-on-year. The sizable quarterly contraction underscores the severity of the pullback in mortgage activity within the bank’s portfolio during the period, reflecting both weaker demand and tighter underwriting standards that have persisted through the year.

Similarly, Bangkok Bank (BBL) — Thailand’s largest bank by assets — reported a mortgage loan portfolio of 332 billion baht as of September 2024, representing a slight quarter-on-quarter decrease of 0.6% and a year-to-date decline of 1.7%. Krungthai Bank (KTB), the second-largest lender, posted 498 billion baht in housing loans, marking a 1.5% quarter-on-quarter rise and a 2.9% year-to-date increase, indicating resilience in its lending for the period. Krungsri (Bank of Ayudhya) saw its housing loan portfolio slip to 248 billion baht, down 3% quarter-on-quarter and 7.6% year-to-date, signaling a more pronounced cooling in that portfolio segment. TMBThanachart Bank (ttb) also posted a decline in overall mortgage lending, with a 0.8% drop quarter-on-quarter and a 2.2% year-to-date decrease as of September, reflecting the broader tightening environment.

KBank’s data on housing loans was not disclosed in the financial statements submitted to the Stock Exchange of Thailand (SET), leaving a gap in comparative portfolio tracking for the quarter. Notwithstanding the lack of complete disclosure from KBank, the broader trend across the sector shows a contraction in housing loan portfolios for several major players, aligning with the tightening of underwriting criteria and the cautious stance among lenders amid slowing demand and uncertain price trajectories.

In addition to pricing and portfolio dynamics, lenders are recalibrating risk management practices to align with the evolving market. The contraction in mortgage portfolios, particularly for SCB, points to a shift toward prudent lending, a probable emphasis on creditworthy borrowers, and heightened scrutiny of debt service capacity given the higher rate environment. The combination of stricter mortgage approvals and elevated borrowing costs contributes to a more selective mortgage market, where buyer eligibility becomes a more critical determinant of loan approval and issuance. This environment makes it more important for potential buyers to have stable income, significant down payments, and robust credit histories to secure favorable terms.

Taken together, these developments illustrate a banking sector that is actively adjusting to a slowing housing market. While MRR cuts are designed to support demand and maintain lending momentum, the declines in mortgage portfolios and the narrower scope of approvals indicate that banks remain cautious about risk exposure in a stressed macro context. This tension between price competition and risk management will likely shape the terms of housing credit for months to come, influencing both buyer behavior and the pace of market activity as the market moves through 2025.

Developer strategies and market segmentation

In a market characterized by tighter credit and softer demand, developers are recalibrating their strategies to align with the new risk and reward dynamics. The shift toward mid- to upper-market projects reflects a strategic calculation that these segments exhibit relatively stronger purchasing power and greater resilience to financing constraints. Buyers in these segments often have higher down-payment capacity and better access to diverse funding sources, enabling them to navigate higher price points even in a tightening credit environment.

This strategic pivot comes with an emphasis on features and amenities that justify premium pricing. Developers are focusing on product differentiation, such as high-quality finishes, smart home integration, location advantages, and access to premium facilities, as differentiators to attract buyers who can withstand higher monthly costs or longer-term debt obligations. The premium segment offers a potential buffer for developers against margin compression, especially when construction costs rise and financing becomes more expensive. By targeting buyers with stronger financial profiles, developers aim to maintain project viability and profitability despite a tougher market environment.

From a capital markets perspective, developers’ emphasis on mid- to upper-market projects may influence their funding strategies. Higher-end projects can attract a different mix of funding sources, potentially including more private equity, strategic co-investors, or international capital seeking stable returns in a lower-risk segment. The discipline in project selection and pricing can help preserve margins in an uncertain cycle, even as overall sales velocity remains subdued. This strategic shift may also impact landbank management, as developers prioritize acquisitions that support premium development formats and long-term value creation.

The 2024 slowdown in new launches by approximately 28% year-on-year signals that developers are prioritizing risk management and liquidity preservation. In 2025, the projected 2-4% contraction in launches, while indicating a partial rebound in volume, still suggests a market that remains selective. Developers may avoid overexposure to low-margin, mass-market projects that could be vulnerable to demand swings and tightening credit, choosing instead to concentrate resources on units that can command stronger pricing and faster absorption in a constrained market environment.

As developers realign their portfolios, the urban landscape in Bangkok could see a gradual rebalancing of supply mix. This realignment has implications for construction activity, job creation in the property sector, and the availability of diverse housing options for different income segments. A more selective pipeline can also influence neighborhood dynamics, with premium enclaves and urban core areas benefiting from concentrated investments and improved amenity ecosystems, while lower-cost options may see slower development or longer absorption periods.

In sum, developer strategy in the current cycle emphasizes resilience through market segmentation. By focusing on mid- to upper-market projects, developers seek to protect margins, reduce exposure to high-risk segments, and capitalize on pockets of stronger buying capacity. This approach aligns with the broader market outlook that sees a gradual stabilization in 2025, even as overall activity remains constrained and financing remains more selective. The interplay between buyer affordability, product differentiation, and capital access will continue to shape the trajectory of Bangkok’s housing supply over the near term.

Implications for buyers and market dynamics

For homebuyers, the converging pressures of higher lending costs, stricter credit criteria, and slower market activity imply a more deliberate and potentially longer decision-making process. Buyers may face a narrower set of financing options and higher monthly payments, especially for new units in the mid- to upper-market segments where prices are higher, making affordability a central concern. The housing market, in turn, may respond with intensified price negotiation dynamics in certain submarkets, as developers balance the need to move inventory with the imperative to maintain margins in the face of rising costs and financing constraints.

Affordability remains a critical lens for evaluating market health. As the cost of living climbs and wage growth remains uneven, households must weigh the trade-off between owning a home and renting, particularly in a price environment that can wobble with macroeconomic shocks. The tightening in mortgage approvals means fewer buyers will qualify for financing without substantial down payments or robust credit histories. This constraint particularly affects first-time buyers and lower-income households, potentially widening the affordability gap and shaping demand distribution toward higher-end housing where mortgage access is comparatively stronger.

From a financial sector perspective, the pattern of shrinking mortgage portfolios and rate adjustments points to a more cautious credit environment. Banks’ willingness to extend new housing credit will depend on their assessment of borrower’s debt service capacity, stability of income, and overall macroeconomic resilience. While price competition through MRR adjustments can stimulate some demand, lenders will likely maintain strict underwriting standards to manage risk exposure in a slower economy. This dynamic may lead to a gradual improvement in loan performance indicators if the economy stabilizes and consumer confidence improves, but it may also prolong a period of subdued activity in the housing market if macro risks persist.

The market’s evolution will also be influenced by policy signals and housing finance reforms. If policymakers respond with measures that support affordable housing finance, reduce borrowing friction, or provide targeted incentives for lower-income buyers, the balance of demand could improve somewhat. Conversely, if macro headwinds intensify, any potential uplift could be delayed, pushing buyers toward alternative options such as resale markets, rental housing, or non-bank financing channels. In this context, buyers should monitor lender terms, down-payment requirements, and potential eligibility criteria as they plan purchases and financing strategies.

For lenders and developers, the implications of the 2024–2025 cycle are clear. The convergence of weaker demand, tighter underwriting, and higher financing costs will continue to test profitability and project viability. Banks will need to manage risk meticulously while remaining competitive on pricing to sustain volumes, particularly for prime segments. Developers will need to optimize project mix, accelerate absorption of core offerings, and maintain liquidity to navigate the period of slower market activity. The alignment between mortgage market developments and supply-side strategies will shape how the market rebalances in the coming years, with potential opportunities arising for players who can adapt quickly to changing buyer preferences and financing landscapes.

Overall, the market trajectory remains cautiously optimistic about a gradual recovery beginning in 2025, albeit with a still-fractured path. Buyers should enter the market with a clear understanding of their affordability limits, anticipate potential changes in loan terms, and remain vigilant for shifts in the credit environment as lenders recalibrate risk. The sector’s resilience will hinge on effective collaboration among developers, lenders, policymakers, and buyers to foster sustainable growth and stable housing outcomes in Bangkok’s dynamic real estate market.

Financing costs, consumer behavior, and long-term outlook

The evolution of financing costs continues to be a central driver of buyer behavior and project viability. With MRR reductions and evolving bank lending criteria, borrowers may experience a shift in the cost of capital that influences their decision-making timelines and purchase priorities. The sequencing of rate cuts and underwriting loosenings can create windows of opportunity for some buyers while excluding others who do not meet revised credit thresholds. The net effect is a more selective purchasing environment in which buyers with strong credit profiles and robust income sources may time purchases to capitalize on favorable lending terms, while others postpone until conditions improve.

From a longer-term perspective, Bangkok’s housing market remains sensitive to structural factors, including population growth, urbanization trends, and the affordability gap. If the economy gradually strengthens and consumer confidence improves, the market could re-accelerate, particularly in segments with stable demand fundamentals and supportive financing. However, this path depends on a broad constellation of variables, including inflation trajectory, employment growth, wage dynamics, and fiscal or monetary policy shifts. The 2024–2025 window thus represents a transitional period in which the sector reshapes its mix of supply, demand, and financing to align with evolving market realities.

In this context, the supply-demand balance will be critical to monitoring future price dynamics and absorption rates. A tighter supply pipeline in the near term could limit downward price pressure, while a weaker demand trajectory could push prices downward in segments where buyers are most price-sensitive. Market participants should remain attentive to how the interaction between new launches, existing inventory levels, and financing conditions unfolds in the months ahead. The trajectory will depend on how effectively the market reconciles affordability, investor expectations, and risk management imperatives in a tightening macro environment.

Conclusion

The SCB EIC’s forecast for Greater Bangkok’s residential market signals a period of careful recalibration rather than rapid recovery. A 10% drop in new units in 2024, coupled with a 9% decline in market value, underscores the depth of the current cycle, while the anticipated 1-3% contraction in 2025 and a 0-2% value range reflect a cautious stabilization rather than an immediate rebound. The 28% drop in new launches in 2024, followed by a modest 2-4% contraction in 2025, indicates that supply dynamics will remain constrained as developers adjust to lower demand and tighter financing.

Mortgage lenders are responding with a combination of pricing adjustments and tighter underwriting, as evidenced by the coordinated MRR reductions set to take effect on November 1. The lowest MRR among major banks currently belongs to BBL at 7%, with other lenders moving to 7.175%–7.445% ranges, signaling a competitive effort to support housing credit while managing risk. The portfolio data from major banks confirms a sector-wide pullback in mortgage lending activity through 2024, with SCB posting a substantial year-to-date and quarter-on-quarter decline, and other institutions showing mixed movements. Krungthai Bank, however, stands out for posting growth in its housing loan portfolio, suggesting selective resilience within some segments of the market.

Developers’ strategic pivot toward mid- to upper-market projects reflects a pragmatic response to the financing and demand environment. By prioritizing segments with stronger purchasing power, developers aim to preserve margins and maintain project viability even as overall absorption remains subdued. The reduction in new launches and the emphasis on premium offerings indicate a market that favors high-quality, differentiated products that can justify higher price points and attract buyers with solid financial footing.

For homebuyers, the current cycle emphasizes careful affordability analysis, thorough evaluation of loan terms, and a clear understanding of how financing changes could affect monthly obligations. With tighter credit and elevated borrowing costs, buyers may need to adjust expectations regarding pricing, down payments, and payment schedules. The broader market landscape will continue to evolve as banks, developers, and policymakers navigate a period of gradual adjustment, seeking to balance risk, liquidity, and sustainable demand. As 2025 approaches, the sector will closely watch macroeconomic signals, credit conditions, and price formation to determine whether the stabilization gains real traction or remains fragile.

In the long run, the Bangkok housing market’s resilience will hinge on a delicate equilibrium: continued demand in higher-income segments, disciplined supply growth, and a banking system capable of offering accessible financing without compromising risk controls. The forecast underscores a market in transition, where strategic product positioning, prudent lending practices, and robust buyer financing readiness will collectively shape the pace and trajectory of Bangkok’s real estate market in the years ahead.