The demand for property in Pattaya and other coastal areas of Thailand keeps growing. Despite this positive trend, the Thai market will face some challenges in 2022, such as labor shortages and rising construction materials prices. Local developers monitor this situation and try to minimize this trend to meet the demand.
The impact of labor shortage on Thai property prices
“2022 will be a difficult year for construction companies, as demand remains high, but supply and high costs for the construction of buildings are worrisome. We need to be as responsible as possible with cost management to complete the construction of the properties and sell them at the price we agreed with the customers earlier,” said Fanid Manirattanaporn, a specialist in construction and business development.
He noted that the shortage of labor is still a problem for many developers, as foreign builders cannot enter Thailand. Increased competition and rivalry of construction companies in the labor market has led to higher wages for local workers.
The impact of construction costs on Thai real estate prices
As already mentioned, labor shortages are not the only problem facing the Thai real estate industry. High prices for building materials, or rising prices for steel and cement, are another category of expenses that development companies will struggle with in 2022. This factor will inevitably lead to higher prices for local housing.
“Real estate construction costs excluding land value are likely to increase by 3-4% this year. With an increase in employee salaries and fuel prices, housing prices will rise by about 2%,” Pratip Tangmatitam, chairman of one of the largest construction companies in Thailand.
Many developers have noted the increase in prices for building materials but have not yet determined how this will affect the value of real estate. Some companies expect construction expenses to increase by 5-10% in 2022. To date, most organizations have not yet decided how to adjust the cost of their housing.
What changes are happening with the prices of Thai housing?
Market experts predict that housing prices will no longer be controlled, since the rapid increase in house construction costs has also been associated with fuel costs. The increase in fuel prices affects both transport services and production costs. Prices will rise by 10% and higher if wages also grow.
Nickel, which accounts for 20-30% of system work with such components as electrical wiring, experienced the highest jump: prices rose by 60%. Although steel prices have doubled over the past year, the cost of self-construction has remained stable during the coronavirus outbreak. Demand would have fallen since then if the cost had increased, but it has remained at the proper level.
What is the forecast for Thai real estate?
If the situation around Russia and Ukraine does not improve, the demand for independent construction of houses may decrease. The private housing market, which has been steadily declining since 2020 as a result of the pandemic, has only recently recovered, but its future remains unknown.
In November 2021, sales at the developers’ fair were 20% higher than at the same event in 2020 due to pent-up demand. Earlier in Thailand, everyone expected demand to continue to grow in 2022, but there were many uncertainties.
Due to the Russian-Ukrainian situation, the market may stagnate until the end of the year. Driving factors are likely to limit the mid-range to price sectors.
In Pattaya and other regions, prices now start from 15,000 baht per square meter.
Economic and real estate promotion projects
Thailand is home to several mega-projects that will boost its economic recovery. The stable development of the real estate market is linked to the hopes for GDP recovery.
The megaprojects are:
- Thailand’s participation in China’s “One Belt, One Road” program. This is a global trading system that, when completed, will have to encircle the entire “Old World”.
- Thailand continues to work on the launch of the Eastern Economic Corridor. It is a free economic zone in the east of Thailand, covering an area of more than 13,000 square kilometers.
Several international developers work in Thailand, mainly in partnership with local companies, for example, Japan’s Mitsui Fudosan together with Thai Ananda Development.
Several new Japanese developers also entered the market in 2021. For example, Tokyo Tatemono Co.
In some market segments, the share of foreign nationals is still high, and in some places, it is even growing. In some prestigious areas of Bangkok, almost 25% of buyers are foreigners. But Thailand’s main objective is to ensure a large-scale return of Chinese investors to the country.
Is it worth buying Thai real estate in 2022
Despite the economic difficulties faced by the Thai real estate market, local residential and commercial properties remain investment-attractive assets. In 2022, entrepreneurs continue to buy houses in Thailand and receive a stable passive income from their rental and capital gains. To join them, please check with the Thailand-Real.Estate agents who:
- cooperate with the best developers in the country;
- help customers choose the best property to achieve their ambitious goals;
- provide legal support at all stages of the transaction;
- ensure high-end after-sales service.
Thailand-Real.Estate is a team of professional real estate brokers working with clients from all over the world. Your deal is in safe hands.