Bangkok Land Price Index up 3% in Q3

The land price index in Greater Bangkok for the third quarter of 2023 increased 3% year-on-year, the lowest growth rate in seven quarters.

Vichai Viratkapan, who serves as the acting director-general of the Real Estate Information Center (REIC), recently commented on the challenges facing the real estate market. He noted that in the fourth quarter of 2021, the growth rate reached its lowest point in over a decade, standing at just 1.7%. Several negative factors have contributed to this downturn, with the most significant being the increase in interest rates to 2.5% as of September 27, marking the fifth such hike this year.

Two other key factors affecting the purchasing power of potential homebuyers are the return of loan-to-value limits to their normal levels early in the year and the rising household debt, which has exceeded 90% of the GDP. These factors have led residential developers to delay their plans for launching new projects and potentially postpone the acquisition of vacant land for future development.

Additionally, the lack of a significant reduction in land and building taxes this year has caused a decrease in demand among developers to acquire land. The acquisition and retention of land now come with higher taxes, making it a more costly endeavor, which can translate into increased expenses for future project development, according to Mr. Vichai.

According to data from the REIC, the price index of vacant land in Greater Bangkok increased from 376.5 in the second quarter to 379.9 in the third quarter of 2023, marking a 0.9% increase. However, this growth still falls short of the five-year average of 4.1% observed during the period from 2015 to 2019. Year-on-year growth has declined for two consecutive quarters, with a rise of 6.2% in the second quarter compared to the significant 13.1% increase in the first quarter.

The third quarter of 2023 witnessed the most substantial year-on-year price index increases for vacant land in Nakhon Pathom at 62.5%, followed by Bang Phli-Bang Bo-Bang Sao Thong with a 22.3% rise, and Muang Samut Prakan-Phra Pradaeng-Phra Samut Chedi at 17.9%. These changes indicate that land prices in suburban areas around Bangkok have risen more significantly than those in inner Bangkok, primarily due to extensive development plans in the neighboring provinces of Bangkok.

Furthermore, land prices in suburban areas remain relatively affordable, making them an attractive option for residential development, especially for low-rise housing. This aligns with the demand from potential homebuyers seeking affordable housing in these areas. During the first half of 2023, these suburban zones saw a surge in newly launched residential projects and high volumes of new sales, as pointed out by Mr. Vichai.

Source: Bangkok Post