Potential buyers consult sellers of housing projects at the recent House and Condo Expo.

Thailand’s structural issues are expected to put prolonged pressure on the country’s real estate sector, raising concerns about a potential “lost decade” for the industry, according to several local research centres.

Persistent structural challenges such as slow economic growth, high household debt and an aged population are likely to weigh on the property market in the coming years, notes research carried out by Kiatnakin Phatra Financial Group (KKP).

Since late 2022, household debt in Thailand has been undergoing a deleveraging cycle, driven by a rise in non-performing loans in the household sector. This has resulted in a contraction in housing loans and a decline in property prices.

According to KKP’s research house, Japan experienced a housing bubble that burst in 1990, leading to a sharp contraction in mortgage lending and a steep decline in both new and second-hand housing prices. This triggered a negative wealth effect, as falling home values reduced household wealth and the value of collateral.

As a result, households became more cautious with their spending, while banks, facing increased risks and potential losses, tightened lending standards. The reduced credit availability drove down housing prices, creating a vicious cycle that extended Japan’s economic stagnation for more than two decades. However, the challenges faced by Japan and Thailand differ.

“It is still too early to determine whether Thailand’s real estate sector will experience a lost decade similar to Japan, given the differences in economic context. While the Thai economy may face a period of slow and prolonged stagnation, this could also present an opportunity for restructuring and more effective adaptation,” noted KKP Research.

The SCB Economic Intelligence Center (EIC), a research unit under Siam Commercial Bank, forecasts the Thai housing market will continue contracting across various segments this year, though the rate of decline is expected to improve compared with the previous two years.

In 2025, the total number of residential unit transfers nationwide is projected to reach 338,000 units, down 3% year-on-year. In the Bangkok metropolitan area, residential sales are expected to total 56,000 units, contracting by 3%. Meanwhile, the number of new residential units launched in these areas is anticipated to drop by 9% to 56,000 units.

“Despite the Bank of Thailand’s decision to ease loan-to-value [LTV] regulations for mortgages, the impact on the property market will be limited. The policy is expected to mainly lift demand in the upper-income segment,” noted SCB EIC.

Separately, Krungthai Compass forecasts the LTV relaxation will help reduce excess supply in the property market and support developers’ liquidity. The excess supply in Bangkok and its metropolitan area tallies 234,400 units, up 4.6% from the annual average of 224,100 units recorded between 2019 and 2024.

The LTV easing is expected to support housing transfers. Without this relaxation, residential transfers this year would likely total 570,000units, down 3.8% year-on-year, according to the research house. The LTV relaxation should increase residential transfers in the Bangkok metropolitan area, generating an additional 13.8-27.6 billion baht this year and sustaining momentum from the previous year, noted Krungthai Compass.