Visitors at a real estate fair in Bangkok in March. Somchai Poomlard

The slowdown in the real estate sector is expected to trigger a price war in the property market and dampen the purchasing power of upper-income homebuyers.

Amonthep Chawla, chief economist at CIMB Thai Bank (CIMBT), warned the housing market may encounter a price war in the near future, similar to what occurred in the automotive sector last year, based on the sector's ongoing slowdown.

Competition could emerge for both new and existing residential projects. Sales of second-hand homes in both low-rise and high-rise segments have been declining for some time, leading to price reductions and intensified competition, he said.

"We are concerned the property sector may experience a price war similar to what happened in the auto market last year, which could prolong its recovery. However, the impact on the property sector could be more severe, given the higher value of the housing market," said Mr Amonthep.

While slower loan growth has partially helped to improve Thailand's household debt-to-GDP ratio, he said it also reduced liquidity in the economy and weighed on economic growth.

According to a Bank of Thailand report issued on June 30, total household debt tallied 16.35 trillion baht in the first quarter of 2025, equivalent to 87.4% of GDP, down from 16.42 trillion baht or 88.4% of GDP in the previous quarter.

Mr Amonthep said the country's household debt-to-GDP ratio is expected to ease further this year and next, largely due to loan contraction and softer economic growth.

Despite ongoing policy rate cuts under the central bank's monetary easing, loan growth in the banking sector has yet to pick up due to the slowing economy and the regulator's responsible lending guidelines, he said.

CIMBT expects the Thai economy to slow further in the second half of this year amid headwinds from both domestic and external factors. The economy is expected to stagnate in the final quarter of 2025 through to the first quarter of 2026, before recovering in the second half of next year.

Data from the Real Estate Information Center (REIC) shows the price index for new houses in Greater Bangkok tallied 132.4 in the second quarter of 2025, up 0.6% year-on-year and 0.4% quarter-on-quarter.

Although the index rose, the growth rate has slowed, largely due to an increase in unsold housing units, prompting developers to accelerate inventory clearance.

Rather than cutting prices outright, most developers have made only modest adjustments in line with weaker purchasing power. Many large developers are instead turning to promotional strategies, such as complimentary gifts and special campaigns, to ease the financial burden on homebuyers, according to REIC data.