Homes and condos under THB3 million slump as banks reject nearly 40% of loans

Thailand’s housing market for homes priced at no more than THB3 million, once a key pillar, has recorded its steepest contraction in a decade, despite underlying demand, as tight mortgage approvals and high household debt continue to shut many Thais out of first-home ownership.

Prasert Taedulayasathit, president of the Thai Condominium Association, said the under-THB3 million segment in Bangkok and surrounding provinces has fallen sharply.

He said the segment’s presale value peaked in 2018 at THB147.965 billion, but has continued to shrink since then.

He said the economic slowdown in 2024 hit the segment hard, with market value plunging 52% year-on-year to THB54.377 billion, described as the most severe contraction across all price bands in the housing market.

In 2025, the market remained weak: presales in the first nine months totalled about THB33.889 billion, down from THB42.4 billion in the same period of 2024, a decline of roughly 20%.

Prasert said the segment has also lost market share, dropping from 36% in 2014 to an estimated 21% in 2024.

He attributed the slump mainly to stricter bank lending, with high rejection rates, while purchasing power among lower- to middle-income households has been undermined by heavy household debt amid low economic growth of around 1-2%, discouraging long-term borrowing.

Sunthorn Sathaporn, president of the Thai Housing Business Association, cited a third-quarter 2025 survey of housing loan services by state and private banks, based on responses from 17 association members nationwide, ranging from small to large developers.

The survey was compiled to reflect real market conditions and serve as policy input for state agencies and financial institutions.

The survey found mortgage rejection rates remained above 39-40%, continuing from the previous quarter.

The main reasons were borrowers’ incomes failing to meet bank criteria and appraised values coming in below actual selling prices, together accounting for more than 60% of all cited reasons.

He said more than 70% of loan-application problems were linked to strict bank criteria and complex documentation, making it particularly difficult for lower-income and self-employed borrowers to access credit.

Sunthorn said the survey also found that the most common problems developers encountered in loan applications were borrowers’ credit scores and financial histories, followed by strict conditions and criteria, long approval times and complex documentation.

He said the under-THB3 million segment has been hit hardest by the economic slowdown and strict lending rules.

The survey also found that high debt burdens and unstable incomes were key risk factors behind rejections.

He said self-employed and low-income earners remain vulnerable: even with financial discipline, they often cannot prove income under bank rules.

As a result, rejections due to borrowers’ incomes falling below requirements rose to around 40%.

Developers have called on banks and the government to ease lending criteria, recognise new income patterns for self-employed and online earners, cut special-rate mortgage costs, and speed up approvals.

Short-term proposals include special low-interest loans for first homes or homes priced at no more than THB3 million, tax relief on mortgage interest and down payments, fewer documentation requirements, and higher loan ceilings based on realistic valuations.

Sunthorn said developers also want the government to introduce first-home loan measures and cut transfer and mortgage registration fees to help stimulate ownership transfers.

The third-quarter 2025 survey also found that insufficient income pushed rejection rates to around 40%.

The association’s statistical analysis found the under-THB3 million segment had the highest rejection rate, the THB3-7 million segment was broadly steady, and the above-THB7 million segment remained low but began to slow among business customers.

The survey also pointed to loan-to-value (LTV) controls and the credit bureau system as continuing constraints, particularly for buyers seeking second or third homes who are unable to secure additional financing.

Overall, the third-quarter 2025 findings showed continued pressure from the economic slowdown and strict lending criteria.

The association called on the state and banks to jointly set a “common standard” for housing loans to improve access, especially for low-income households.

Separately, Phattarachai Taweewong, director of research and communications at Colliers Thailand, said Thailand’s condo market in 2025 showed clear structural slowing.

Only 40 new projects were launched during the year, totalling 17,110 units, the lowest in 17 years.

He said investment value fell to about THB70.368 billion from a normal level of more than THB100 billion per year, reflecting the accumulated impact of an uneven recovery, fragile domestic purchasing power, and high household debt.

Looking back to 2009, he said the Bangkok condo market was hottest during 2013-2018, before entering a prolonged downturn from 2019, which became even clearer after Covid-19 from 2020 onwards.

He said 2025 marked a full low supply cycle.

Listed developers, accounting for more than 83% of new supply, launched 14,323 units with an investment of nearly THB64 billion, while non-listed developers played a smaller role, highlighting the importance of capital strength, risk management, and brand power in the current cycle.

Colliers expects the market to gradually rebalance in 2026, with new supply projected at around 15,000 units and investment of about THB60 billion, still below long-term averages.

Developers are expected to remain cautious, focusing on small- to mid-sized projects in clear locations, particularly along mass-transit lines and in central business districts.