Thailand's Property Market Faces Extended Slowdown as Developers Urged to Embrace Niche Strategies

 

KKP Financial Group warns of 2-3 year contraction amid soaring household debt and tightening credit, with cascading loan rejections forcing strategic overhaul.

 

Thailand's real estate sector is bracing for a prolonged period of adjustment rather than a cyclical downturn, according to analysts at Kiatnakin Phatra (KKP) Financial Group, who outlined a sobering assessment of the market's trajectory at a media briefing on Monday.

 

Speaking to journalists, Vissarut Panyapinyopon, Real Estate Lending head at KKP Bank, and Kornthip Puckprasurtdee, the bank's Real Estate Industry Data researcher, painted a picture of a market undergoing fundamental restructuring.

 

The message to developers was unequivocal: the era of mass-market, large-scale projects is over, and survival depends on financial prudence, hyper-specific targeting, and a willingness to think smaller.

 

 

 

A Market Under Pressure

The numbers tell a stark story. Nationwide property transfers are projected to decline by 6% in 2025, following a 15% drop in 2023 that pushed transaction volumes to a seven-year low.

 

The situation is more acute in Bangkok and surrounding areas, where transfers fell 15% in the first eight months of 2025 compared with the same period in 2024.

 

For new-build properties from developers in the Bangkok area, the estimated decline reaches 20%.

 

"The current residential market is in a slowdown and cannot generate sales as it did in the past," Kornthip warned. "This slowdown is expected to continue for another 2-3 years."

 

Three interconnected forces are suppressing market activity. Household debt stands at a formidable 90% of GDP, severely limiting consumers' capacity to take on new mortgage commitments.

 

 

Financial institutions have responded by tightening lending standards, creating significant barriers to entry for potential homebuyers.

 

Meanwhile, broader economic malaise has dampened consumer confidence, with many households postponing major purchasing decisions.

 

 

 

The Rise of the Second-Hand Market

Amidst the gloom, one segment is thriving: the second-hand market. In 2025, pre-owned properties accounted for 56% of transfers, up sharply from 38% before the COVID-19 pandemic.

 

The shift is most pronounced in the sub-3 million baht bracket, where price advantages and accessible locations are attracting buyers priced out of new developments.

 

The trend has not gone unnoticed by major developers, who are increasingly adopting "buy-renovate-sell" strategies, particularly for well-located two-bedroom condominiums along major mass transit lines in prime districts such as Watthana, Chatuchak, Huai Khwang, and Khlong Toei.

 

 

Segment-Specific Pressures

The new-build sector's troubles vary considerably by property type. Condominium sales plummeted 28% in 2025, with their share of total transfers falling to 55% from a pre-pandemic high of 60%.

 

The decline reflects not only affordability constraints and slow foreign demand recovery but also rising public transport costs that have eroded the value proposition of city-centre living. Recent seismic events have further dented consumer confidence.

 

Townhouses have been hit hardest. Catering to "real demand" buyers—those purchasing for owner-occupation—this segment has been particularly vulnerable to high household debt and stringent loan reviews.

 

 

The result is a disturbing phenomenon Vissarut described as "cascading loan rejections," where individual properties are sold and returned to the market multiple times as successive buyers fail to secure financing. Some projects have cycled the same unit through 3-5 sales attempts.

 

With approximately 115,000 unsold units concentrated in the 2-5 million baht range, the townhouse segment faces what analysts describe as an impending "price war."

 

Perhaps most surprisingly, the luxury housing segment—once considered a safe haven from mass-market loan rejection issues—is showing clear signs of weakness.

 

Sales of single detached and semi-detached homes fell 15% in 2025, and an estimated 3,000 unsold units in the 25-50 million baht bracket represent a 5-6 year supply at current absorption rates.

 

 

 

Geographic Divergence

Whilst Bangkok and its vicinity continue to dominate with 46% of national transfers, KKP's analysis reveals sharp regional variations.

 

Growth markets include Phuket, Surat Thani (particularly Koh Samui), Prachuap Khiri Khan (Hua Hin), and Nakhon Ratchasima.

 

Conversely, developers should approach Pathum Thani, Nonthaburi, Chonburi, Chachoengsao, Chiang Mai, and Khon Kaen with caution.

 

Foreign buyers, whilst seeing overall condominium transfers decline modestly by 4% in 2025, show dramatically different patterns geographically.

 

Transfers fell sharply in traditional hotspots like Chonburi (-15%) and Chiang Mai (-28%), but surged in Bangkok (+9%), Prachuap Khiri Khan (+66%), and Surat Thani (+220%).

 

Phuket stands out as a premier growth market, maintaining steady absorption of approximately 1,000 condominium transfers to foreign buyers annually, with 10% year-on-year growth in 2025.

 

Significantly, the island is witnessing a shift from short-term tourism and holiday homes to long-term family residency, driven by rapid expansion of international schools.

 

 

 

The 2026 Outlook

KKP's forecast for 2026 anticipates continued contraction, albeit at a slower rate of approximately 6%. Unsold inventory is projected to fall by 6% to around 207,998 units as developers hold back on large-scale launches.

 

The return of "real demand" buyers will be slow and heavily contingent on tangible economic recovery.

 

Potential catalysts include government stimulus measures—such as expanded reductions on transfer and mortgage fees or new tax incentives—and infrastructure development.

 

Key projects to watch include the MRT Orange Line and transformative private-sector developments such as Bangkok Mall and Cloud 11, expected to invigorate zones like Bang Na and Phahonyothin.

 

KKP projects these will generate demand for mid-tier single-family homes (8-15 million baht) and affordable condominiums (1.5-3.5 million baht).

 

 

 

Strategic Imperatives

Vissarut outlined three critical imperatives for developers.
 

First, they must fortify financial positions for longer sales cycles, either accepting extended timelines with sufficient liquidity or strategically reducing project sizes.

 

Second, they must target hyper-specific demand drivers—projects must be anchored to identifiable buyer pools near major office buildings, international schools, or mass transit hubs.

 

Third, they should prioritise quality over quantity, shifting from large-scale developments to smaller, high-quality projects meticulously designed for well-defined buyer profiles.

 

"Green and sustainable living" features are rapidly moving from niche preference to market expectation, KKP noted, with low-carbon materials, solar roofs, and smart home technology becoming key differentiators that also align with future regulatory standards.

 

"Look at your own wallet and see if you can withstand slower sales, then reduce project size appropriately," Vissarut advised. "And third, if possible, find a location with specific demand."

 

On the lending front, project loans to developers are estimated to have declined approximately 20% by year-end 2025, which Vissarut characterised as appropriate given current inventory levels.

 

For 2026, the bank will focus on existing clients—both large listed companies and experienced SMEs—whilst avoiding aggressive expansion that runs counter to industry conditions.

 

The mass-market playbook of the past is indeed obsolete.

 

Success in 2026 and beyond will belong not to the largest or fastest developers, but to the most strategically precise—well-capitalised, agile firms that master niche targeting, geographic divergence, and sustainable quality.

 

Only these will capture the market's most profitable opportunities in what promises to be a challenging period for Thailand's property sector.