Thailand’s land prices skyrocket amid urban growth
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Land prices in Bangkok capital city of Thailand has skyrocketed 75% in recent years due to infrastructure development along with urbanization driven by mass transit expansion.
Saenphin Sukhee, chief executive of residential developer Frasers Property Home (FPH), said land prices in Bangkok continued to grow despite the Covid-19 pandemic with an average increase of 70-75% during 2020-2022.
Saenphin said actual prices of land have risen beyond appraisal land prices. Financial institutions cannot catch up with the rise. As a result, FPH got project loans lower than they should.
The Real Estate Information Center (REIC) has recently reported the price index of vacant land in Greater Bangkok in the fourth quarter in 2022 at 381.4 points, an increase 12.5% compared to the same period in 2021 and rose 3.4% from the third quarter of 2022.
REIC acting director-general Vichai Viratkapan said rices of vacant land kept increasing but the rises remained lower than the five-year pre-pandemic average of 14.8% year-on-year and 4.1% quarter-on-quarter during 2015-2019.
He said the lower growth was derived from the global economic slowdown due to the pandemic and the Russia-Ukraine conflict and the normal collection of the land and building tax in 2021-2022.
Meanwhile, land in outer Bangkok locations saw a rising change in prices as land prices remained low, viable to develop low-rise houses at affordable prices for mass market demand.
Questions & Answers
Q.What is driving the significant increase in land prices in Bangkok?
What is driving the significant increase in land prices in Bangkok?
Land prices in Bangkok have skyrocketed due to infrastructure development, specifically mass transit expansion, which is driving urbanisation. This growth has continued despite the Covid-19 pandemic, with increases of 70-75% during 2020-2022.
Q.How are financial institutions impacted by the rising land prices?
How are financial institutions impacted by the rising land prices?
Financial institutions are struggling to keep up with the actual rise in land prices, which have gone beyond appraisal values. This has led to developers like FPH receiving project loans that are lower than they should be, impacting their financing.
Q.Why has the growth in vacant land prices in Greater Bangkok recently been lower than the pre-pandemic average?
Why has the growth in vacant land prices in Greater Bangkok recently been lower than the pre-pandemic average?
The lower growth in vacant land prices is attributed to the global economic slowdown caused by the pandemic and the Russia-Ukraine conflict. The normal collection of the land and building tax in 2021-2022 also contributed to this reduced growth.
Q.Where are developers currently finding opportunities for affordable housing projects in Bangkok?
Where are developers currently finding opportunities for affordable housing projects in Bangkok?
Developers are focusing on outer Bangkok locations where land prices remain low. This allows them to develop low-rise houses at affordable prices, catering to the mass market demand for housing.