Miniature house models on display at a property fair.  (Photo: Varuth Hirunyatheb)

Thailand's residential market index in the first quarter of 2024 dropped for the sixth consecutive quarter, plunging to a low point post-pandemic as GDP growth slowed to 1.5%.

Vichai Viratkapan, acting director-general of the Real Estate Information Center (REIC), said the index was 79.6, down 2.8% from 81.9 in the fourth quarter of 2023, and dipping 15.4% from 94.1 in the first quarter of 2023.

"The key factor was slowing economic growth in the first quarter, which was only 1.5%," he said. "The slowdown stemmed from declines in the agricultural and industrial sectors."

Other negative factors included consecutive drops in government spending, which was delayed for several months, as well as declines in private sector investment, exports and consumption.

The hospitality sector was the only industry posting growth.

The year-on-year decrease of 15.4% was the largest since the fourth quarter of 2020, which had a decline of 18%, according to the REIC.

In the third quarter of 2023, the index declined 13.6% year-on-year, while for the fourth quarter it dipped 13.9%.

The low reading was reflected by supply and demand. On the supply side, the number of new residential units registered rose by 16.5%, while the permitted construction area of residential units declined by 25.3%.

On the demand side, the number and value of residential transfers nationwide dropped by 12.4% and 13.4%, respectively.

The absorption rate of new condos and low-rise houses declined 1.9% and 0.8%, respectively.

"Weak demand was caused by several negative factors, particularly loan-to-value limits and high household debt, which exceeded 90% of GDP," Mr Vichai said.

These risk factors caused financial institutions to tighten their mortgage lending criteria, resulting in high rejection rates, particularly among middle and low-income earners.

A string of interest rate hikes last year, the sluggish recovery of the Thai economy and rising living costs have directly affected home purchasing power, he said.

Despite government property incentives, REIC expects the index for the entire year of 2024 to grow by 0.2% to 87.5 as negative factors remain.

The only driver would be a possible increase in residential transfers, caused by the property measures, said the centre.