Energy costs continue to weigh on production
Dr Yunyong Thaicharoen, chief economist and sustainability officer at SCB Economic Intelligence Centre, said SCB EIC had raised its 2026 Thai economic growth forecast to 2%.
However, the economy is expected to slow in the next phase as higher energy and raw material costs from earlier intense conflict begin to feed through to production costs, inflation and purchasing power.
The recovery is becoming more clearly K-shaped. Growth drivers are concentrated among large companies and industries linked to technology, including AI, data centres, electronics and digital infrastructure. However, many of these sectors rely heavily on imports, limiting the wider benefits for domestic supply chains, employment and income.
Low- and middle-income households and SMEs remain vulnerable as incomes recover slowly, production costs and living expenses rise, and debt burdens stay high. This is limiting consumption and putting pressure on businesses that depend on domestic purchasing power, especially smaller firms and parts of the service sector.
These businesses are facing pressure on sales, liquidity and debt repayment capacity.
Property recovery may take another two years
Dr Kobsak Pootrakool, senior executive vice-president at Bangkok Bank, said the property sector had not yet recovered and remained a serious concern.
He described real estate as one of the weakest business groups, with no clear sign of a short-term turnaround.
The most worrying issue, he said, was the high level of caution among financial institutions in lending. Banks remain concerned about household debt, which has directly affected loan approvals across all categories, from personal loans and car loans to mortgages, which have not grown as they should.
Beyond credit conditions, consumers now have less purchasing power, or almost none in some cases. Businesses are also worried about global conditions, making it difficult for them to invest or move forward with new plans.
“Looking ahead, I believe the property sector will need more time to recover. It may take up to two years before the market truly improves, because property follows the broader economy. The overall economy must improve first before the property sector can follow,” he said.
If the government can drive investment, it would help create a new economic base, improve household income and gradually reduce household debt as a share of GDP. Once that happens, banks would regain confidence and resume lending, creating momentum for a property recovery.
Four risks dragging on real estate
Dr Amonthep Chawla, executive vice-president and head of the Research Office at CIMB Thai Bank, said the property industry in the second quarter remained clouded by several risks, especially the Middle East conflict, which had created knock-on effects for construction material prices through higher energy and transport costs.
The sector also faces rising financial costs, a major obstacle for new project development and debt management.
He identified four key risks for the property industry in the second quarter:
- Developers are struggling to survive. Thai property developers have faced continued pressure for three to four years from a slowing economy and weaker housing demand. Demand from foreign buyers, especially Chinese buyers who were once a major force in the condominium market, has clearly declined.
Developers that have managed to hold on are mostly mid- to upper-tier players, some of which are still launching new projects. However, their strategy has shifted towards clearing old projects to generate cash flow. This has led to a price war, with signs of price dumping in some units or buildings where developers are trying to close sales quickly.
- Bond and debenture risks remain. The level of risk varies by developer group. Large listed companies with strong credit profiles, particularly mid- to upper-tier firms, can still issue debentures to raise funds as usual.
The more worrying group is made up of unlisted developers and companies with higher credit risk, which face greater difficulty accessing loans and issuing debt instruments.
- Property weakness affects the wider economy. Thailand’s broader economy relies heavily on construction and real estate, meaning a slowdown or disruption in the property sector can affect the macroeconomic structure.
“Although first-quarter figures showed some signs of recovery in property-related construction, uncertainty in the second quarter from war-related factors and the costs mentioned earlier remains an issue that all parties must monitor closely,” Dr Amonthep said.
- Tighter bank lending and household debt remain key constraints. Banks continue to apply careful and strict lending criteria because of concerns about borrower credit risk. This caution has become more important in the second quarter as living costs have increased while household incomes have not kept pace with expenses.
The hardest-hit groups are low-income earners and borrowers with high existing debt-service ratios, who will find it much harder to access credit. However, in the longer term, if the Thai economy begins to recover and household debt declines, borrowers with strong credit profiles could still have opportunities to access housing loans.
Property weakness remains persistent
Dr Kanchana Chokpaisansin, head of research at Kasikorn Research Centre, said Thailand’s property sector was in a worrying position and likely to remain weak.
Retail housing loans, or post-financing, grew by about 1% in the first four months of the year. However, she said this could not be considered genuine growth because it was measured against a very low base last year.
Much of the increase came from refinancing of existing debt rather than new borrowing to buy homes. This indicates that new purchasing power in the property sector remains highly fragile.
Kasikorn Research Centre has taken a cautious view of housing loan growth this year, estimating it at between minus 0.5% and 0%, or only marginally positive at best.
Developers are also under pressure. Pre-financing loans for project development remain in negative territory, showing that new investment in the sector has not returned.
The debenture market is another obstacle. Although developers can still raise funds, the process has become more difficult. Long-term debenture issuance by property firms has fallen sharply, while many developers have turned to short-term debentures because the cost of long-term fundraising has risen and become a heavy burden.
In the first five months of the year, property companies were able to raise only about 75% of their targeted debenture issuance. This was below the overall market average and showed that investors had become more selective, focusing mainly on issuers with strong credit profiles.
Bad loans and overdue property debt rise
On asset quality, non-performing loans among developers appeared stable or slightly lower in the first quarter. However, this was partly because of debt restructuring designed to prevent loans from being downgraded to NPL status.
The more worrying sign was the rise in Stage 2 loans, or loans overdue by no more than 90 days. These rose to 8.66% in the first quarter from 8.61% at the end of last year.
This compares with an average Stage 2 ratio of 6.95% for the overall banking system, showing that property loans carry a clearly higher risk than the broader bank portfolio.
For retail housing loans, NPLs rose to 3.79% in the first quarter from 3.76% at the end of last year. Stage 2 housing loans fell to 5.70% from 5.95%, but the decline was not necessarily positive because some borrowers had already moved from Stage 2 into NPL status.
Source: Bangkokbiznews