Home purchasing power takes a hit

A mismatch between the growth of housing prices and income, actual housing costs including transport expenses, and high household debt is denting home purchasing power, according to SET-listed residential developer Sena Development.
Managing director Kessara Thanyalakpark said risks from a fluctuating economy continue to affect purchasing power in the property sector, particularly a massive amount of household debt.
“Although housing is one of the essential needs and remains in high demand, many prospective buyers are unable to purchase due to rising development costs, while consumer incomes haven’t been able to catch up, reducing the ability to afford homes,” said Ms Kessara.
She said weak demand was mainly attributed to a mismatch between the growth of housing prices and income.
“Housing demand across various price segments does not align with the available supply. More than half of the population has an income suitable for purchasing units priced below 3 million baht, yet most of the supply in Bangkok is more expensive than that,” said Ms Kessara.
She said consumer purchasing power has not increased in line with economic growth, making it increasingly difficult to own a home.
The impact is more pronounced among those earning less than 30,000 baht per month, with over 50% of people in Bangkok only being able to afford homes priced below 3 million baht.
“Most people’s incomes in the capital city have not grown in line with housing prices, which have risen 70% compared to those of 2014, while the average income per capita has increased by only 15%,” said Ms Kessara.
This disparity is largely due to the continuous annual increase in land prices, which is a key factor driving up housing costs, she said.
Seeing a drop in land prices is unlikely, while developers also face higher costs for construction materials.
“Transport plays a crucial role in the decision-making for purchasing a home, especially in Bangkok. For those with an average income of 30,000 baht per month, transportation costs account for 16% of their monthly expenses, making this expense a significant factor,” said Ms Kessara.
She said buying a home in the city centre has become increasingly difficult, as housing prices are too high for most people.
As a result, consumers are often forced to look for homes in the outskirts or suburban areas, which come with additional commuting costs.
Ms Kessara said actual housing costs encompass both home prices and transportation expenses. Therefore, the true cost of housing is not just the price of the home but also includes transportation.
When factoring in commuting costs, homes in urban areas become even more expensive, making it increasingly challenging for average people to purchase homes in city centres.