Arya News - Thailand`s property sector is teetering on the brink of collapse as soaring household debt and tightening credit conditions create a perfect storm threatening the industry`s survival, according to leading experts.
BANGKOK – Thailand’s property sector is teetering on the brink of collapse as soaring household debt and tightening credit conditions create a perfect storm threatening the industry’s survival, according to leading experts.
The nation’s household debt has reached a staggering 90% of GDP in the first quarter of 2025, totalling 16.2 trillion baht. Housing loans alone account for 37.9% of this figure – approximately 6 trillion baht – whilst non-performing loans from the household sector exceed 200 billion baht, with another 575 billion baht in loans on the verge of default.
Against this backdrop, Thailand’s economic growth remains anaemic, with projections of just 2% for 2024 and a mere 1.5% for 2025.
The sluggish economy has prompted financial institutions to adopt increasingly cautious lending practices, with the “Responsible Lending” index contributing to a sharp contraction in approved loans.
Dr Vichai Viratkapan , an independent academic specialising in housing and urban development, warned of the severity of the situation.
Property transfers have declined by 5-10% from Q1 2023 to Q1 2025, with condominiums – which must be constructed before transfer – particularly affected.
The combined impact of dwindling sales, fewer mortgage approvals, and sluggish transfers is severely hampering developers’ income and cash flow.
Corporate Bond Crisis Deepens
Both listed and unlisted developers are now struggling with corporate bond repayments.
First-half 2025 reports indicate that one developer defaulted on 300 million baht, whilst five others sought extensions on debts totalling 7.86 billion baht.
With 95 billion baht in corporate bonds due to mature this year, rollovers are proving increasingly difficult.
The situation has created what experts describe as a “tiger in trouble” scenario, characterised by negative liquidity, eroding investor confidence, and a rapidly escalating debt burden. Without swift intervention, they warn this could become an “economic time bomb.”
Dr Vichai has outlined a comprehensive survival strategy requiring coordinated action from developers, government, and financial institutions.
Property developers are urged to implement six immediate measures:
Immediate cash flow management : Clear existing inventory through promotions, discounts, extended payment plans, or rent-to-own schemes
Asset conversion : Bundle projects into Real Estate Investment Trusts (REITs) or use assets as loan collateral
Financial planning : Conduct conservative assessments and prepare for debt restructuring if necessary
Cost rationalisation : Delay new projects and focus resources on completing existing developments
Bond restructuring : Convert short-term debts into longer-term arrangements
Business diversification : Expand into ventures providing recurring income
Government Intervention
The government is called upon to implement six support measures:
Liquidity boost : Provide short-term soft loans through state banks, using unsold properties as collateral
Tax relief : Reduce land and building taxes for unsold units over three years old, with savings passed to buyers
New home incentives : Offer temporary tax benefits for new properties over second-hand ones
Mortgage insurance : Guarantee up to 20% of housing value for high loan-to-value borrowers
Employment creation : Generate jobs and income whilst addressing household debt through special projects
“Homes for Thais” pause : Temporarily halt the government housing programme to redirect demand
Financial Institution Support
Banks and lenders are urged to:
Relax lending criteria : Update conservative assessment guidelines for modern customer profiles, including freelancers and online merchants
Promote low-interest offers : Back fixed-rate products for 3-5 years to stimulate the market
Provide developer funding : Step in where corporate bonds remain unattractive to investors
Accelerate NPL management : Promptly address non-performing loans
Encourage non-bank lenders : Increase market competition and buyer choice
Urgent Action Required
Industry experts emphasise that coordinated action from all three sectors is essential to prevent a complete market collapse.
By combining enhanced liquidity, stimulated purchasing power, restored confidence, and effective debt management, the crisis could potentially be transformed into an opportunity for long-term sustainability.
The property sector’s troubles reflect broader economic challenges facing Thailand, with the combination of high household debt, slow growth, and tight credit conditions creating an increasingly precarious situation that demands immediate and decisive intervention.