Residential demand in Chiang Mai began slowing in the second half of 2023 and has continued through the first two months of this year, largely attributed to shrinking purchasing power caused by the economic slowdown and higher interest rates.
Soranand Sethi, president of the Chiang Mai Real Estate Association, said the number of people looking for homes in Chiang Mai via property marketplace Baania.com dropped from 53,336 in July last year to 39,817 last month.
"Despite optimism surrounding Chiang Mai's tourism recovery, prospective homebuyers had lower purchasing power because of the economic slowdown, high household debt, increasing expenses, decreasing income and interest rate hikes," he said.
Given fragile purchasing power, many sellers of condo units in the resale market, particularly those with one bedroom and less than 40 square metres in size, have lowered their prices by 17% in an effort to sell them more quickly, said Mr Soranand.
For units with two bedrooms and less than 80 sq m, the prices have dropped 1.5%.
"There were discounts in the lower-end segment, not the upper-end. This indicates purchasing power was weak," he said. "Rents also decreased while supply increased by 35%."
These statistics mean the economy remains sluggish and purchasing power has been significantly affected, said Mr Soranand.
He suggested the government use stimulus to increase consumer spending.
According to the Real Estate Information Center (REIC), new sales of residential units in Chiang Mai in the second half of 2023 dropped by 12.4% year-on-year to 949 units worth a combined 3.7 billion baht, representing a 7% decrease.
New sales of low-rise houses declined by 10.3% to 698 units worth 3 billion baht, dipping 5.8%.
New condo sales shrank by 17.7% to 251 units worth 708 million baht, down by 11.5%, noted REIC.
Housing inventory in Chiang Mai tallied 9,591 units worth 41.6 billion baht, up 6.6% and 9.7%, respectively, according to the centre.
The inventory comprised 8,145 low-rise houses worth 37.2 billion baht, up 4.6% and 8.6% respectively, and 1,446 condo units worth 4.5 billion baht, gains of 19% both in terms of quantity and value.
REIC also reported pricing competition in low-rise housing projects, with those featuring modern designs and offering good after-sales services for units priced between 3-5 million baht recording good sales.