The residential market in Chiang Mai and Chiang Rai will need to rely on demand from China and Myanmar, along with locals in the upper-end segment as lower-income earners continue to struggle in terms of purchasing power and access to mortgage loans.
Nawara Sakulnamarka, assistant director of the Bank of Thailand's Northern Region Office, said foreigners have helped drive property demand in Chiang Mai amid limited purchasing power among locals, especially in the lower-end segment.
"Household debt remains high, and purchasing power has yet to recover, particularly among low-income earners and freelancers," he said. "This trend is also increasingly affecting salarymen."
In the fourth quarter of 2024, newly issued mortgage loans in the North, with over 90% in Chiang Mai, declined by 3.9% year-on-year.
This marked an improvement from a 13% drop in the third quarter, but the overall decline for the year remained significant.
By unit price, residential units priced at 7 million baht and above recorded a growth of more than 10% last year, those in the 3-7 million baht bracket declined by 33%, while units priced at 3 million baht or less dropped by 57%, said Mr Nawara.
This trend aligned with the shifting proportion of homebuyers in the North securing mortgage loans.
Borrowers earning less than 20,000 baht per month have seen a continuous decline since 2022, while higher-income groups remained stable or have increased.
In 2024, people earning less than 20,000 baht per month accounted for 22% of mortgage borrowers, down from 25% in 2023 and 29% in 2022.
Meanwhile, those with an income of 20,000-30,000 baht per month made up 22% from 2022 to 2024.
The proportion of borrowers earning 30,000-50,000 baht per month increased from 23% in 2022 to 25% in 2023 and 26% in 2024, while the segment of earners making 50,000-100,000 baht per month grew from 15% in 2022 to 17% in both 2023 and 2024.
"The property market in the North is likely to remain stable in the first half of this year, as the regional economy is expected to experience a slight improvement, driven by the high season for tourism," Mr Nawara said.
Predikorn Buranupakorn, chief executive of Chiang Mai-based developer Ornsirin Plc, said the tourism industry could help revive property demand in Chiang Mai.
However, the low-rise housing market, particularly single detached houses and twin houses largely driven by local demand, is expected to contract further in 2024-2025 due to factors such as rising interest rates and increased development costs.
"Non-local buyers such as foreign buyers, those from other provinces and investors remain interested in condos priced 3 million baht and above due to prime locations and the large sizes," Mr Predikorn said.
Demand from foreign buyers, particularly from China, Myanmar and South Korea, has been increasing, contributing to the continuous improvement of the condo market in Chiang Mai, he added.
China Suttatanachod, president of the Chiang Rai Real Estate Association, said that Mae Sai district has seen strong demand for low-rise houses from buyers in Myanmar, who typically pay by cash and often use nominees for these transactions.
"It must be acknowledged that off-the-books money has helped support the economy in Chiang Rai, as local purchasing power has significantly declined," he said.
"Many customers request extended down payment periods with developers until they are ready to apply for a bank loan, which usually gives them a lower credit line than the price. Developers are willing to take the risk, as it is better than not selling at all."
