CHIANG RAI – In the cool hills of the far north, where the Mae Sai River hums with quiet life, the dream of a first home is slipping out of reach. For Somchai Phuangmanee, a 35-year-old teacher from Chiang Rai, years of saving were meant to lead to a simple two-bedroom house and a small garden for his children.
Last month, he applied for a mortgage at a major bank. The answer was a firm no. He says the bank flagged his debt-to-income ratio, despite steady pay and no other loans. Rent now takes half his salary, leaving his family stuck in place.
His experience is widely shared. Across Thailand, the housing market is straining under a sharp credit crunch. Mortgage rejection rates have surged to about 80% this year, up from around 30% during the COVID-19 slump.
Developers, analysts, and households say the pattern is deep and persistent. The property sector that once lifted the middle class now blocks many from buying, from Bangkok’s high-rises to Chiang Rai’s quiet suburbs.
Why Approvals Are Falling
This is not just about risky borrowers. It reflects wider pressures in a fragile economy. Household debt remains very high at 87.4% of GDP in the first quarter of 2025, only slightly down from 88.4% at the end of 2024. That equals roughly 16.35 trillion baht, or about 475 billion dollars.
The Bank of Thailand’s comfort level is under 80%. Such debt weighs on spending and investment, and the hangover from the pandemic has not lifted. Mortgages make up about 34% of household debt, while non-performing housing loans reached 232 billion baht in the first quarter, up 16.5% from a year earlier.
Banks have reacted by tightening credit. The easy-approval era is over. Lenders now assess not only personal finances but also the health of employers and sectors. Tourism and exports face extra scrutiny due to global slowdowns and tariff risks.
Growth of only 1.5% to 2% in 2025, coupled with the aftermath of the March earthquake and weak Chinese tourism, has softened household readiness to buy. High living costs and flat wages add pressure. Many young Thais are joining a growing “Generation Rent”, choosing flexibility while juggling student loans and credit card balances.
The pain is pronounced in provinces like Chiang Rai, where farming and border trade with Myanmar and Laos underpin local incomes. Monthly pay often sits below 25,000 baht. Even homes priced between 2 and 5 million baht feel out of reach. Local agents report rejection rates near 70% for buyers with volatile farm income, and a clear drop in enquiries this year.
Market on Pause, With Wider Economic Risks
Credit constraints are freezing both new builds and resales. The result is a loop of weak demand, rising inventory, and delayed purchases. New housing launches fell 28% in 2024. Another 2% to 4% decline is expected in 2025 as developers slow projects.
In Bangkok, condo sales dropped about 60% in the third quarter, while townhouses and detached homes fell more than 26%. Existing homes offer lower prices, often around 30% less than new units, but banks have turned more cautious here as well. Transfers have fallen by about 5% to 10% between the first quarter of 2023 and the first quarter of 2025.
In Chiang Rai, detached houses dominate buyer demand. Many new units listed in the first half of 2025 ranged from 5 to 10 million baht. Yet absorption sits near 40% due to financing hurdles. Renting is on the rise, up about 15% year on year, as families delay purchases.
Some foreign buyers still look to eco-style villas in the Golden Triangle, but local demand remains soft. Oversupply from pre-2024 projects lingers, pushing price cuts of 10% to 15% and squeezing developers, including projects near Wiang Ka Long.
The economic spillover is broad. Property directly accounts for 5% to 6% of GDP, while related activity through building, materials, and services touches 12% to 15%. Slower sales and stalled sites have idled workers. In Chiang Rai, housing sites once hired seasonal staff from hill tribes. Layoffs now hit local craft sellers and small eateries.
A prolonged squeeze could trigger discount battles between developers, cut homeowner equity, and lift bad loans further. Analysts warn that growth could lose another 0.5% to 1% if the trend continues. Provinces still managing earthquake repairs face more delays, while wealth gaps widen as well-off buyers secure prime assets and locals rent for longer.
Policy Moves: Relief in Sight or Short Fix?
The Srettha government has moved to ease the strain. The Bank of Thailand relaxed loan-to-value rules in March, in effect from May 2025 to June 2026. First homes above 10 million baht can now be financed up to 100%, and the same applies to second homes priced under that threshold. The aim is to support genuine buyers while keeping speculation in check, though banks remain wary.
Transaction costs are lower, too. Transfer and mortgage fees for homes under 7 million baht have been cut to 0.01% and extended through late 2025. That saves buyers money and should lift transfers by about 10% to 15%. The “You Fight, We Help” scheme, running to February 2025, offers debt workouts for housing and SME loans to protect assets.
The government is also preparing tax breaks for low-cost homes priced up to 1.5 million baht and a 50% land tax reduction for 2026. Mortgage guarantees that cover 20% of high LTV loans are in the pipeline. In Chiang Rai, proposed eco-friendly subsidies aim to back projects in border areas.
Industry voices remain cautious. Soothorn Sathaporn of the Housing Business Association calls these measures short-term, given deeper issues like stagnant pay and informal debt. Without stronger incomes and better credit health, rejection rates could stay above 60%.
The central bank must also balance support with stability. Further policy rate cuts to around 2% by year-end are under discussion to ease costs.
As evening settles over Chiang Rai’s clock tower, Somchai keeps browsing listings and crunching the numbers. He wants more than small tweaks. He wants a fair shot at a home through steady work and basic credit.
Thailand’s housing standoff reflects heavy debts, delayed plans, and the need for firm reform. Will action come before the slowdown bites harder? For families like the Phuangmanees, time is running short.
