For property buyers comparing Phuket with Bangkok, a supply squeeze in the capital may matter more than it first appears. When developers postpone launches due to rising costs, reduced inventory affects pricing power, buyer choice and market dynamics across Thailand’s residential sector.
According to Siam Commercial Bank Economic Intelligence Center, new residential launches in Greater Bangkok are forecast to reach 39,000 units in 2026, down 5% year-on-year. If the Middle East conflict persists and energy volatility continues, that figure could decline by as much as 10%.
The immediate cause is energy prices. Rising costs in the construction materials industry are hitting energy-intensive products hardest, where energy accounts for 35-50% of total production costs for steel, cement and tiles.
Why construction costs are rising
Energy prices directly affect the materials required to build residential property. Steel, cement and tiles all require significant energy input during production. When fuel costs rise, producers face higher expenses they cannot easily absorb.
At the same time, imported raw material prices remain volatile in line with global commodity markets, while transport costs have increased. EIC notes that in the short term, construction material prices are expected to rise modestly over the next one to two months, mainly due to higher logistics costs.
Many operators currently hold inventory accumulated before the conflict, and large-scale construction projects have locked in material prices through advance orders. This provides temporary cushioning. However, a prolonged disruption in the Strait of Hormuz would pose further upside risks to construction material prices.
What the supply decline means for buyers
Developers face a difficult calculation. Rising material costs increase development expenses, while weak demand and intense competition limit their ability to raise prices. The result is project delays and fewer new launches.
For buyers, reduced supply typically creates upward pressure on pricing over time, particularly in markets where inventory is already constrained. Phuket’s villa and condo market operates differently from Bangkok’s high-rise sector, but both are affected by the same cost pressures and developer caution.
The wider issue is affordability. Higher living costs driven by energy prices are weighing on household budgets, particularly among middle- to lower-income groups. This constrains housing demand domestically, even as supply tightens.
Global economic uncertainty is also slowing foreign condo purchases. Although there is some demand from wealthy buyers seeking to relocate from conflict zones, EIC notes this segment remains small. Transfers of condos to buyers from the Middle East affected by the conflict and nearby areas accounted for only 1% of the total value of foreign condo transfers.
How developers are responding
Developers are adjusting tactics to manage cost volatility. Prateep Tangmatitham, president of SET-listed developer Supalai, explained the company’s approach: “We will help contractors procure materials directly and absorb the difference if they face higher material costs driven by fuel prices.”
Supalai also prioritises prompt payments to contractors and continues developing projects in the same locations to minimise relocation costs and enhance operational efficiency.
SET-listed Eastern Star Real Estate is taking a different route, offering upfront cash payments to secure construction materials originally ordered by large developers but left undelivered after projects were frozen.
EIC advises developers to work closely with contractors to manage costs, optimise procurement and reduce construction waste. The think tank also suggests developers seek to increase revenue by targeting foreign buyers with high purchasing power, as well as adapting business models such as rental or rent-to-own schemes to address domestic affordability constraints.
What remains uncertain
The key variable is the duration and intensity of energy price volatility. If the Middle East conflict stabilises and shipping routes normalise, the 5% decline in Bangkok launches may prove accurate. If disruption continues or worsens, particularly affecting the Strait of Hormuz, the 10% decline becomes more likely.
For Phuket property buyers, the question is whether island supply will follow Bangkok’s pattern. Phuket’s property market is smaller, more focused on foreign buyers and lifestyle-led investment, and less dependent on domestic middle-income demand. However, developers across Thailand face the same material cost pressures and financing conditions.
Contractors working on government projects still face liquidity risks due to delayed disbursements and calculation formulas that do not fully reflect actual construction costs, EIC notes. This creates additional pressure on project timelines and delivery.
Government response under consideration
EIC suggests the government could mitigate the impact on the construction and property sectors through reduced import taxes on raw materials used in construction, improved access to energy sources, and direct support for affected businesses.
For public projects, authorities could consider extending contract periods without penalties and accelerating K-factor disbursements, which adjust payments based on material cost changes.
Whether these measures materialise, and how quickly, will affect both developer confidence and project timelines across Thailand’s property sector.
Frequently Asked Questions
Why are Bangkok condo launches declining?
Rising energy prices have increased construction material costs, particularly for steel, cement and tiles where energy accounts for 35-50% of production costs. Developers are postponing new launches due to higher development expenses combined with weak demand and limited pricing power.
Could Phuket property supply be affected?
Phuket developers face the same material cost pressures and energy price volatility as Bangkok operators. While Phuket’s market structure differs, with more foreign buyer focus and villa-led supply, construction cost increases and developer caution may affect launch timing and pricing across Thailand.
How long will construction material prices stay elevated?
EIC expects construction material prices to rise modestly over the next one to two months, mainly due to higher logistics costs. Many operators currently hold pre-conflict inventory and large projects have locked in prices through advance orders. A prolonged disruption in the Strait of Hormuz would pose further upside risks.
What are developers doing to manage rising costs?
Developers are helping contractors procure materials directly, absorbing cost differences driven by fuel prices, prioritising prompt payments, and continuing projects in the same locations to minimise relocation costs. Some are securing materials from frozen projects through upfront cash payments.
Is foreign buyer demand helping offset weak domestic demand?
Global economic uncertainty is slowing foreign condo purchases. Although there is some demand from wealthy buyers seeking to relocate from conflict zones, EIC notes this segment remains small, accounting for only 1% of total foreign condo transfer value from Middle East and nearby areas.
Sources
- Bangkok Post — Construction, property shift tactics — link
