High oil prices are driving up housing prices by 10%, KKP predicts the real estate market will be at its lowest point in 8 years in 69.

KKP warns that the real estate market in 2026 will be impacted by war costs, particularly oil prices. They predict house prices could rise by 10% and recommend locking in costs and maintaining fixed interest rates to cope with the market's lowest level in eight years.

April 7, 2026 - The Business Loan Department of Kiatnakin Phatra Bank (KKP) analyzed the Thai real estate market in 2026, forecasting a contraction in nationwide property transfers to 290,000 units from 316,214 units in 2025, the lowest level in eight years. This is attributed to rising oil prices due to heightened tensions in the Middle East, pushing up construction material costs and leading to a "new cost base." This forces new housing projects to raise prices by 5-10%, severely slowing down the mid-to-low-end market. KKP advises developers to lock in material prices and manage liquidity by clearing existing inventory. Meanwhile, consumers should seize this opportunity to acquire homes at original costs and lock in fixed interest rates to mitigate the risks of rising inflation and interest rates.

• Hidden costs of mass market housing.

The escalating conflict between Iran and Israel and its allies in March is impacting the Thai real estate market in several dimensions, affecting supply (cost), demand (purchasing power), and buying opportunities. A key factor is energy, as Thailand currently requires an average of 124 million liters of refined oil per day and relies heavily on crude oil imports. The closure of the Strait of Hormuz has driven global crude oil prices to over $110-120 per barrel, consequently increasing the production and transportation costs of key construction materials such as cement, concrete, and steel.

These impacts are most evident in the standard-sized home segment (120-170 sq.m.) priced between 2-5 million baht, which is the largest market segment in Bangkok and its surrounding areas, accounting for 54% of sales, or a total value of over 76,200 billion baht.

Typically, the cost structure of this type of housing consists of 60% materials and 40% labor (excluding land). However, fluctuations in global energy prices have become a significant variable causing volatility in construction budgets, especially the price of steel, which is sensitive to both shipping costs and global energy prices. Steel is a primary material used in foundations, columns, and beams, accounting for as much as 18% of the total house price. If global steel prices surge at the start of a project, it will lead to a rapid increase in overall costs from the first month of construction.

Besides structural work, electrical and plumbing systems are highly sensitive to petrochemical prices, as PVC pipes, wires, and various plastic components are directly linked to crude oil prices, accounting for approximately 12% of the cost. Similarly, architectural elements like paint and tiling require petroleum-based solvents and resins as primary components. Homes in this price range often prioritize visible aesthetics, meaning that every detail of the decoration carries a hidden cost stemming from the war.

• Strategies for coping with volatility.

Amidst widespread global conflicts, managing construction projects requires faster-than-usual decision-making. Kiatnakin Phatra Bank's (KKP) business lending division analyzes that "locking in prices" with local construction material suppliers, or stocking up on building systems and paints in advance when warning signs appear, are key strategies to control construction budgets and prevent them from being swept away by volatile global oil and commodity prices.

• Impact on purchasing power.

The global conflict unfolding thousands of kilometers away is not just making headlines internationally, but also inevitably impacting the Thai economy and daily life. In particular, purchasing power in the Thai housing and condominium market is showing significant signs of slowing down.

The most noticeable impact is the rise in fuel prices in Thailand. This has not only increased transportation costs but also driven up the transportation costs of goods and the prices of various consumer goods, all of which have steadily increased in line with rising energy costs. As the overall cost of living rises, many households have to reallocate their income. Money that could previously be saved for a down payment on a house or used to pay off mortgages may now have to be channeled more towards essential daily expenses. As a result, purchasing power in the Thai housing market is weakening, even though the demand for homes remains.

Besides the cost of living, war also affects inflation levels in the economy. As energy and commodity prices continuously rise, inflation tends to expand, forcing central banks in many countries, including Thailand, to adopt tighter monetary policies to control inflation. This includes maintaining high interest rates or raising them. Higher interest rates mean increased long-term loan burdens, resulting in monthly payments several thousand baht higher. This can lead to some families being able to borrow less or needing to delay purchasing decisions.

The housing group expected to be affected is the low-rise housing priced between 2-5 million baht, which is distributed in the Greater Bangkok area. The areas expected to be affected include the Rangsit-Pathum Thani zone, with 19,300 unsold units valued at 67,500 billion baht; the Bang Bua Thong-Nonthaburi zone, with 18,100 unsold units valued at 63,300 billion baht; and the Bang Na-Samut Prakan zone, with 16,400 unsold units valued at 57,400 billion baht.

• Managing Risks and Golden Opportunities

Amidst the volatility stemming from the Middle East conflict and its impact on the global economy, deciding to buy a house at this time presents a significant advantage for those who are financially prepared, especially by seizing opportunities from "existing costs" before a new wave of rising construction material prices arrives.

The first key factor is locking in fixed costs by purchasing ready-built homes (stock homes). This is akin to buying a product from a bygone era, as these homes are priced based on past labor and construction costs, before the fluctuating material prices or transportation costs driven by current fuel prices are added. Signing a contract now provides an indirect discount against accelerating inflation, allowing buyers to own a property with a true construction value higher than the price paid.

Beyond the value for money, market mechanisms are also becoming more favorable to buyers. As concerns about war pressure overall purchasing power slows down, most real estate developers need to maintain liquidity and attract cash flow. This leads to sales campaigns and inventory clearance promotions with discounts and giveaways far exceeding normal levels. This presents a golden opportunity for buyers to acquire homes at their original prices, before any price adjustments, along with special offers and benefits rarely found in normal circumstances.

Another crucial factor not to be overlooked is the certainty of interest rates, a long-term hidden cost. In times of global geopolitical uncertainty that could push up financing costs in global markets, accelerating loan agreements and approvals now will allow buyers easier access to fixed-rate offers from banks for the first 1-3 years. This serves as a hedge against the risk of rising interest rates that often follow energy crises. Locking in financing costs alongside existing material costs is a strategy that helps stabilize family expenses in a volatile global economy.

From an international perspective, Thailand remains perceived as a safe haven for residence and investment due to its stability and absence from direct conflict zones. This makes real estate markets in prime locations and key tourist destinations such as Bangkok, Phuket, Hua Hin, Chonburi, and Chiang Mai continue to attract foreign investors seeking to diversify their risk.

Ultimately, while a war in the Middle East may seem distant, its repercussions on the global economy—including energy prices, inflation, interest rates, currency values, and consumer confidence—directly impact Thailand's ability to purchase homes. Closely monitoring global events is therefore no longer a distant concern, as circumstances on the other side of the world could be crucial in determining whether homeownership will be easier or more difficult for Thais in the future.

As a long-standing partner in the real estate sector and aware of the challenges posed by new costs, Kiatnakin Phatra Bank's (KKP) Business Loan division prioritizes providing in-depth advisory services to help entrepreneurs plan their finances in line with market conditions, particularly regarding liquidity management and project risk assessment, in order to jointly maintain the stability of the industry in the long term.

Read all economic news throughout Thailand here.