The property sector appears likely to grow only slightly next year, despite falling oil prices and the likelihood of lower interest rates in the current quarter, according to a leading property developer.

Land and Houses managing director Anant Asavabhokhin told a property market seminar organised by the Thansetakij weekly newspaper yesterday that the residential market, including detached housing, town houses and condominiums, would continue to face a hard time next year.

Although oil prices and interest rates are expected to fall further in the current quarter, and the trend will continue next year, economic growth will be only slight, with new domestic and foreign investments falling and government spending showing a year-on-year reduction.

These things will have a negative impact on people's earnings next year and, as a result, consumer spending will continue to be slow and most people will delay decisions to buy new houses, he said.

According to the Government Housing Bank's Real Estate Information Centre, 51,446 new homes were registered in the first eight months of the year, up 12 per cent from 45,860 units in the corresponding period last year. However, more than a half of the new registrations occurred in the second quarter.

With this market trend, most property firms have had to adjust their projects by reducing margins and offering middle- to lower-market prices.

Anant said Land and Houses was among those affected by the economic environment, with lower sales and net profits than last year, because the company offers ready-built houses. Other property firms who have recorded strong growth have achieved this because of pre-sales last year for delivery this year.

"This year's pre-sales will lower than last year's, and as a result most of those property firms that recorded strong sales growth this year will suffer a drop next year," he said.

Land and Houses has tried to reduce its construction costs by maintaining its concept of providing ready-built homes and offering middle-market prices lower than Bt5 million per unit, he said. Next year, the company will "balance its portfolio" by launching ready-built condominiums.

Preuksa Real Estate's chief executive Thongma Vijitpongpun said most property firms had had to adjust their management style to maintain margins and survive in conditions of slight growth. These conditions will also prevail next year.

He said property firms had had to employ supply-chain systems to manage their construction costs, maintain their margins and compete. "We believe that if property firms develop their technologies and use new management techniques, they will survive this period."

Jones Lang LaSalle managing director Suphin Mechuchep highlighted a bright spot in the property market. Although the residential market has poor prospects for the next year, the office building, serviced apartment, hotel and retail markets all promise strong growth next year in an atmosphere of high demand and supply shortage.

"Demand for office buildings and serviced apartments in the central business district is strong because most multinational firms want not only new offices, but also serviced apartments for their staff," she said.

The acting director of the Real Estate Information Centre, Samma Kitasin, said the second quarter of  recorded high growth because developers launched a number of condominium projects before the new city plan was implemented in May.

The centre expects that the number of new houses registered this year will reach 75,000 units, up only 4 per cent from last year's 72,000.

Mortgage Loan Association president Kitti Patanapongpibul said demand for mortgages had grown only slightly this year after interest rates rose from the minimum lending rate of 5.75 per cent earlier this year to the present 7.75 per cent.

Although the interest rate has risen by only two percentage points, this translates into an increase of 20 per cent in the monthly repayments of home-buyers. As a result, most  are delaying their decisions to spend.

However, Kitti said there were signs that interest rates will fall next year and this may be a factor in supporting growth in the sector.

Somluck Srimalee

The Nation