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Published on January 30, 2008

Small and medium-sized property companies will face difficulties developing residential projects this year, due to fierce competition and the likelihood of only slight growth in market demand.

So says Asian Property Development CEO Anuphong Assavabhokhin, who points out that major players in the market have successfully reduced their costs and will be able to undercut the prices of smaller firms.

Anuphong's forecast came as the Agency for Real Estate Affairs released research findings that construction had not yet begun on as many as 80,000 residential units out of 108,000 launched last year. About 70 per cent of the 80,000 stalled units are in projects owned by small and medium-sized enterprise (SME) developers.

Most of the projects have been suspended, and it is believed they may be sold to other property firms.

Anuphong said big property developers would launch residential projects this year with special prices below those able to be offered by small and medium-sized firms.

"Most big players in the market have succeeded in reducing their construction and management costs and as a result can offer prices lower than small and medium-sized players. That's why small and medium-seized property firms will face a hard time this year," he said.

Anuphong's comments coincided with his company's announcement of a plan to launch 13 new residential projects with a combined market value of Bt14.25 billion this year. Asian Property Development expects presales of Bt15 billion this year, of which between Bt7.7 billion and Bt8.25 billion will be booked as revenue for this year. However, nearly half of company revenue this year will come from last year's presales.

The company's existing presales from 2006 and last year amount to Bt17.55 billion and will be booked as revenue over the next three years.

Asian Property Develop-ment achieved presales of Bt15.67 billion last year, up 94 per cent from 2006. It estimates revenue for last year at between Bt7 billion and Bt7.5 billion, up 11-19 per cent from 2006.

The company has also set aside Bt3 billion to buy land for development next year. All of the company's investments will come from its cash flow.

Anuphong said this year's 13 new projects would include six townhouse projects collectively worth Bt3.87 billion, five city condominiums projects worth Bt8.38 billion and two single-detached house projects.

"We're launching more low-rise projects this year, because our existing townhouse and single-detached-house projects will close this year and we need to balance our portfolio with half condominium projects and half low-rise projects," he said.

Anuphong said demand for condominiums would continue but be down from last year, because home-buyers would be selective about location, with most opting for prime positions close to mass-transit systems.

Demand for single-detached houses and townhouses is expected to be stable and about the same as last year.

He said the company had managed its construction costs by negotiating long-term contracts with suppliers. It will consider increasing its prices in the third quarter, when the time comes for new supply contracts.

However, construction costs are not expected to rise more than 2-5 per cent, and Asian Property Development will consider market conditions when setting its retail prices.

"If there is high competition, we may be unable to raise our prices and may have to accept a reduction in our gross margin. If there is no high competition, we may increase our residential prices 5-10 per cent, depending on our costs," Anuphong said.

Asian Property Develop-ment recorded a net profit of Bt500.59 million, or 10.22 per cent of its Bt4.9-billion revenue, in the first nine months of last year.

Somluck Srimalee

The Nation