Developers could beat present slump

Research shows the property sector will clock strong annual growth despite a dismal first quarter

Although property companies' financial results in the first quarter of this year are expected to show only slight growth or a drop, analysts and property experts believe the sector will show significant growth over the course of this year, thanks to the government's tax package.

According to a research report released by UOB Kay Hian Securities (Thailand) last week, presales in the first quarter are seasonally weak as buyers choose to wait for the property tax incentives to become effective.

However, the research company believes the property sector will record a sales growth of about 40 per cent by the end of the year as compared to last year's figures. This will be largely due to the reduction in taxes as per the new property stimulus package.

The research predicts the first-quarter results of property companies listed on the Stock Exchange of Thailand will be poor. This is common knowledge in the market. Realised sales weakened as the ownership transfer was halted by February end. Asian Property Development is expected to post a drop of 42 per cent to Bt91 million from sales of about Bt1 billion.

LPN Development is expected to record revenues of Bt1 billion, calculated on a percentage-of-completion basis, while net profit is expected to drop 26 per cent to Bt150 million (on the basis of an assumption of a 15-per-cent margin).

However, compared to results of the last quarter of last year, which included a Bt250-million provision for land purchase, net profit is expected to double.

Quality Houses and Land and Houses are expected to report a modest increase in profits - 16 per cent and 13 per cent, respectively.

The cumulative profit for the property sector is expected to be flat on a year-on-year basis. However, a decline of 27 per cent is expected compared to the good numbers reported in the fourth quarter last year.

The research company said the presales estimate for Land and Houses and Quality Houses is likely to be flat year on year but will

show a modest drop from the fourth quarter which is generally the best one.

LPN Development recorded a presales growth year on year and quarter on quarter after the launch of two projects worth Bt3.4 billion in the first quarter of this year.

Asian Property Development achieved presales of Bt2.3 billion, a 19-per-cent rise from the same period of last year when several major condominium projects such as The Address@Chidlom, The Address@Sukumvit42 and Life@Ratchada - together worth Bt4.8 billion - were launched.

Last week, LPN Development posted a first-quarter revenue of Bt1.39 billion and a net profit of Bt204.3 million, a rise of 32 per cent and 1.08 per cent, respectively.

Preuksa Real Estate announced first-quarter revenue of Bt2.2 billion and a net profit of Bt308.28 million, a rise of 22 per cent and 5 per cent, respectively, from a revenue of Bt1.8 billion and a net profit of Bt292 million in the corresponding period last year. 

Noble Development has reported a revenue of Bt564.86 million and a net profit of Bt61.67 million in the first quarter, a rise of 121 per cent and 462 per cent, respectively, from its revenue of Bt255.09 million and net profit of Bt10.96 million in the same period last year.

Asian Property Development's chief executive Anuphong Assavabhokhin said most home-buyers have delayed the transfer of property - condominiums as well as detached houses - after the government announced a special tax package on March 4. However, the package is not in effect as of now.

The package includes a reduction in the special tax from 3.3 per cent to 0.01 per cent, a reduction of the transfer fee from 2 per cent to 0.01 per cent and mortgage registration fee reduced from 1 per cent to 0.01 per cent. This tax package - expected to become effective April 1 - has been delayed.

"Our customers who bought units in the Address@Siam - which is now completed and ready for transfer - have delayed the transfer because they want to avail of the tax incentive," he said.

Given this market trend, Anuphong said the company's first-quarter result may show modest growth and could be lower than the estimate.

Property Perfect's chief operating officer Dr Teerachon Manom-aiphibul said the company has decided to pay the transfer fee to customers who decided to go ahead with the transfer before the package becomes effective.

"We have accepted the increased cost of 2 per cent - 1 per cent of the transfer fee and 1 per cent from the mortgage registration fee. However, our cash flow will be better and our sales for the first quarter will also go beyond our estimate," he said.

He said the company recorded a sales growth of up to 30 per cent in the first quarter this year due to a resurgence in customer confidence after the government announced policies that support the property sector.

Teerachon said the property market is expected to grow between 10 per cent and 20 per cent this year.

By the end of last year, the housing register for Bangkok and suburban areas recorded 73,800 units, a drop of 5.5 per cent from 2006

figures.

"We believe the housing register in Bangkok and suburban areas will touch 80,000 units by the end of this year," he said.

Preuksa Real Estate's Thongma Vijitpongpun said the company recorded strong sales growth in the first quarter of this year because it succeeded in developing projects that met customer requirements over and above the location of the property.

"Some customers may delay their decision due to the government's tax incentive for home-buyers, but have offered to pay the tax for our customers who allow the transfer of property before the tax incentive becomes effective. As a result, our sale did not face a negative impact," he said.

 The company has maintained its sales estimate at the targeted Bt14 billion for this year, a rise of 55 per cent from last year's revenue of Bt9.09 billion, he said.