Home-builders ask buyers to share burden

Rising costs of house construction are forcing some home-building firms to negotiate with their customers for increases in their contract prices, says Home-Builders' Association president Panthep Thanchitikul.

The requested increases range from 15 to 20 per cent.

If home-owners refuse to revise their contracts, some firms are abandoning projects, he said, adding that most of these firms were not association members.

Panthep said the association was trying to mediate between home-owners and home-builders in a bid to explain the rising costs of construction and achieve negotiated settlements.

"We [association members] have tried to complete projects by following the contracts, but in some cases where losses are more substantial, we need the customer's help in adjusting the price," he said.

Panthep had no figure for the number of projects abandoned because of rising costs. However, he believes nearly 30 per cent of more than 10,000 construction firms registered with the Commerce Ministry have closed down, many of them small companies.

Home-builders have adjusted their construction prices 15 to 20 per cent upwards for new contracts. Construction costs for standard houses have risen from an average of Bt11,000 a square metre last year to between Bt12,500 and Bt13,000 now, he said.

When construction costs began to increase, Panthep said he accepted that the home-building market would fall in the first half of the year, especially demand for houses priced between Bt3 million and Bt5 million, because this market was very price sensitive.

However, demand for luxury houses priced up to Bt7 million a unit has grown aggressively, and the association now believes the luxury market will supplant the middle market.

At present, half of the home-building market comes from units costing Bt3 million to Bt5 million, 20 per cent from units costing Bt7 million to Bt20 million and the rest from houses priced higher or low than these.

The association believes houses priced Bt7 million to Bt20 million will make up nearly 30 per cent of the entire market this year. The middle market, or houses priced at Bt3 million to Bt5 million, will fall from 50 per cent to 35 to 40 per cent, Panthep said.

To drive second-half growth in the home-builder market, the association will spend Bt17 million to organise a major home-building fair at the Queen Sirikit National Convention Centre from August 20-24. The event is aimed at helping the home-builder market grow 6.25 per cent this year to a value of Bt8.5 billion.

The association expects 25,000 visitors at the five-day event, which it hopes will generate Bt1.5 billion worth of contracts for new houses.