Firms gear up for recovery next year

Real Estate December 30, 2011 00:00

By Somluck Srimalee
The Nation

3,174 Viewed

Top-10 listed developers launching 200 projects worth Bt200 billion


Listed property firms are confident that the property market will recover in the middle of 2012 and plan to launch more than 200 residential projects worth over Bt200 billion next year.
According to a survey by The Nation this week of the top-10 listed property firms about their business strategy for next year, the market will focus on high-rise residences than low-rise. 
Experts said that residences priced at not more than Bt3 million per unit will be popular.
Pruksa Real Estate will continue to be the property firm launching the most number of residential projects in 2012. It is planning 50 new residential projects in Bangkok and its suburbs worth a total of about Bt35 billion. Over a half of that will be residences priced at not more than Bt3 million per unit. 
The second-largest property firm, Sansiri, plans to launch 20-23 residential projects worth more than Bt20 billion in 2012.
Other leading property firms are planning 10-20 projects. Most of them have to focus on high-rises due to anticipated rise in demand following the floods in the last quarter of 2011. 
Pruksa Real Estate director and chief business officer Prasert Taedullayasatit said that home-buyers who had delayed transfer of their residences between October and November were starting to begin the process. Of 40 per cent of its sales, about 25 per cent had already transferred, which signifies that customer confidence is returning in the aftermath of the floods. 
“About 15 per cent of our customers have delayed transfer as the projects were in flood-hit areas,” he said.
The company expects customer confidence to return to the market in the middle of 2012 and that is the reason it is planning 50 new residential projects that combine low-rise and high-rise residences in the central business districts and suburbs of Bangkok.
SC Asset Corporation, the property arm of the Shinawatra family, is maintaining its target of double-digit growth next year after succeeding in protecting its 33 residential projects from the floods, the company’s chief operating officer Kree Dejchai said. 
Next year, 20 residential projects worth Bt15 billion will be launched, including one each in Hua Hin and Cha-am as it ventures outside the capital, the company’s first foray into the provinces, he said. 
Although demand for residences came to a standstill in October and November when Bangkok and the suburbs were inundated, the company managed to rack up presales of Bt2.27 billion. This was lower than the target by about 5 per cent but still higher than in the same two months of last year. 
In November and December, the company went ahead with three condominium projects worth Bt3.7 billion. It expects presales of Bt1.85 billion this quarter. 
He added that the demand to buy residences will not change when compared with this year. Home-buyers who enjoy living in single detached houses or townhouses will continue to buy property of their choice, just as those who love condominiums would still buy condos. But people may become more choosy about the location, ensuring it was not an area prone to flood threats. 
Some locations that faced flooding are inhabited by traditional communities hence the demand to buy residences in such locations may not change, but home-buyers will choose projects by property firms who take care of their customers during times of flooding, he said. 
LPN Development managing director Opas Sripayak said that the demand to buy condominium usually sees strong growth in October and November. 
“Our presales in 2011 met our target of Bt14 billion and our transfer value of Bt12 billion thanks to the demand for condominiums,” he said.
He added that the company plans to launch the first three new condominium projects worth Bt7.8 billion in the first quarter of 2012. This is a part of its 10 new residential projects worth Bt15 billion to be launched next year. This will boost its total presales and revenue target growth by at least 10 per cent in 2012 over the previous year. 
Quality Houses director and senior executive vice president Suwanna Buddhaprasart said the company’s pre-sales and total revenue in 2011 fell 20 per cent short of the target for the year but maintained the pre-sales and revenue as in 2010. This has forced the company to revise its new business model in 2012 to focus on the middle and lower-income market by launching six new residential projects, with units under brand Gusto priced at lesser than Bt2.5 million per unit. This is a part of 23 new residential projects worth Bt21.35 billion that will be launched by the company next year. 
She added that some home-buyers might change their preferences and go for a condominium instead of a low-rise residence following the recent floods. This has prompted the company to change its business model in view of the changed circumstances by setting plans to launch six condominium projects in Bangkok and Pattaya to cover the demand for second homes.
Market growth
The launch of residential projects worth more than Bt200 billion by the top-10 listed property firms are expected to drive up market growth by at least five per cent in 2012. That would be better than the performance this year, which saw an estimated 5-per-cent drop in terms of presales. However, the drop in terms of transfer may be more than 20 per cent.
Pruksa Real Estate’s director and chief business officer Prasert added that some of the customers returned to the market in the last two weeks of December as a result the company believes that customer confidence will return to the market in the middle of 2012. This may drive market growth by 5-10 per cent in 2012 compared with this year.
“That also depends on the government’s measures to manage floods next year,” he said.
Sansiri’s president, Srettha Thavisin, said that he believed the property market will recover in the second quarter of 2012. The market will grow at the same pace as the country’s economic growth. If the government targets gross domestic product (GDP) growth of 4-5 per cent, he believed that the property market will grow at the same pace.
Business Housing Association president Issara Boonyoung said that whether the property market will recover or not in 2012 will depend on the government’s measures to manage floods in the future. If the government is clear on what it will do, the property market will recover within six months, otherwise it may take more than one year, especially in flood-hit locations.
Although the property market will take time to recover, the price of residential property will rise 5-7 per cent in 2012. This is because of the impact on the cost from the increase in daily minimum wage to Bt300, which will become effective on April 1, 2012. 
Pruksa Real Estate president and CEO Thongma Vijitphongpun forecast that residential prices will increase between 3-5 per cent, depending on the size of the residential property. The other factor that will push up construction cost is the provisions developers will have to make to ensure their projects will not be hit by floods in future.
Quality Houses executive vice president Saenphin Sukhee said that the two factors together – rise in daily minimum wage and increase in construction cost – will push up residence prices by 5-10 per cent depending on the location and the competition in the area.