Condo developer banks on income from ready-for-sale projects after slow Q1; plans new launches as economy, confidence start to recover
Leading condominium company LPN Development is maintaining its business-growth target at 4 per cent in terms of overall revenue this year, despite expectations that the condo market will fall by up to 20 per cent from last year’s level.
“We have been monitoring our business every month and have revised our business strategy in line with the market outlook, until we are now confident that our presales and overall revenue for this year will achieve the target set early in the year,” managing director Opas Sripayak said during an interview with The Nation this week.
The listed developer’s full-year targets are for revenue of Bt15 billion and presales of Bt26 billion, up 4 per cent and 10 per cent respectively from last year.
Meanwhile, the company recorded revenue of Bt2.5 billion and presales worth Bt3 billion in the first quarter, lower than expected due to the condominium market in greater Bangkok witnessing a 40-per-cent decline from the same period last year.
Opas said that early this year LPN had forecast that the property market would grow only slightly this year, or could even fall a little, given the life cycle of the business after the boom period since 2010.
This factor, coupled with the country’s political problems and uncertainty, persuaded the company to prepare a business plan to support the outlook of only slight market growth, he added.
In line with its business plan, the company tested the market early in the year by launching its first two condominium projects of the year – at On Nuj 46 and Pattanakarn Road – and targeting presales of at least 50 per cent of the combined project value of Bt3.2 billion.
However, presales on the first day of booking came in at only 30 per cent of project value, confirming that demand had dropped. As a result, LPN revised its plan and postponed the launch of three other condominium projects – in Hua Hin and Cha-am – that had been planned for the first quarter.
The developer decided to focus instead on its ready-for-sale condo projects, such as the Mega Bang Na and a development on Ngam Wong Wan Road (or Pong Phet 2), which have each generated monthly sales averaging Bt500 million.
This proves that there is still condominium demand if projects are situated in the right locations, said the MD.
Meanwhile, LPN also resold its second condominium project on Rama IX, after having had to suspend presales last year while the project awaited environmental impact assessment (EIA) approval.
The project received EIA approval and a construction permit in March, following which all 200 units have been sold.
Opas said that given the market trend, the company has strong confidence that it can successfully launch three projects worth Bt7.5 billion combined this month. These are a Bt3.6-billion condominium situated on Petchakasem Road, a Bt2.2-billion project on Baromratchachonnanee Road and a Bt1.7-billion project on Nawamin Road.
The three projects are expected to boost first-half presales to Bt10 billion, while the company plans to launch five or six additional condominium projects worth between Bt10 billion and Bt12 billion in the latter half of the year.
This programme of new launches should enable the developer to achieve presales worth Bt26 billion by year-end, he said.
“We believe the condominium market passed the bottom of the market cycle after the first quarter, and that the second half of the year will see a recovery. As a result, the overall condominium market could drop by between 10 per cent and 20 per cent this year – an improvement on the market in Bangkok and its suburbs in the first quarter, which fell by 40 per cent,” he said.
Since the coup on May 22, the country’s economy has begun to show signs of recovery, while consumer confidence has also improved when compared with the first quarter, he said.
However, LPN is waiting to see whether home-buyers’ confidence also recovers. If it does, both the condominium market and the overall residential property market will recover too, he added.