Property market could contract by up to 10% this year: Pruksa

Real Estate May 15, 2014 00:00


THE RESIDENTIAL property market could fall by between 5 and 10 per cent this year because of the prolonged nature of the country's political conflict, according to the head of leading developer Pruksa Real Estate.

The overall property market in Bangkok and the provinces was worth about Bt650 billion last year, but could come in below Bt600 billion this year, with people having delayed their purchasing decisions since the final quarter of 2013 through to February, said Thongma Vijitpongpun, chairman of the executive committee and chief executive officer of the listed company.
Given the market sentiment, Pruksa recorded presales of only Bt10.3 billion in the first four months of the year, down by about 33 per cent from the same period last year.
However, the company continues to maintain its presales target of Bt45 billion and revenue goal of Bt42 billion for the full year, he said.
“We have maintained our presales and revenue targets after seeing residential demand recover in March and April,” he said.
The company recorded revenue in the first quarter of Bt8.05 billion, up 27 per cent year on year, and net profit of Bt1.06 billion, up 38 per cent.
Thongma said revenue and earnings growth had been achieved thanks to the company’s backlog from both condominium and low-rise projects (detached housing and townhouses), which had speeded up overall construction time and enabled the developer to deliver units to customers on time. 
Pruksa has also tried to reduce the rate at which banks reject its customers’ mortgage applications to about 18 per cent. Such rejections occur when applicants’ financial status fails to meet the prevailing standard. Thongma said it had managed to get the rate down by helping some customers revise their financial statements and recommending that others seek joint borrowers to reduce the chances of their loan applications being turned down.
“We are trying to keep our customers by helping them at a time when the commercial banks are restricting the provision of loans during a period of low economic growth,” he said.
Meanwhile, the company has a Bt18.84-billion backlog of homes to be transferred to customers this year, out of an overall backlog worth Bt38.02 billion. 
It also plans to launch 50 residential projects worth more than Bt50 billion combined over the course of the year, with 18 of them worth Bt14.12 billion already having hit the market in the first quarter and receiving positive feedback, said the CEO.
Residential demand has improved since the beginning of March both in Bangkok and the provinces, he said, adding that this had boosted presales in the first four months of the year.
Investment overseas 
Pruksa is also continuing to expand by investing overseas, with plans to launch its first entirely new foreign project worth Bt1 billion in Indonesia. It is negotiating to buy land for the project at a site about 20 kilometres from Jakarta. When due diligence for the land purchase is complete, the company will launch a condominium project on the site, he said. 
Indonesia will be the third foreign country in which Pruksa has invested, after Maldives and India. Another project, in Vietnam, is still planned, but discussions over buying the land have taken place since 2012 without any deal being reached as yet, he added.
Pruksa targets overseas revenue accounting for about 5 per cent of income this year, with the company’s project in India starting to transfer units to customers – and having already generated revenue of Bt138 million in the first quarter.
Provincial revenue, meanwhile, accounted for about 10 per cent of overall income in the first three months of the year, Thongma said.