Sansiri chief denies existence of property bubble, says market growing
The property market is still showing strong growth thanks to the country's expanding economy, Sansiri Plc's president Srettha Thavisin said in an interview with The Nation. He also denied the existence of a market bubble.
He explained that the Thai economy was not just driven by that of the capital, citing a National Economic and Social Development Board (NESDB) study showing that greater Bangkok contributed to only 44 per cent of the economy in 2010, which was lower than the 52-per-cent contribution in 2001. This ratio means the provinces now have a greater influence in the nation's economic growth. As a result, property firms have decided to expand their investment into the provinces since 2010.
"When comparing the country's economic growth this year to that of 1997, it is clear that the economy has changed in line with the country's environment," he said.
The factors contributing to this are lower interest rates, 3 per cent compared to 10 per cent in 1997, which makes it easier for commercial banks to approve loans for projects and mortgages. The second factor is that Thailand now has credit bureaux, which were lacking in 1997.
Lastly, property firms nowadays are able to restrict their debt-to-equity ratio to no more than 2:1, something they were unable to do in 1997.
In addition, Srettha said, the country's infrastructure has also changed since 1997. Now the government is spending more on projects linking the capital to the provinces, which offers new areas for residential developments.
"Since 2010, we have seen a rising demand for property in the provinces, especially since their lifestyles are changing and people are getting more urbanised. This is why the demand for condominiums in the provinces is rising," he said.
It is due to this that the property market has recorded a strong growth since 2008, he said.
"We don't believe that the property market is in a bubble because most of the people who bought into our condominium projects since 2008 have recorded an increase in the value of their property. Plus it has generated high income for our business," he said.
At the end of last year, Sansiri Plc recorded total revenue of Bt30.08 billion and a net profit of Bt3.01 billion or up 45 and 50 per cent respectively from the previous year. This has been the highest earnings recorded for Sansiri, which proves that there is a real demand for property. The company has also earned Bt16.64 billion in pre-sales during the first two months of this year.
However, Srettha admitted that some speculators have been booking units and selling them for an average of 10-15 per cent more. He said most of these speculators have been able to sell their booking contracts to real buyers, and hence the company has succeeded in selling meeting the real demand. In other words, he said, though there has been speculation, there is still a real demand to support this and hence, there is no bubble.
"We believe that the property market will continue showing stable growth in line with the country's economy," he said.