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home-builder says

Summing up the year in home-building and looking ahead to 2014

As I was writing this article over the weekend, the political tensions appeared to have reached a peak since the crisis started some 40 days ago.

It must be noted here that all Thais are worried about the situation and I can only pray to all the sacred beings in this country to protect our nation and people, no matter whose side they are on, and keep them safe.

In this article I would like to talk about the outlook of an industry that is no less important than the real-estate industry - the home-building business.

The business has been picking up, as the severe labour shortage has been partially relieved in the wake of the flood crisis in 2011.

The increase in the minimum daily wage to Bt300 in Bangkok in April of last year and in the provinces last January was the only way out, although the quality of the workforce has not necessarily improved.

This adjustment inevitably resulted in an increase in building costs of at least 10 per cent.

Besides this about-face solution (adjusting labour and construction-material costs), home-builders also helped themselves by introducing prefab technology, either by manufacturing components at their own factories or contracting out manufacturing to other companies. They also selected materials that are less dependent on labour.

Equally important is the adjustment of internal management to become more efficient and competitive. More important is the building of an incentive system to motivate workers.

These solutions reflect the reality that the labour problem and construction costs are uncontrollable factors.

The next question is how these solutions will affect business conditions.

To explain this, we have to segregate home segments and customers.

For small houses priced from Bt1.5 million to Bt3 million and customers who borrow to build a house, which is about 60 per cent of all owners who build homes, demand has fallen mainly because their loan applications are being rejected and their money has been spent on their first car. They cannot qualify for a home loan.

For medium and large homes priced Bt5 million to Bt8 million and customers who use cash, demand has apparently increased. The determinant factor for this group is that the longer they delay, the higher the home cost and the severer the labour shortage.

For a pricey large home with a special plan, the economy has no bearing on demand.

To sum up this year's business health, it was neither good nor bad. Home-builders have been able to sustain their business.

As for the 2014 outlook, there should be no significant change except for the political uprising that has flared up in the last two months of this year and will continue in the first two months of next year. But this should not be a serious concern. Looking back at the May 2010 political crisis, it did not cause such a long lull in business that it depressed the outlook of that year. In fact business was very good then.

However, the pertinent problem and obstacle for home-builders today remains the labour problem, which has not been addressed thoroughly.

Unless there is a comprehensive solution to this problem, the cost of building will further increase over two years when the government's Bt2-trillion transport-infrastructure project will exacerbate the labour shortage.

Whether small home-building companies can survive this predicament is something to think about. The concern is whether they can resist the pressure of workers flowing to big construction companies.

The government will have to step in to solve the problem more sincerely and seriously, otherwise building a house will not be an easy task any more.


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