LISTED AND non-listed property firms are launching special promotion campaigns to boost sales in the first quarter of this year before they are hit by a new Bank of Thailand (BOT) mortgage measure, effective April 1.
Sansiri Plc’s latest promotion campaign offers a total of Bt12 million in discounts on condominium units starting at Bt990,000.
The campaign will run till March 15, with the firm expecting sales of up to Bt2 billion, the company’s chief operating officer, Uthai Uthaisangsuk, said recently.
Sena Development Plc offers a 0-baht down payment and a 100-per cent mortgage loan from commercial banks, along with total price discounts of up to Bt1 million for its 18 residential projects nationwide, ranging from Bt1.2 million and Bt8.2 million per unit. The campaign will run till March 31 or when all available units are sold.
“We have launched this campaign to boost sales before the BOT’s new regime takes effect as it will have an impact on market demand for the rest of this year,” Sena Development Plc’s director, Kessara Thanyalakpark, said recently.
Thai Real Estate Association’s president Pornnarit Chonchaiyasit said most property firms have tried to launch similar marketing campaigns to boost their first-quarter sales before the BOT’s measure kicks in on April 1, 2019. That might not be enough to ensure their survival if the market drops, and companies are also expecting a shortfall in cash-flows.
“Some property firms may face liquidity problems, especially small companies , given the new restrictions. Commercial banks may not approve project loans when sales are below 50 per cent of the total project’s value. This will impact directly on small and medium-sized property firms.They may have to lay off staff or even suspend operations,” Pornnarit said.
The commercial banks are restricting access to both project loans and mortgage loans as the BOT is keeping a close watch on risks to the financial system posed by factors ranging from the investors’ search for yield and the fragility in the property market due to high household debts and increasingly large swings in capital movements.
According to the BOT’s latest report on January 3, 2019, Thailand’s financial institutions have high liquidity, mirroring the strong capital base of commercial banks. This should help them cope with risks if there are more loan impairments. But the central bank is continuing to monitor some risks. The main one, it says, is investor behaviour driven by the search for yield, possibly leading to the underpricing of risks as a result of prolonged low interest rates.
Investors’ search for higher yield through savings cooperatives is continuing. These cooperatives recorded high growth in assets and deposits. Meanwhile, risks to credit and liquidity remain and need monitoring, as some large cooperations are making more short-term borrowings for securities investment.
On another front, the central bank is waiting to see the results of the new measures for residential loans that will come into force on April 1. In the lead-up, demand for homes may rise if buyers rush to borrow for second homes.
The BOT said that oversupply in the property sector is also under watch as earlier, demand from foreigners for condominium units had risen. Caution in this sector may be required if the Chinese economy slows down more than expected, as the Chinese have been a key force in the ranks of foreign buyers.
Another risk lies in the high household debt, even though it has declined slowly. Prolonged low interest rates could help households to take out new loans. This would likely reduce their ability for future repayments and lead to a reduced ability of households to deal with the economic uncertainties.
The BOT’s new policy and its monitoring of the property sector, is forcing most commercial banks to restrict loans to property firms and homebuyers. This will directly affect property firms this year, and the prospect has motivated most of them to launch aggressive marketing campaigns to boost sales before the central bank measures kick in.