More value seen in higher end of market

Real Estate January 06, 2017 01:00

By   SOMLUCK SRIMALEE
THE NATION

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LISTED AND NON-LISTED property developers plan to launch residential projects worth at least Bt274 billion this year, generating market growth of at least 5 per cent from last year’s level.



They are mainly focusing on the middle- to upper-income segment, as it is witnessing stronger demand than the lower-income end of the market, which continues to be held back by very tight criteria enforced by banks on the approval of mortgage applications.

“We target boosting our premium-market sales to 20 per cent of our portfolio, from less than 10 per cent last year, after seeing demand in the middle- and upper-income market remaining strong when compared to the lower-income market, where prospective home-buyers still face a hard time getting a mortgage from the banks,” Pruksa Real Estate chief executive officer Thongma Vijitpongpun told The Nation in a recent interview.

Last year’s premium residential market in Bangkok and its suburbs was valued at around Bt70 billion, out of an overall residential-market value of Bt350 billion for the area, he said. 

Amid signs of strong premium-market growth in the year ahead, Pruksa plans to launch four luxury condominium projects worth about Bt10 billion combined over the next 12 months, with offer prices ranging from Bt200,000 to Bt250,000 per square metre.

With the company also planning to launch more luxury detached housing this year, it expects sales value from the premium market to account for at least 20 per cent of its sales by the year’s end, the CEO added.

LPN Development, a leader in the development of economy-level condominium projects, has revised its business plan for this year to develop mid- and upper-market condominiums, as some 60 per cent of its customers at the lower-income end of the market had their home-loan applications rejected by the banks in the final months of last year. “Our sales in the fourth quarter dropped more than 50 per cent compared with normal for the period, with sales of between Bt600 million and Bt700 million a month. As a result, our backlog of units ready for sale and waiting to be transferred to customers is only Bt3 billion. 

“This has forced us to revise our business strategy by boosting sales this year via focusing on the middle- to upper-income market,” managing director Opas Sripayak said.

Land prices have also increased faster than LPN estimated, with the company now having to pay more than Bt40,000 per square metre for condominium-development plots, as opposed to an average of Bt30,000 per square metre last year, he said.

This year, the company will develop units priced between Bt40,000 and Bt150,000 per square metre, compared to Bt30,000-Bt50,000 per square metre last year, he added.

Singha Estate, another listed developer, plans to develop luxury residential projects – for both condominiums and detached housing – worth Bt7 billion combined this year, the company’s chief financial officer, Methee Vinichbutr, said.

 

New mass-transit routes, EEC

Meanwhile, construction of a number of new mass-transit routes through to 2020 will open up new locations for residential projects by property firms this year, while the Eastern Economic Corridor (EEC) also challenges them to expand their investment in the East of the country.

Sena Development director Kessara Thanyalakpark said her company planned to launch 10 projects worth Bt3.2 billion combined this year, most of them located close to parts of the new mass-transit system on which construction will get under way this year, especially the Orange Line from the Thailand Cultural Centre to Min Buri, the Yellow Line from Lat Phrao to Samrong, and the Pink Line from Kairai to Min Buri.

The company also plans to develop residential projects in the EEC area, which runs through the provinces of Chon Buri, Rayong and Chachoengsao.

“We have a 10-rai [1.6 hectare] plot in Chon Buri’s Sri Racha district, where we plan this year to develop a mixed-use project combining a 30-storey condominium worth Bt1 billion, a hotel and retail area. 

This will focus on customers moving to expand their investment in the EEC area,” she said.

Pruksa’s Thongma said the EEC area would be a new destination for property firms to develop residential projects that serve strong demand from people moving to the area in order to work.

CP Land, meanwhile, plans condominium projects in Rayong province to serve strong demand when the government kicks off incentives for manufacturers expanding their investment in the location.

Naravadee Waravanitcha, executive vice president for investment and hotel management, said the company would be launching a condominium in the province as one of five projects planned for this year, in light of expected demand from people moving to the area as their new place of work.

 

Developers confident

Given developers’ aggressive plans to launch residential projects in Bangkok and its suburbs this year, most property firms are confident that the market will grow by at least 5 per cent from last year.

“We are confident that [the majority of] those people who delayed their decision to purchase a home in the final quarter of last year will decide to buy this year, boosting market growth to over 5 per cent compared with last year, which witnessed a drop of more than 5 per cent from 2015,” Thongma said.

Kanda Group’s chief executive officer, Issara Boonyoung, said residential demand would be better than last year, due to expectations of the economy growing by more than 3 per cent, on the back of government spending expanding by more than Bt1 trillion this year. 

This will be the main factor boosting residential demand during the course of the year, he added.