Published on August 03, 2006 - Smaller players with lower margins may suspend projects or pull out: Plus Property

New house and town-house project starts in Bang-kok and suburban areas dropped by 19 per cent in the first half of the year compared with the second half of last year following waning demand for new housing.

Small and medium property firms, faced with lower margins due to stiff competition from leading developers, may suspend their projects or withdraw from the market completely, according to Kantitat Moltha, head of research and development for Plus Property Partners Plc.

"We cannot say how many firms have withdrawn from the market but we believe this has happened because the number of new projects in the first half of this year is less than in the second half of last year," he said.

According to Plus Property Partners, 554 new housing projects, with 35,507 units, were initiated in the first half, down 19 per cent from the second half of last year.

Forty per cent of the units were sold, 10 per cent less than in the final half of 2005.

Homes priced at less than Bt3 million have proved more popular than those up to Bt5 million. One big problem is rising interest rates. As the theory goes, with every one-percentage point in-crease in rates, the average monthly mortgage payment increases 8 per cent.

Kantitat said political uncertainty, the rise in interest rates and the high price of oil meant fewer people are keen to buy new properties. Property developers have taken note and most of them have delayed the launch of new projects.

The exception in Bangkok is in the central business district, where the number of new condominium projects has continued growing.

In the first half, 32 projects were launched in the area with a total of 9,913 units, up 37 per cent on the same period last year. Of these, 94 per cent have been sold. Phayathai, Ratchada and Lat Phrao have proved to be the main locations for new condominiums.

Kantitat said home-buyers were purchasing more condominiums because almost all of the new projects are near Skytrain and underground stations.

He said condominiums priced up to Bt3 million were the most likely to be sold.

Current market trends have forced almost all property developers to also reduce the size of their housing and condo units to reduce construction costs, he said. Almost all developers have had to reduce their profit margins before expenses and taxes from to an average of 25-28 per cent this year from 32 per cent last year.

He added that the property market would continue growing slowly in the second half.

Somluck Srimalee
The Nation