Thai Asian Property raises ’09 revenue target

(BANGKOK) Thai Asian Property Development has raised its revenue target for 2009 to 10 billion baht (S$424.4 million) from 8.5-9.0 billion baht thanks to an improvement in house sales, a senior executive said on Friday.

‘The improving first-quarter results have made us feel more confident and we have raised our revenue target for this year to around 10 billion baht,’ executive vice-president Pumipat Sinacharoen told Reuters.

Its first-quarter sales doubled to 2.8 billion baht and quarterly net profit trebled to 481 million baht due to strong condominium margins and lower taxes as the government extended lower property tax schemes for a second year to March 2010.

Asian Property now had 8.0-8.5 billion baht of presales, about half condominiums, which would be booked as revenue this year, enabling the company to reach the annual target, Mr Pumipat said.
Domestic political instability and the closure of two Bangkok airports by protesters hit confidence late last year, with a knock-on effect on housing demand in the fourth quarter, weakening home sales, while banks had tightened up on lending.

However, the domestic economic turmoil also had the effect of wiping out a number of small developers, thereby easing competition, lowering the supply of houses and increasing sales at remaining companies, including Asian Property, Mr Pumipat said.

The company’s weekly sales and the number of site visits had increased in March and April, he said. Strong condominium margins would help the company keep its net profit margin this year at least at last year’s 11.5 per cent, he added.

Asian Property, which builds town houses and condominiums in urban areas, is beefing up sales campaigns this year in an effort to attract home buyers and the company had previously said its net profit margin would fall short of last year’s.

Fifteen analysts polled by Reuters Estimates forecast 2009 revenue of 8.6 billion baht, down 13 per cent, and a net profit for the year of 1.2 billion baht, down 29 per cent.

The company planned to launch 12 new projects this year, including six condominiums, worth a combined 18 billion baht in sale value, Mr Pumipat said. — Reuters

Source: Business Times, 19 May 2009

Investment in Thai construction may halve

This could lead to Bangkok property prices plummeting 30%, say analysts

INVESTMENT in Thailand’s construction sector will halve this year and could cause Bangkok property prices to plummet 30 per cent, analysts say.

The Thai Contractors Association (TCA) expects investment in construction to fall to 320 billion baht (S$13.8 billion), down 51 per cent from 650 billion baht last year.

Private investment it tipped to sink the most – by two-thirds to 160 billion baht, from 450 billion baht in 2008. Public investment is expected to contract 27 per cent year-on-year to 160 billion baht, from 220 billion baht.

Demand for basic construction materials such as cement will fall as investment and activity
subside.

‘Domestic cement consumption could decline 10 per cent from 25 million tonnes,’ Pramote Techasupatkul, president of SCG Cement, Thailand’s biggest cement producer, told The Business Times. ‘We forecast we will sell nine million tonnes locally and ship about six million tonnes overseas this year. ‘The situation should pick up slightly in the second half, thanks to the government’s stimulus measures, with demand fully recovering in the next two years.’

Analysts say Bangkok’s property market is showing signs that support TCA’s forecasts. ‘I agree that a 50 per cent drop in investment is likely because of what we are hearing from the private sector, especially residential property,’ said Veena Naidu, research director UOB Kay Hian (Thailand).

‘Land & Houses (Thailand’s biggest residential developer) just reported that its single-detached house and townhouse sales are down 50 per cent this year.

‘The top six developers listed on the Stock Exchange of Thailand account for 70-80 per cent of the market share – and they are seeing a 30-40 per cent drop in sales. The small to medium-size developers that are not listed are already dying out because of lack of funding from the banks.’

Ms Naidu predicts Bangkok residential prices will fall at least 20-30 per cent this year and that developers’ bottom lines will be further hit by the cost of the promotions and special offers to reduce their inventories.

Other observers do not see a mass price correction across Thailand, but agree that investment in construction will plummet this year.

‘We see no evidence of a drop in value, but in terms of investment we certainly see a slowdown in the pipeline,’ said Bill Barnett, managing director of C9 Hotelworks, a Thailand-based hospitality property consultancy.

‘Within the residential sector there is a lack of credit for developers. For mixed-use projects (hotels with residential units) there are a lot of preconditions that didn’t exist a couple of years ago.

‘For example, if you’re doing a development with a hotel, the banks now want you to reach a 50 per cent sales threshold before they’ll fund the residential part. That makes doing a capital formation and debt structure much more complex – you can’t go to overseas investors because they are not there, and local banks are being more difficult.’

TCA has called on the government to speed up the implementation of mega projects, but economists said that would not benefit the construction industry this year as the earliest ground to be broken would be late-2010.

Source: Business Times, 10 Mar 2009

Bangkok home prices may fall 10%

Resort area and luxury sector transactions grind to a halt as foreign buyers continue to disappear

BANGKOK’S residential property prices will fall by 10 per cent this year, while resort area transactions have ground to a halt, but domestic political turmoil may have prevented a market crash, experts say. Foreign buyers, who account for around 30 per cent of Bangkok’s condominium market, continue to evaporate, leading developers to cut prices as luxury sector transactions stall.

But prices will not implode by the same extent as in Singapore and Hong Kong.

‘In the past couple of years we viewed Singapore’s booming a market with some jealousy as local politics here dampened prices,’ said David Simister, chairman for CBRE Thailand, Cambodia and Vietnam. ‘But we’re now thankful that we’ve avoided the subsequent spike and crash.’

CBRE has seen a significant slowdown in transactions in the 17 off-plan projects it represents in Bangkok.

Robert Collins, managing director, Savills Thailand, said that there will be a ‘flight to quality completed projects’, and that preventing oversupply is crucial in preventing a price crash.

‘A lot of what’s being marketed is off-plan,’ he said. ‘It would be very healthy for the market for these developers to postpone or shelve their plans until existing projects have reduced their inventory.

This would prevent a huge surge in the current oversupply, which would inevitably lead to a market depreciation if it took place.’

However, Bangkok prices will still drop by 10 per cent this year, said Thaninee Satirareungchai, property analyst, KGI Securities (Thailand). Early sales by investors and speculators, who account for about 20 per cent of Bangkok’s condominium market, are taking place, but there is little evidence of distress selling, she said.

‘The current situation is simply mute transactions, there’s no real distress selling as in the previous 1997 crisis.’

Bangkok-based property broker Harrisons said its condominium sales in Bangkok had recovered slightly from an exceptionally low base last quarter, which was down 70-80 per cent on the first nine months of 2008. While condominium developer Grand Unity Development slashed prices at a Bangkok project by 20 per cent to boost sales before completion this July.

Luxury property prices will be the hardest hit, but cheaper projects will continue to sell, said Ms Thaninee.

‘Pacific Star, a Singapore-based property company, still works hand-in-hand with Asian Property Development for mid-to-high-end condo developments in central Bangkok.’

‘Overall, the condo market in Bangkok would be fine as most projects are not high-end segment and, therefore, not dependant on foreign investors,’ she said.

Experts said sales in resort areas like Phuket have ground to a halt.

CBRE saw its Phuket residential transactions slump by more than 60 per cent year on year from January to four, despite making record sales in the first 10 months of 2008.

‘Phuket missed its high season last year which has led to very disappointing sales,’ said Mr Simister, ‘but we still maintain our view that the residential villa and property market remains strong in terms of long-term demand.’ Mortgage approvals continue to decline but housing loans will still grow by 6.8 per cent this year to 1.69 billion baht (S$72.7 million), down from 7.8 per cent growth in 2008, said Kasikorn Research Centre. More cautious lending could benefit lower-risk borrowers as intense competition in the loan market will see some banks build market share through refinancing by offering aggressively favourable interest rates to existing borrowers, it said.

Source: Business Times – 21 Feb 2009