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First dip seen in Greater Bangkok realty since 1997
Publication Date : 22-01-2014
Overall value of the Greater Bangkok property market could see a decline of nearly 2 per cent this year if the political conflict drags on much longer, warns Thongma Vijtipongpun, president and chief executive officer of Pruksa Real Estate.
If he is right, it will be the first such decline since the economic crisis of 1997.
The metro Bangkok property market was worth 330 billion baht (US$10 billion) last year.
However, while the capital city is hit by the latest round of political chaos, the provincial property market should maintain last year's value of between 330 billion baht and 340 billion baht, Thongma said.
In the metro area, only 30 residential projects totalling 4,438 units worth 15.63 billion baht were launched last month. That was a decline from November of 30 per cent in terms of projects, 73 per cent in terms of units, and 69 per cent in terms of value, according to a survey by the Agency for Real Estate Affairs.
For 2014, AREA forecasts that the value of project launches in Bangkok and its suburbs will drop by 30-40 per cent from last year's 385 billion baht. Thongma said Pruksa's presales last month dropped by 15 per cent from November as the political turmoil escalated.
However, the firm is maintaining its targets this year of presales worth between 41 billion baht and 45 billion baht and revenue of 40 billion baht to 42 billion baht. This performance will be driven by the company's 37.83-billion baht backlog of homes awaiting transfer to customers. Of that figure, 20.78 billion baht worth will be transferred this year, he said.
Pruksa launched 74 residential projects last year, but plans only 40-50 this year worth 40 billion baht to 50 billion baht. Of its 2014 investment budget of 20 billion baht, half will be used to purchase land for next year's developments, and the rest for this year's construction. The investment budget will come from both the company's cash flow and issuance of debentures worth between 5 billion baht and 7 billion baht.
"We have had to reduce our project launches this year, as we cannot estimate what will happen with no sign of the political problems ending," he said.
If there is a political solution, however, the property market could begin recovering as early as next quarter. If not, it could decline by nearly 2 per cent compared with last year, with the only fairly bright spot being upcountry, largely spared the impact of the anti-government movement.
Other property firms also plan fewer launches this year as the political row has directly affected the demand to buy homes in Bangkok and the suburbs for the past two months. Sansiri, which launched 48 projects worth more than 50 billion baht last year, plans only 19 worth 33.26 billion baht this year.
"We revised down our plans for new projects when we saw the slowdown in the economy, along with impacts from the political uncertainty on the market in the first quarter of this year," Sansiri president Srettha Thavisin said. Sena Development will also cut back on new projects and lower its presale and revenue targets, company director Dr Kessara Thanyalakpark said.
She said an earlier plan for at least 10 new projects this year worth 7 billion baht had been reduced to seven launches worth about 5 billion baht. The decision was based not only on the blow to the market from the political crisis but on the expected delay of mega-projects under the government's 2-trillion baht infrastructure programme.
US$1 = 33 baht