3 years for some property to clear

Baan Preuksa

Baan Preuksa

But many bigger firms say their stock is already largely presold.

Firms may take more than three years to sell out an inventory of residences worth more than Bt200 billion in Bangkok and its suburbs because of a slowdown in demand arising from the economic downturn, property experts say.

However, some bigger property companies believe their inventory should be sold out and generating revenue as soon as three months hence, but surely within a year. Many say their inventories are now largely presold.

A survey by The Nation early this week found that property developers listed on the Stock Exchange of Thailand had residential inventories worth a combined Bt178.79 billion at the end of 2008, an increase of 14 per cent over inventories worth Bt155.09 billion at the end of 2007.

Preuksa Real Estate recorded the highest growth of residences “in stock”, with its inventory rising by 55.55 per cent year on year to a value of Bt12.6 billion at the end of 2008. Next came Supalai and Quality Houses, whose inventories grew 34.1 per cent and 33.1 per cent respectively, to finish 2008 with values of Bt11.4 billion and Bt19.3 billion (see graphic for other firms).

Real Estate Information Centre director-general Samma Kitsin said that in normal conditions, residential inventories were absorbed by the market in one-and-a-half to two years. But in the current economic downturn, in which purchasing power has fallen, it may take two and a half to three years to sell out residential projects.

“We believe property firms will have to drive sales with marketing campaigns because home-buyers are delaying their decisions to buy and are taking more time to select a property to buy,” he said.

Samma said that when existing inventories were combined with new projects launched this year, some property developers could take more than three years to sell out their projects.

Preuksa Real Estate’s director and chief operations officer Prasert Taedullayasatit said his company’s inventory would generate revenue between now and the middle of next year. More than 80 per cent of the inventory has already been sold and is waiting for project completion before being transferred to customers.

Of the total inventory value of Bt12.6 billion, residences worth Bt5 billion will be transferred to customers in the second quarter of this year, Bt5-billion-worth will be transferred at the end of this year and the rest will be transferred in the first half of 2010, he said.

“We manage our inventory by constructing our projects following customers’ orders, and we speed up our construction so we can deliver to customers on time. We believe that our inventory is not a burden, but a performing asset for our business,” he said.

Land & Houses’ senior executive vice president Naporn Soonthornchitcharoen said his company had tried to reduce its inventory from enough residences “in stock” to last two or three months to enough for only one and a half months. This was aimed at helping the company to reduce its management costs.

The company’s inventory, which was worth Bt28.4 billion at the end of 2008, will be transferred to customers this year and next year. This will generate part of Land & Houses’ revenue target of Bt15.4 billion this year, he said.

“Our inventory is not a burden. It is a performing asset that will guarantee our sales reach the target this year,” he said.

NC Housing’s managing director Somchao Tanterdtham said his company’s inventory fell 9.6 per cent from a value of Bt3.1 billion in 2007 to Bt2.8 billion at the end of last year. This was because NC Housing decided against launching new residential projects last year when it saw purchasing power falling.

The company has also suspended new projects this year and will try to sell out its existing projects, which may take two or three years.

“We accept that our sales this year will be slower than they were two years ago, so our sales target for 2009 is only Bt1 billion,” he said.

About the author

Somluck Srimalee Somluck Srimalee
Somluck Srimalee is a journalist with The Nation, Bangkok's independent English language newspaper and specialises in the property and real estate sectors.
Other posts by Somluck Srimalee ( 49 )
Website: http://www.nationmultimedia.com

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