Developers cut back revenue forecasts

Thongma Vijitpongpun

Thongma Vijitpongpun

Buyer sentiment worsens as economic crisis, political strife hit spending power

Most of Thailand’s property developers have revised their 2008 revenue forecasts downwards in the face of a depressed market that began to slide into difficulty several months ago.

Prospective home-buyers, with their immediate future clouded by the twin effects of the global economic crisis and local political turmoil, are shying away from what is to many of them the biggest financial commitment of their lives - buying a new home.

A survey by The Nation has found that leading property developers, together holding 70 per cent of the Bt80billion property market, have stepped back from earlier revenue targets and have set lower figures.

Preuksa Real Estate, for example, has revised expected revenue down to Bt13 billion from its early target of Bt14 billion. Land and Houses’ revenue forecast for the year is down from Bt21 billion to between Bt16 billion and Bt18 billion, and Property Perfect has cut its revenue target from Bt8 billion to Bt7.5 billion. Supalai has revised its presale target from Bt10 billion down to Bt9 billion.

Property Perfect’s managing director Chainid Ngowsirimanee said his company had revised its revenue target from Bt8 billion down to Bt7.5 billion when home-buyers began delaying their decisions to buy.

Purchasing power has fallen significantly in the final quarter of this year, compared with the first nine months, following protest action by the People’s Alliance for Democracy (PAD) in closing Bangkok’s airports, he said.

“Normally, the last quarter in every year is a high season for selling residential projects, but this year we have faced a different environment. The country’s political uncertainty has had a greater negative impact on Thailand’s economic sentiment than the global crisis,” he said.

Luxury residential projects will suffer a direct impact from the crisis when foreign investors suspend their overseas spendingPreuksa Real Estate’s president and chief executive Thongma Vijitpongpun said the number of visitors to the company’s residential projects had dropped by 20 to 30 per cent, depending on project locations. They were also delaying their decisions to buy out of concern that the impact of the global economic crisis would cut their future earnings.

“Although the global economic problems have not directly affected Thailand’s economy, the value of exports has begun to show a negative impact and the tourism business is suffering because of the PAD’s closure of Bangkok’s airports late last month. As a result, some home-buyers are delaying their decisions to buy from residential projects,” he said.

Market leader Land and Houses has reduced its 2008 sales target by nearly 20 per cent, from Bt21 billion to between Bt16 billion and Bt18 billion.

Senior executive vice president Naporn Soonthornchitcharoen said demand for residential projects had fallen significantly since October, when home-buyers first became concerned about the twin effects of the global economic crisis and local political uncertainty on both Thailand’s economy and the level of their earnings.

“If the new government cannot solve the country’s political problems, we cannot estimate what will happen to the country’s economy and the property market, so we have to be very conscious of our investments and business plan next year,” he said.

The Real Estate Information Centre (REIC) believes that the value of the property market this year will be 5 to 10 per cent lower than in 2007, because demand for residential projects has fallen significantly in the current quarter, the agency’s director general Samma Kitsin said.

Although the financial crisis in the United States has not directly affected Thailand’s property market, it is beginning to have a negative impact on the country’s economy, with some manufacturers who are dependent on export markets in the US and Europe closing plants, he said. These influences are weighing increasingly on the concern home-buyers are feeling for their future earnings, and they are delaying decision to buy new homes as a result.

However, the REIC believes that demand for residential projects with units priced between Bt2 million and Bt5 million will feel less impact from the crisis because this is where present real demand exists in the market.

Luxury residential projects that are focused on foreign buyers, on the other hand, will suffer a direct impact from the crisis when foreign investors suspend their overseas spending, Samma 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 ( 50 )

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