Property firms bite bitter pill

Asia Plus Securities

Asia Plus Securities

Third quarter results likely to trail second quarter as buyers defer decision

Property firms will face hard times in the last quarter of this year as homebuyers may delay their decision to invest in residential projects beginning in the third quarter, according to research by Asia Plus Securities.

Asia Plus Securities senior executive director Therdsak Thaveeteeratham said financial results in the third quarter of property firms listed in the stock exchange will be better compared to the same period last year. However, the thirdquarter performance will be lower than the second quarter this year as homebuyers are delaying their decision to buy residential projects, concerned about their future earnings once the global economic crisis hits Thailand’s economy.

According to the research by Asia Plus Securities, six of 12 property firms will announce lower net profits of between 12 per cent and 62 per cent in the third quarter compared to the second quarter. They include Asian Property Development, Land & Houses, LPN Development, Major Development, Property Perfect, and Supalai. Five property firms will record net profit in the third quarter between four per cent and 176 per cent higher than the second quarter. They are Sansiri, Prinsiri, MK Real Estate Development, Quality Houses, and SC Asset Corporation.

Preuksa Real Estate will maintain its net profit in the third quarter similar to that of the second quarter.

“We forecast that their net profit in the third quarter will be lower than the second quarter because almost all recorded presales in the third quarter lower than the second quarter. Meanwhile, demand for residential projects have dropped significantly, although the government may decide to extend its tax incentive deadline for property from March 28, 2009 to March 28, 2010,” he said.

He added that 31 property firms, who were listed in the Stock Exchange of Thailand, had recorded presales of Bt28.12 billion in the second quarter of this year, a drop from Bt30 billion in the first quarter of this year.

The company also estimates that their presales in the third quarter will be only Bt25.8 billion, an 8percent drop from the second quarter of this year. That means the government tax incentive was not enough to woo homebuyers if they were concerned about their future earnings. This will effect financial results in the third quarter of this year and may have an impact on the last quarter of this year when the country’s continuing political uncertainty and the global economic slowdown start to hit the Thai economy.

According to a survey by the Real Estate Information Centre (REIC), the Housing Developers’ Sentiment Index (HDSI) in the third quarter of this year dropped 1.2 points.

The survey included 146 property developers, 28 of those listed companies.

REIC directorgeneral Samma Kitsin said the survey showed that property developers have concerns that the economic slowdown and the political turmoil will have a negative impact on homebuyers, who will delay their decision to buy new residential projects.

Following the survey, HDSI in the third quarter of this year recorded 43.8 points, lower than 45 points in the second quarter of this year.

Samma said that property developers’ confidence dropped over concerns that demand in the market will drop due to homebuyers’ worries about their future earnings.

However, most remain confident as construction costs have dropped following sharp declines in the prices of steel and oil.

Preuksa Real Estate president and CEO Thongma Vijitpongpun, said presales in the third quarter of this year would be lower than estimates.

“Our presales may be lower than the target of Bt20 billion if homebuyers continue to delay their decision to buy and reduce their budget to buy small residential properties,” he said.

Asian Property Development chief executive officer Anuphong Assavabhokhin, said that the company’s sales in the third quarter had recorded growth of up to 10 per cent compared with the second quarter of this year.

Property firm NC Housing had to revise its presale target from Bt1.9 billion to Bt1.5 billion to Bt1.6 billion.

“Our presales in the first eight months of this year recorded only Bt1 billion, lower than the target. As a result we have to adjust our presale target from Bt1.9 billion to between Bt1.5 billion and Bt1.6 billion. That may affect our revenue target, which will be lower than the estimated Bt1 billion at the end of this year,” the company’s managing director, Somchao Tanterdtham, said.

NC Housing recorded total revenue of Bt383.39 million and a net loss Bt7.53 million in the first half of this year.

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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 ( 28 )
Website: http://www.nationmultimedia.com

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