Supalai upbeat on middle market growth

Developer plans to launch 12 projects next year, but with greater emphasis on fast lowrises

Developer plans to launch 12 projects next year, but with greater emphasis on fast lowrises

Supalai continues to be optimistic about the property market next year and plans to launch 12 residential projects in 2009 with a market value of nearly Bt16 billion, its president, Prateep Tangmatitham, said this week.

“Although Thailand’s economy will get a negative impact from the global economic crisis next year, I believe that domestic demand for residential property will continue to grow because some economic factors are helping homebuyers to save their money. These include lower interest rates, a fall in construction costs and the government’s tax incentives for homebuyers,” he said.

However, Supalai will change its product mix by increasing its number of lowrise projects. At present the company generates 68 per cent of its revenue from condominium projects and 32 per cent from lowrise projects, including townhouses and detached houses. Next year, the percentages will change to 50 per cent from each.

Prateep said the company had to change its product mix because of the construction process and market demand. When building condominiums, the construction period takes oneandahalf to two years, which means the company has to inject money into a project for that time before expecting any returns.

Detached houses or townhouses, on the other hand, take about six to eight months to build and are generating income much more rapidly.

Consequently, eight of Supalai’s 12 new residential projects in 2009 will be detached houses and townhouses and only four will be condominiums.

The company will also cut back on the amount of money it will spend next year to buy undeveloped land, from its usual budget of Bt3 billion to about Bt2 billion, because it now holds seven undeveloped plots in Bangkok – sufficient for new residential projects until 2011.

The company also has a backlog of residential units worth Bt14.9 billion which are presold and waiting for the completion of construction before being transferred to customers. Of this amount, Bt1.5 billion will booked to the company’s revenue before the end of this year. About Bt5.2 billion will be booked in 2009, Bt5.3 billion in 2010 and the remaining Bt2.7 billion in 2011.

The company also has an inventory of residential properties worth Bt11.8 billion that it expects to sell over the next three years. This will be sufficient to maintain Supalai’s business growth next year, Prateep said.

Although Thailand’s economy is expected to achieve only meagre growth next year and consumers’ purchasing power is predicted to fall, Supalai believes there will be demand for its planned projects and the products they will offer, especially from the middleincome market, which still shows strong demand.

“In my view, demand for luxury residences will fall because most buyers of luxury residences already have an older residence. They buy a second or third residence for investment, or to change their location. When the economy slows down, they will suspend their investments. But most buyers in the middleincome market are buying their first homes. Most of them have saved to buy a home for a long time, and despite slow economic growth, they will continue to buy. They might reduce the size of the home and the amount they will spend, but we believe the middleincome market will continue to grow next year,” he said.

Supalai is one of Thailand’s leading property firms that are listed on the Stock Exchange of Thailand. In the first nine months of this year it recorded revenue of Bt4.6 billion and a net profit of Bt854 million, up by 45 per cent and 75 per cent respectively over the corresponding period in 2007.

Thirteen of 16 brokerage firms reporting research analyses through www.settrade.com recently recommended that investors buy Supalai shares at target prices ranging from Bt2.60 to Bt4.60 per share. Most of them said the company’s share price was lower than its face value, while the company had a backlog of pre-sales sufficient to generate high revenue until 2011. They said the company also had a policy of paying dividends every year averaging 7 to 8 per cent, and this should attract longterm investors.

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 ( 63 )
Website: http://www.nationmultimedia.com

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