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Despite expectations of stagnant sales in many property segments this year, low- to medium-priced condominiums near mass-transit routes will thrive, although developers will need to diversify and be careful about their funding costs, according to industry executives.
Condos have sold well since 2005 as people had become more concerned about the cost of living, said Naporn Sunthornchitcharoen, the executive vice-president of the country's largest residential developer, Land & Houses Plc.
"Living expenses are higher, especially travel costs as a result of higher oil prices," he said. "Condo units are also affordable for the new generation who have limited budgets for buying housing in the city."
Strong demand has been fuelled by the availability of the current subway and Skytrain networks and proposed new routes, while some developers have also begun to offer lower-cost units quite far from mass transit, Mr Naporn said.
One reason for the shift toward more distant locations is that the cost of land near mass-transit routes has risen, making it less profitable to develop low-cost condos in some areas.
In the detached-house segment, site visits by prospective buyers have been falling for three years but the ratio of bookings to visits has risen, says Mr Naporn. The reason is that the people visiting sites represent real demand from the local area.
As a result, he said, developers should know who their core target customers are and do more focused marketing.
"Developers will need to be concerned about the cost of funds which includes higher oil prices and project-finance interest rates. These factors have a direct impact on developer's cashflow. Any investment should be more cautious and detailed," he added.
Teerachon Manomaiphibul, deputy managing director of Property Perfect Plc, said residential demand this year would be strong but would shift to smaller units to match purchasing power.
"The property market slowed down during the past two years while supplies were very limited. It will pick up in 2008 but only for big players in the market due to higher competition," he said.
Many large developers in 2007 adjusted by offering units in all segments and price ranges. However, competition would be stiffer in 2008 due to higher construction costs linked to oil prices.
"Developers will face higher costs. Some will pass the costs on to consumers while some may need to reduce gross profit margins to maintain market share," said Mr Teerachon.
Big players would also need foreign investment, just as retail operators and banks have discovered. Bonds and property funds will continue to be popular.
"As debt finance changes to equity finance, the property market will be closed to non-professional developers," he added.
Phanom Kanjanathiemthao, managing director of the property agency Knight Frank Chartered (Thailand), said the city condo market remained strong as 80-90% of the demand came from local buyers.
By Bangkok Post : (2 January 2008) |
