Property market faces hit from political woe

Pruksa chief concerned about lengthy conflic

Thailand’s property market is likely to contract this year should the political crisis run into February, warns Thongma Vijitpongpun, chief executive officer of the SET-listed developer Pruksa Real Estate Plc (PS).

He said yesterday that the overall property market, which is sensitive to economic and political circumstances, will grow no more than 5% to 640 billion baht nationwide, with major provinces and border provinces key drivers.

However, if the political situation worsens or the turmoil does not end this month, then the property market will shrink by 2%, he said.

The impact will be greater on the Greater Bangkok property market which will decline from around 330-340 billion baht last year.

“There will be no growth in the property market in the Greater Bangkok this year due to political turmoil,” he said. “In a good case that they [the rallies] end in January, the property market value will be the same as that of last year.”

According to property consultant Agency for Real Estate Affairs (AREA), the number of new housing units being launched this year will decline by 30-40% from around 131,000 units in 2013 due to the prolonged political crisis.

AREA’s managing director Sopon Pornchokchai said the property market may be sluggish until the third quarter if the demonstrations do not end in the first quarter.

In December last year, the number of new units launched totalled 4,438 units from 30 projects worth a combined 15.63 billion baht, much lower than other months. The largest number were single houses with 1,300 units (29.3%), followed by townhouses with 1,254 units (28.3%) and condos with 1,200 units (27.0%).

Mr Thongma said the political problems had no impact on the company’s housing transfer but new sales in November and December last year dropped 15% from their usual figure.

Under the current sentiment, PS plans to launch 40-50 new projects worth 40-50 billion baht in 2014, lower than in 2013 when it launched 60 projects worth 50.19 billion baht. Meanwhile, new project launches will start in the second quarter.

PS will give more weight to single houses and townhouses with 80% of total launches as they serve real demand and are more secure than condos.

“We are monitoring the situation very closely. If the economic or political picture changes, we will adjust our business plan,” he added.

Despite fewer projects being launched this year, PS expects presales and revenue to continue growing. It targets to have revenue growth of only 5-10%, well below the average of 25% per annum during the past 16 years after 1997. Even in 2012 after the great floods, the company’s growth was over 10%.

This year it aims to have 41-45 billion baht in presales while it recorded 41.28 billion baht in 2013. Revenue will be around 40-42 billion baht, up from an expected 37 billion baht last year.

The company is confident it will achieve revenue as target due to several factors including a backlog of 37 billion baht, of which 20 billion baht will be realised this year. Besides new projects being launched, it has 164 active projects with total remaining sales value of around 60 billion baht.

This year it will spend 10 billion baht to buy plots of land for new projects to be launched in 2015, and 1.74 billion baht to build two new prefabrication factories in Navanakorn by August.

Shares of PS closed yesterday on the SET at 18.10 baht, up 30 satang, in trade worth 117.38 million baht.

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