Thai developers advised to unload old condo supply

Thai developers advised to unload old condo supply

Condo developers should monitor their own unsold inventory closely and try to drain as much as possible before planning new supply launches this year amid slowing property market growth, according to analysts.

Therdsak Thaveeteeratham, executive vice-president for the research division at Asia Plus Securities Co, said housing inventory carried over from last year is in high volume, which will take 18 months to absorb if no new supply is added.

“If total presales of new supply being launched this year are lower than the total value of new supply, inventory will become larger,” Mr Therdsak said. “It will be tougher for developers if that inventory is financed by interest-bearing debt.”

According to Asia Plus Securities, total inventory value of 16 SET-listed developers (with a combined market share of two-thirds) has continued to rise as total presales were lower than the total value of new supply launched in recent years.

The 16 firms posted combined presales of 353.93 billion baht last year while launching a combined 365.74 billion baht in supply.

In 2017, the same figures were 321.3 billion baht and 337.18 billion baht respectively, up from 244.4 billion baht and 254.44 billion baht in 2016.

Mr Therdsak suggested developers sell as much existing inventory as possible and slow new launches, as the property market this year will be dampened by the central bank’s lending curbs and higher interest rates.

Vichai Viratkapan, acting director-general, the Real Estate Information Center (REIC), said the residential market will slow slightly because of numerous negative factors like the lending curbs and higher rates.

“Despite no oversupply at the moment, developers should not launch too large an amount of new housing supply this year, as completed units which remain unsold are in a high number,” Mr Vichai said.

He forecast a decrease of 7% in new condo supply. That amount would be higher than in 2017 and the five-year average. The number of new units being completed this year will rise by 7% after a high volume of new supply was launched in 2017-18.

Under a base-case scenario, the REIC forecasts a decline of 9.8% in new condo supply launches in 2019 and a rise of 4.7% in inventory. The number of condo units newly registered will increase by 6.6%, but newly transferred units will drop 24.2% with a decline of 26% in transfer value.

Under the best case, the number of new condo units being launched this year will edge down 0.8% with a drop of 5.7% in inventory. The number of condo units newly registered will increase by 17.2%. Newly transferred units will drop 16.6% with a decline of 18.6% in transfer value.

Last year, newly launched supply rose by 12.1% with a drop of 5.1% in inventory. The number of housing units newly registered and newly transferred rose 10.3% and 21.3% respectively. Transfer value rose 35.6%.

Apa Ataboonwongse, president of the Thai Condominium Association, said the condo market this year will continue to grow, but at a lower rate after rising during the past few years.

Atip Bijanonda, president of the Housing Business Association, said rising interest rates will have an impact on housing market sentiment as buyers see their purchasing power reduced.

“Second-hand homes will compete with new units, as the new building and land tax that will take effect on Jan 1, 2020 will urge second-hand homeowners to sell in the market to avoid the tax,” Mr Atip said.

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