Property Firms May Take a Minimum Time of 3 Years to Sell Their Property Inventory

Many property companies may take over 3 years to sell out an inventory of residences of value over Bt200 billion in Bangkok and its outer reaches for the reason of a hold back in demand happening from the economic slump.

On the other hand, a few bigger property firms consider their inventory should be sold out and producing revenue after three months for this reason, although definitely within a year. A lot of experts say their inventories are now mostly presold.

A recent survey revealed that property developers listed on the Stock Exchange of Thailand had housing inventories of a combined value of Bt178.79 billion by the final quarter of 2008, a rise of 14% over inventories of value Bt155.09 billion by the last quarter of 2007.

The leading property firm Preuksa Real Estate recorded the maximum growth of houses "in stock", with its inventory increasing by 55.55% every year worth of Bt12.6 billion by the final quarter of 2008.

Other leading property firms Supalai and Quality Houses, whose inventories increased by 34.1% and 33.1% correspondingly, by the last quarter of 2008 with values of Bt11.4 billion and Bt19.3 billion.

Real Estate Information Centre director-general said that in usual circumstances, housing inventories were fascinated by the market in 1½ -2 years. However in the present financial slump, in which buying power has decreased a lot, it may take 2 ½ -3 years to sell out housing projects.

“We consider property companies will have to enforce sales with marketing campaigns for the reason that home purchasers are postponing their decisions to purchase and are taking more time to choose a property to purchase,” he said.

When obtainable inventories were united with fresh projects launched in 2009, a few property developers could take over 3 years to sell out their projects.

Developers Advise the Government to Increase Tax Allowances For Home Purchasers

Property developers have called on the new government to raise the tax allowance for home purchasers from Bt100,000-Bt200,000, as a means of straightforwardly growing purchasing power in 2009, at a time when customers will be hit by the global economic recession.

They also asked the government to expand long leases for foreign purchasers from 30 years to 60 or even 90 years, as a way to improve purchasing power in that section of the market.

Nobel Development managing director Thongchai Busrapan said the most successful measure that would straightforwardly do good to home purchasers would be escalating the tax allowance for those purchasing into housing projects for their first home. They put forward the existing allowance be doubled from Bt100,000-Bt200,000, which would boost their purchasing power.

“The tax allowance of value Bt100,000 has focused on purchasers of apartments valued at approximately Bt1.5 million. If the allowance is elevated to Bt200,000, that would develop the market for those purchasing more expensive apartments,” he said.

Prasert Taedullsatit, director and chief operating officer of Preuksa Real Estate, said that if the government improved the tax allowance for down payments in the first six months of 2009, it would be a reception boost for the market.

Demand for housing projects this quarter has minimized by over half from the same period in 2008. This tendency is likely to carry on until the first half of 2009. Thus, Preuksa called on the government to launch provisional measures to improve the market in the coming six months, he said.

“In case the government supports these proposals, it would honestly boost purchasing power,” he said.

“If the property market can get better, it will also assist linked businesses to develop. That sequentially would facilitate the economy endure the global financial slump,” he added.

Clouds Figure Out On the Skyline

Thailand's real estate sector in 2009 will come across two big effects - the worldwide economic tsunami and long-drawn-out local political troubles - regardless of encouraging signs from easing price rises, declining prices of steel and oil, and a probable expansion of the government's tax inducements.

Dark is the night as the local industry fights back to deal with a double blow that has set aside probable purchasers and investors on the sidelines.

For the local market, 2008 has been an unstable year. The market in the initial two months of the year persistent to be slow, a development triggered late 2007 by the increasing prices of oil and steel and political improbability.

The response of home purchasers improved in March after the government announced tax incentives that took effect from March 29 2008 to March 28, 2009. Sales of nearly all property developers, particularly those developing low-rise units or units set to be transferred within the period, raised in the second quarter of 2008.

But the sales detonation lasted just some months and was condensed to a drop when the People's Alliance for Democracy seized Government House in late May. Many home purchasers delayed their decisions, as they were worried about the consequences of political conflict on the economy at the same time as some probable customers were simply in no mood to purchase.

Thongma Vijitpongpun, chief executive of the listed developer Preuksa Real Estate Plc (PS), said that subsequent to rejection rates and cancellations go up, the company required to track each consumer’s payment ability and tried to fix the troubles as early as possible to re-sell the units as soon as possible.

He said the economic recession had a pessimistic impact on home purchaser’s confidence although real command still existed. Unlike purchasers in the middle-priced section and those shopping for second homes, not very lots of first-time home purchasers delayed their decisions.

He also predicts a drop in the property market development rate by 5-10% compared to 2007. “The government should encourage demand with mega projects and expand the tax incentives,” he suggested.

Thailand’s Property Market likely to shrink by 10%

Thailand's property market is likely to shrink by 5 -10% in 2009 as the country falls under the complete crash of the global financial slump and local political uncertainty carries on without declaration.

Most property developers and real estate agencies understand that the property market will fall considerably in 2009 as anxiety about upcoming earnings deepens and home-purchasers set away plans to purchase fresh residences.

A few purchasers of residential properties, without an apparent image of upcoming earnings, are likely to reduce their budgets and go for lower priced apartments. Above this, mortgages will be more complicated to acquire as commercial banks entail restrictions to defend against bad loans.

Preuksa Real Estate president and chief executive Thongma Vijitphongpun said his company would amend its designed residential projects in 2009 by concentrating on the middle of the market, with prices ranging from Bt1.5-3 million per unit, to meet client demand.

“We supposed that total real estate sector volume in 2009 will drop between 5–10% from the expected total volume of 80,000 units in 2008. We have observed the signs in this last quarter of 2008, when the number of visitors to our projects has decreased between 5-10% and presales have revealed only slight growth,” he said.

Generally, the final quarter of the year is the finest time for selling properties from housing developments.

LPN Development's managing director Opas Sripayak said his company would regulate its business plan in 2009 by dropping the size of its housing projects as per the estimated demand in different locations. This move is likely to offer a speedier cash flow than launching big projects.

“Our board has scrutinized the real estate sector and hopes it to fall in 2009, thus we have to be worried regarding our plans. We will keep on expanding our investments and launch fresh projects, however we have to be cautious,” he said.