Real Estate Information Centre Advises Watchfulness as Liquidity Crisis Effects Developers

Thailand’s Real Estate Information Centre (REIC) director-general Samma Kitsin is advising home purchasers to put into effect more vigilance and watchfulness as an escalating liquidity crisis could compel developers to put on hold on hand housing projects.

With credit from the banks drying up, plunging sales figures are introducing a twist on the all set resources of a number of small- and medium-sized developers, said Samma.

Demand has been going down since the last quarter of past year 2008, and commercial financial institutions are at present hesitant to make available project finance for property developers.

“We cannot articulate which small and medium property firms will experience monetary troubles when the market moves downward, although the picture will turn out to be more clearer in the final six months of 2009,” he said.

In spite of the plunge in demand, Thailand’s major listed developers will be less in danger for the reason that the majority still have a build up of presold properties big in a sufficient amount to hold up upcoming revenue levels, as per Samma.

Small Companies May Not Complete Their Projects In 2009

A number of Thailand's leading property firms are expressing apprehension about small and medium-sized property developers who may no longer be economically proficient of delivering fresh homes to their consumers from projects started in 2008.

These anxieties came to light when LPN Development managing director Opas Sripayak was enlightening his company's strategies for resisting the effects of the global economic recession.

Thailand's property market started to experience the effects of the global financial slump in the last quarter of 2008, when home purchasers started to postpone their decisions to purchase from housing projects.

Even though this crisis started in the US, which is a long way from Thailand, I think this country's financial system and the property market will be distressed. This is due to the fact that Thailand's economy - particularly its exports - will go down when demand for our export products in the US and Europe falls. This will have an oblique influence on Thai people as their earnings should go down.

Though, this crisis will have a poorer impact on Thailand's financial system than the financial recession in 1997, as most of the country's commercial banks start to limit the stipulation of mortgages early 2008. Therefore, Thailand's commercial banks are economically strong when compared with their situation in 1997.

On the other hand, the commercial banks' limitations on providing mortgages for home purchasers will have a pessimistic influence on the real estate sector in 2009.

What is your business policy for surviving this recession and maintaining your business development?

We have started to check our latest investment in emergent land and we are exercising concern in the introduction of new housing projects by downsizing the projects. This will accelerate sales and produce income earlier than property projects of a bigger size.

In the meantime, the company is also managing both its operational and construction expenses by altering its business structure and freezing plans to employ innovative staff.

Property Firms Crunch Into Bitter Pill

Property firms will experience hard times in the last quarter of 2008 as homebuyers may holdup their resolution to invest in residential projects opening in the third quarter, as per a research by Asia Plus Securities.

Asia Plus Securities senior executive director Therdsak Thaveeteeratham said financial consequences in the third quarter of property firms programmed in the stock exchange will be well again compared to the same period in 2007. Though, the third quarter act will be lower than the second quarter in 2008 as homebuyers are holding up their resolution to purchase residential projects, worried about their upcoming earnings once the global economic calamity hits Thailand's financial system.

As per the research by Asia Plus Securities, 6 out of 12 property firms will declare lower net profits of about 12 %- 62 % in the third quarter of 2008 compared to the second quarter of 2008. Preuksa Real Estate will keep its net profit in the third quarter similar to that of the second quarter of 2008.

"We predict that their net earnings in the third quarter will be poorer than the second quarter as nearly all recorded presales in the third quarter of 2008 is lower than the second quarter of 2008. For the time being, demand for residential projects has decreased considerably, even though the government may choose to extend its tax incentive time limit for property from March 28, 2009 to March 28, 2010," he said.

He further declared that 31 property firms had confirmed presales of Bt28.12 billion in the second quarter of 2008, a decrease from Bt30 billion in the first quarter of 2008.

The company also predicts that their presales in the third quarter will be approximately Bt25.8 billion, an 8% fall from the second quarter of 2008. That reveals the government tax incentive was not sufficient to encourage home purchasers if they were worried about their upcoming earnings. This will affect economic consequences in the third quarter of 2008 and may have an effect on the last quarter of 2008 when the country's ongoing political insecurity and the global economic hold back start to hit the Thai financial system.