Ratings firm Fitch Ratings has warned that Thai property developers face a slowdown in growth as expected declines in consumer purchasing power starts to bite.
In its latest report Fitch noted that Thai banks have become stricter on lending to individuals, as household debt has risen to almost 80 percent of GDP at end-June 2013. This, is noted, could increase the rejection rate as well as a delay in the purchasing decisions of new customers.
On the supply side, new launches for the first nine months of 2013 rose 28.5 percent year-on-year by units and 36.2 percent year-on-year in value, according to the Agency for Real Estate Affairs. It noted there may be some construction delays due to the continued labour shortage.
In Fitch’s view, the impact on large listed Thai developers with strong brands and well-diversified product portfolios should be limited, given their ability to adjust their product mix to maintain their take-up rates.
The shift in developers’ strategies to the changing environment is also evident through the slower new launches in September 2013, as well as a shift of focus to the higher income segment.
Given continued urbanisation and economic growth in Thailand, widespread oversupply risk should not be imminent. Oversupply may exist only in some locations, especially in areas where developers are targeting lower middle to low income home buyers, however the competition among large developers is likely to intensify and may put pressure on selling prices and margins.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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