It has been a rough year for some of Thailand’s leading property players as Land & Houses, Quality House and Pruska are among the homebuilders expected to post lower net profit margins this quarter than in the first half of the year, according to local media reports.
The main problem for developers is that banks continue to reject mortgage applications at a near record rate making it difficult for them to transfer units in certain segments. With this trend likely to continue throughout the rest of the year, overall net profit margin among residential developers this year will likely be lower than last year.
“The commercial banks are also [severely] restricting mortgage approvals out of concern over high household debt and with customers’ ability to make their monthly installment payments having dropped due to a reduction in their earnings,” Prasert Taedullayasatit, president of the Thai Condominium Association told The Nation. “Most potential homebuyers who work at manufacturing plants have seen their earnings fall after their companies reduced production capacity – and hence overtime, too – during a period of continued low demand.”
Developers have also spent quite a bit on marketing to boost sales. In addition to this, Business Housing Association president Atip Bichanond told the newspaper most residential developers had been forced to launch special campaigns to generate more sales.
Another problem facing Thailand’s leading developers is that demand has dropped from the first half of the year. There were quite a few homebuyers who decided to speed up the transfer of their homes in the first half of the year in order to take advantage of the government’s stimulus package for the property sector. Those benefits expired at the end of April and with it demand has since decreased.
In order to attract buyers, AP, Property Perfect, SC Asset and many other developers have been offering special deals including reducing transfer fees, slashing prices and offering free furniture packages. Despite these efforts, sales have still remained flat.
