Property Market Heads Down Market

PROPERTY SEMINAR: Smaller players urged to join forces

Published on November 03, 2004

Large developers seen moving down market as high end reaches saturation

Smaller residential developers should form an alliance to boost their bargaining power amid the heightened competition expected next year when large players move down into their market,

a seminar on the direction of real estate development in 2005 heard yesterday.

Anuphong Assavabhokhin, president of Asian Property Development Plc, said small- and medium-scale developers have had the market for homes priced between Bt1 million and Bt3 billion to themselves during the past few years. Big developers, particularly listed ones, were more interested in premium homes with their fatter margins. However, the market landscape is changing with the high end about to reach saturation.

“They [smaller developers] should join forces to raise their negotiating power. Most importantly, they have to accrue cash flow,” Anuphong said.

Tawatchai Sithikijpisal, vice president for residential project lending at Kiatnakin Finance, told the seminar that demand would weaken as home shoppers grow more cautious about making a purchase and this would force developers into a price-cutting war.

Builders are facing higher costs for oil, construction materials and labour, but cannot raise their prices for fear of scaring off homebuyers, he said.

“I estimate that supply would remain at 50,000-60,000 units next year and if they can steer their business over the next six to 12 months, the tricky situation would improve as supply would be gradually absorbed,” he said.

Saranya Tiengtham, head of business research at Bangkok University, warned developers to analyse consumer behaviour, position their products to differentiate them and choose the right locations.

Sophon Pornchokechai, president of the Agency for Real Estate Affairs, said prices of homes ranging between Bt1 million to Bt3 million would tend to fall, as the entry of big players would expand supply.

Meanwhile, Kasikornbank said it would raise mortgage rates across the board by 25 basis points on November 8, in line with the current rising interest rate trend.

The bank’s fixed three-year rate will be hiked to 3.25 per cent for the first year, 4.25 per cent for the second year and 5.25 per cent for the third year. From the fourth year on, the package will charge the minimum lending rate (MLR) minus 0.5 percentage point. The bank’s MLR now stands at 5.5 per cent.

Siriporn Chanjindamanee,Somruedi Banchongduang

The Nation down market