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PROPERTY
KANANA KATHARANGSIPORN
Condominium buyers appear to understand that rising construction costs will lead to higher prices and are prepared to absorb them to some extent, says the listed condominium specialist L.P.N Development Plc.
Managing director Charan Kesorn said that L.P.N. had tested a new approach, releasing units for sale in lots at its Lumpini Place Rama IX-Ratchada building. It found that customers could accept an increase in unit prices as they realised construction costs were being pushed up by steel prices.
Earlier the company planned to sell only 400 units of a total of 1,200 at an average price of 57,000 baht per square metre. However, existing customers took up about 700 units on the first day of the launch in late June.
The company the next day increased prices by 5% and increased them another 2% this week. At 57,000 baht, the company calculated the steel price at 48 baht a kilogramme, 10% higher than price on that day. So far, it has sold 70% of these units.
The company's ability to adjust prices and still receives a good response from customers indicated the demand in the area is very strong, said Mr Charan.
At the same time, the company found that competition in the area made it more appropriate to speed up the launch to this month, instead of October.
''During the period of price fluctuations, this strategy is efficient risk management,'' he said.
''Raising prices of units in the same project can cause a bad images for a company as consumers may think that we are taking advantage. But under the scenario of rising construction costs, consumers are aware of the situation and can accept new prices with reasonable increases.''
He added that condominium developers should evaluate the market situation carefully before deciding to apply this strategy. They should also find the right timing to raise the prices at appropriate rates.
Developers must also ensure that there is strong demand in the location and the project size is large enough to apply different prices on a lot basis.
Before L.P.N. launched its Rama IX project, it considered different solutions because it was not confident about the construction cost situation.
Mr Charan said condominium developers could also save costs through close attention to engineering from the first day of the design stage. For example, combining electrical wiring from different connecting points into the same tube can help the company reduce cost by 1,200 baht per a condominium unit.
''You can imagine how much we can save when applying this method to building more than 10,000 units,'' he said.
LPN shares closed yesterday on the SET at 5.05 baht, down 20 satang, in trade worth 35 million baht.
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