Residential developers should slow down new supply launches in 2020 as the dour global economy and weak property market will persist for another year, warn analysts.
Therdsak Thaveeteeratham, executive vice-president at Asia Plus Securities' research division, said the absorption rate is slower as residential demand dropped after the loan-to-value (LTV) limits took effect.
"In the residential market, around 25-30% of demand was from investment buyers. With the LTV limits and economic slowdown, these buyers have left the market," he said.
The impact of the LTV limits was reflected in SET-listed residential developers' combined revenue and net profit in the second quarter, which dropped to 49 billion and 6 billion baht, respectively, from 65 billion and 10 billion in the first quarter.
Their combined presales in the second quarter this year also continued decreasing to 67.2 billion baht from 69.1 billion in the first quarter and 72.4 billion in the fourth quarter last year.
The highest presales were in the third quarter of 2018, at 107 billion baht, while average quarterly presales are around 80 billion.
Mr Therdsak said early in the year the 16 listed firms' presales were estimated to total 350 billion baht this year, flat from 2018. But their first-half performance was not as good as expected.
Asia Plus expects 2019 presales for listed firms will decline for the first time in three years to 310 billion baht as developers cut project launches from 290 worth a combined 440 billion to 238 worth 370 billion.
"The slowdown in new supply should continue next year as economic and market sentiment are unlikely to be favourable," he said. "Developers' ongoing projects are increasing."
As of the first half, the 12 listed developers who reported had a combined housing stock of 570 billion baht. If this amount is combined with the new supply launch, the cumulative total will be 900 billion baht, which will take almost three years to absorb.
"A healthy absorption rate is no longer than two years," said Mr Therdsak. "Developers should continue slowing new supply to balance shrinking demand. This demand is only domestic, not including Chinese buyers, who have also slowed purchases."
Despite an upward trend in residential stock, listed developers' financial status and liquidity were not a worry as their net gearing was only one time. About 60% of their debt was long term or from debentures and bills of exchange.
Suwatchai Chaikhor, director of economic statistics at the Bank of Thailand, said an unstable economy will continue next year as the US-China trade war will not end easily or very soon.
"The world's economy will be gloomy until the end of 2020," he said on Tuesday at a seminar on the property market held by the Real Estate Information Center.