Revival in full swing

Demand appears steady but builders may face fresh cost challenges

The steady recovery seen in the property sector is expected to continue this year, as prospective homebuyers feel more confident to buy houses when mortgage rates hit record lows and when they feel secure about their jobs.

Another market driver is the government's tax incentives, which are scheduled to last until year-end. Housing prices stabilise due to intense competition among developers in offering quality units to attract buyers.

Currently, the property transfer fee is 0.01% and the mortgage registration rate and special business tax are 0.11%.

Jiraporn Bamrungchart-udom, an analyst at Merrill Lynch Phatra Securities, said the property market, while still in the recovery stage, improved across the board last year, with higher demand and supply. The turnaround performances of many listed developers also made property stocks highly attractive among investors.

``The recovery, spearheaded by the housing segment, will continue this year, as interest rates remain low and people feel more confident about their job stability,'' she said.

Every percentage point in interest rate cuts is believed to add 5% more purchasing power to homebuyers.

Terdsak Thaveeteeratham, deputy research head at ABN Amro Asia Securities, said housing demand in Bangkok would grow to between 50,000 and 80,000 units this year.

According to the Government Housing Bank, the new housing registrations in Greater Bangkok totalled 34,035 units last year, up only marginally from 34,023 units in 2001.

Against the upbeat backdrop, however, the sector will face some problems this year, including higher material prices and a delay of construction material transport to building sites due to the enforcement of 21-tonne truck load limits, Mr Terdsak cautioned.

The property sector provided a total shareholder return of 84.93% last year, the fifth-highest by sector on the SET. Industrial land specialist Amata Corporation Plc generated the highest return at 335.32%, followed by L.P.N. Development at 250.47% and Supalai at 232.56%.

The worst performer was Golden Land Property Development Plc, with a return of -18.30%, followed by Ch. Karnchang at -14.29%, and Thai Factory Development at 1.88%.

Last year, Amata was dubbed the best performer among 380-plus listed companies on the SET but over three years, Asian Property Development Plc ranked first, with a 138.9% return during the period.

Viboon Kromadit, a director of Amata, said the company's sales of industrial land improved significantly last year on the back of the economic recovery. It sold 713.53 rai in two industrial estates _ Amata Nakorn in Chon Buri and Amata City in Rayong. It also co-invested with the Vietnamese government to develop Amata City in Bien Hao province, Vietnam.

The company posted a net profit of 895.51 million baht last year, up from 335.91 million in 2001.

``Our financial status is strong with the debt-to-equity ratio of 0.43:1 last year, and we expect to see 0.28:1 this year,'' he said.

Amata is considered one of the better value stocks, with a dividend yield of 20.7% or two baht per share in 2001.

Tikhamporn Plengsrisuk, managing director of L.P.N., said his company had a clear focus on developing low-rise condominium projects in more central locations of Bangkok where demand outstripped supply.

``We have little debt and we can realise sales revenue quickly because we mostly develop low-rise condo buildings,'' he said.

L.P.N. plans to develop eight new condo projects in Bangkok this year. It will more than double its net profit to between 300 million and 350 million baht and revenues will surge to between two and three billion baht.

On the other hand, an executive at Golden Land said the company's earnings from housing developments were low when compared with those of the other key players because it had only two ongoing projects, Baan Lat Phrao and Golden Lanna in Ramkhamhaeng.

``Our house sales were pretty good last year, but we lacked the continuity of new project launches. Also, we didn't stock raw land in our portfolio,'' the executive said.

As well, the rental income base from the company's serviced apartments in the Bangkok's central business district remains small.

Golden Land has already reviewed its business policy to increase short-term income. The company will move aggressively this year with a number of new projects in the pipeline. Its earnings are expected to improve in the second and third quarters of this year. _Krissana Parnsoonthorn

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