SET-listed residential developers have adjusted their strategies to cope with sluggish market sentiment that continues to linger in the second half after poor performances in the first half.
At least seven developers have cut the number of new projects being launched this year in line with the weak market and loan-to-value (LTV) limits, low purchasing power and the global economic slowdown.
This decrease reduces costs for the marketing budget.
Starting from April 1, homebuyers are required to make a minimum down payment for third and subsequent mortgages of 30% of the home price, with second mortgages set at 10-20%, depending on how long a borrower has made payments on the first one.
The LTV ratio of 90-100% remains unchanged for those planning to buy a home priced below 10 million baht, but the ratio is lowered to 80% when the borrower buys a residence valued at 10 million baht or higher.
Pruksa leads the pack
Pruksa Holding was the first to pull back, announcing last month a decrease in the number of new projects to 40 sites worth a combined 47.4 billion baht from 55 projects worth 68.1 billion baht planned earlier.
"Overall sentiment remains unfavourable," said Supattra Paopiamsup, Pruksa Holding's deputy chief executive. "We postponed 15 projects to launch next year because many of them will be in the same locations with each other. We will only launch projects in locations where we are strongly confident about demand."
Seven of the 15 postponed projects are for townhouses, five are for middle- to lower-end condos and three are for single detached houses.
Pruksa also revised down its presales and revenue targets to 50 billion baht and 45 billion baht, respectively, from 54 billion baht and 47 billion baht seen earlier.
As the condo market shrank in the first half, Sansiri postponed four new condo projects worth a combined 8.4 billion baht to launch next year from 12 condo projects worth 22.4 billion baht planned earlier.
As a result, the number of new projects being launched this year dropped to 24 projects worth 37 billion baht from 28 projects worth 46.6 billion baht.
LPN Development cut new projects launched to a value of 13 billion baht from 20 billion baht and postponed at least two projects set to open next year after sales of condo supply in the first half were lower than targeted.
According to Yuanta Securities Thailand, the LTV limits have a strong impact on condos priced at 3 million baht and lower -- the main segment of LPN, accounting for 70% of its portfolio.
AP Thailand cut its launch schedule to 34 projects worth a total of 52.3 billion baht from 40 projects worth 58 billion baht. The six projects postponed to launch next year will all be for low-rise houses whose land plots are not ready.
Kessara Thanyalakpark, deputy chief executive of Sena Development, said the company postponed two or three new low-rise projects to launch next year and will revise down presales and revenue targets to be in line with the new launch and market situation.
"We postponed them because we lack contractors," Ms Kessara said. "The number of contractors for low-rise housing development is now insufficient, as many developers have shifted to this segment."
Ideo Q Phahol-Saphan Kwai, a condo project launched in May by Ananda, is revising its development plan.
Low-rise focus
Uthai Uthaisangsuk, Sansiri's chief operating officer, said the company will focus on low-rise houses (single detached houses, duplex houses or townhouses) because the segment faces less impact from LTV limits than condos do.
"The LTV limits have a strong impact on the condo market, particularly those buying as an investment," he said. "If we launch a new condo project and the sales rate is lower than 30%, it is not worth the marketing budget."
A robust low-rise segment was proved by the first-half performance of Golden Land Property Development, which recorded double-digit growth. The company develops only low-rise projects.
Development plans can change when sales are lower than expected. After recording a low sales rate in the first phase of Ideo Q Phahol-Saphan Kwai condo, launched in May, Ananda Development decided to return booking money to all buyers and will revise its development plan to provide cheaper units.
Similarly, Raimon Land returned booking money to all buyers at off-plan luxury condo Shaa Asoke on Sukhumvit Soi 19, launched early last year with a total of 143 units and only 15% of units sold. The company changed the development plan to a hotel instead.
Shift to recurring income
Raimon Land saw potential to turn the Soi 19 site into a hotel because it wanted to increase the revenue portion from recurring income from only 5% of the company's total.
SC Asset Corporation is another firm interested in the hospitality business, with a plan to invest 3 billion baht to develop seven hotels within three years.
"We are expanding recurring income properties in our portfolio for growth with a target of one-fourth in revenue gained from recurring income business," said SC chief executive Nutthaphong Kunakornwong.
Non-listed developers are adjusting in line with demand.
Wasan Kiangsiri, president of the Housing Business Association, said that many developers of single houses and townhouses scaled down new launches after the housing market and economic sentiment in the first half were sluggish.
"Developers are shifting to sell off-plan houses because pre-built units will bring higher costs and cause higher stock if sales slow down," he said.
Pornarit Chounchaisit, president of the Thai Real Estate Association, said developers in provinces changed housing designs to suit local demand, introducing one-storey houses with lower prices instead of two-storey units.