Chewathai expects condo glut from Chinese exodus

Chewathai expects condo glut from Chinese exodus

Mr Boon projects a price war between small and large developers.
Mr Boon projects a price war between small and large developers.

Competition in the condo market will escalate as a large supply booked by Chinese buyers will return to the market, says MAI-listed developer Chewathai Plc.

Around 20 new condo projects with thousands of units are scheduled to be completed this year. Many of these projects had Chinese buyers making up as high as 49% of the units, said Boon Choon Kiat, Chewathai's managing director.

"Due to the Covid-19 outbreak, Chinese buyers who booked a unit at an off-plan project a few years ago won't be able to travel to Thailand to receive the unit transfer once construction is complete," he said.

The outbreak affects many small businesses in China, causing unemployment. This may concern some Chinese buyers, causing them to refuse transfers later this year, said Mr Boon.

He said these dumped units will be a further blow to developers as a glut already exists unsold in this market.

"Small developers like us will face more difficulties this year as we have to fight a price war with bigger players who are likely to release a huge supply of unsold condos refused by Chinese buyers. They will turn to the same target as us -- domestic buyers," said Mr Boon.

Economy of scale gives big companies an advantage in marketing campaigns as they have a lot of projects on hand, he said.

However, when Chinese buyers refuse transfers, their down payments will be seized by developers, giving them a budget to offer discounts to new customers, said Mr Boon.

He expects the situation to worsen considering the domestic economic outlook. A number of Thai buyers have had their mortgage applications rejected. Some Thais may also refuse unit transfers because of the slowing economy, said Mr Boon.

The company plans to spend 858 million baht to buy new plots for future project development this year, half of its investment in 2019.

"Despite flat growth in land prices this year, we will be more cautious of land purchases," he said.

In 2020, the company expects to launch four new projects worth a combined 3.6 billion baht: three low-rise housing projects and one condo.

Chewathai expects a profit by year-end following transfer of residential units worth some 2 billion baht, with 1.12 billion from condos and 880 million from low-rise houses. Last year it posted a net loss of 55 million baht on revenue of 1.15 billion, down from net profit of 264 million on revenue of 2.67 billion in 2018.

CHEWA shares closed unchanged yesterday on the MAI at 41 satang in trade worth 119,930 baht.

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