Rolling with the punches until jabs arrive
Pruksa's chief says the property sector will underperform as long as a Covid-19 vaccine remains distant
Afull recovery from the coronavirus crisis is unlikely until there is a vaccine for Covid-19, according to a local property veteran.
"Despite the ability of Thailand to cope with the spread, the outbreak has made people afraid," said Thongma Vijitpongpun, chief executive of Pruksa Holding Plc, one of Thailand's largest developers. "But it will gradually improve."
A vaccine against the virus is expected to be developed and commercialised by next year at the earliest, he said. Amid the lingering fallout, damage to tourism and exports will continue into 2021.
"All business sectors, including property, are getting hammered by the coronavirus," Mr Thongma said. "The scale of the impact varies among business categories. The property sector will decline this year before improving in 2021, but remain below average."
Despite several property incentives, including cuts in mortgage and transfer fees, a lack of purchasing power is blunting their impact.
"All businesses need time to become better, and we must wait," said Mr Thongma, who with his family was No.25 on the latest Forbes list of Thailand's richest people.
For the property sector, the impact of the unprecedented crisis is worse than during the widespread flooding of 2011. That event lasted for one month, followed by three months of recovery, Mr Thongma said.
"Purchasing power is lower," he said. "People are unemployed. Homebuyers have lost the confidence to spend. This outlook will extend until next year. The market will resume growth in 2022."
He forecasts the property sector to shrink 30% this year as spending power weakens. The condo market is down 40%, while single-house/townhouse is down 30%.
"The impact on each developer will depend largely on the ability to adjust," Mr Thongma said. "The key is cash flow management. Developers should maintain sufficient liquidity during the crisis, or balance cash in and cash out.
"If we do not manage our financial status well enough, we may have trouble, as it is very difficult to borrow from banks in this situation. Basically, unnecessary projects should be delayed."
When Mr Thongma visited Siam Paragon for the first time after the lockdown for shopping malls was eased, he observed that a sense of normalcy was returning.
"There were a lot of people out that day, despite it being Monday," he said.
The Pruksa boss is pinning hopes on a property turnaround in the third quarter.
"The new normal in the residential sector is still unclear," he said. "For low-rise, a family living under one roof has nothing to worry about, as each member is usually cautious of the virus contagion."
Condos pose a different challenge. If space needs to be large enough for physical distancing, or greater comfort when working from home, then the bigger rooms will require a higher unit price.
"Budget and location remain key factors for condo buyers," said Mr Thongma, sometimes dubbed the country's low-priced townhouse tycoon.
"Changing home features is not difficult to do, but it should not make unit prices higher, which would disturb purchasing power."