Residential developers are accelerating business adjustment and new strategies to cope with a property market slowdown and an economic downturn due to the pandemic which is expected to last until next year.
The new black swan of the global economy leading to the worst recession in Thailand in over two decades is a negative factor that will worsen the weak property market, in addition to the lending curbs imposed last year.
Krungthai Compass, the research unit of Krungthai Bank, forecast a 27% year-on-year contraction in Greater Bangkok residential transfers to 426 billion baht in 2020.
According to property developer Pruksa Holding Plc, housing market value in Greater Bangkok shrank 36% to 128 billion baht in the first half, from 199.51 billion baht in the same period last year.
The largest drop was from condos at 54%, followed by townhouses (20%) and single detached houses (12%).
Supattra Paopiamsap, former deputy group chief executive for Pruksa, said market sentiment in May and June recovered from March and April with a higher number of customers visiting project sites.
"Despite an unlively pre-virus market, it bottomed out in the second quarter," she said. "We will stay conservative and keep monitoring the recovery in the second half."
Pruksa was among many developers that revised down the number of new residential project launches this year and delayed them to 2021.
It slashed down to 12 projects worth a combined 15 billion baht from 30 worth 36 billion baht planned earlier in the year. Most of them were condos as opening new sites amid lower purchasing power may cause unnecessary expenses.
Meanwhile, AP Thailand postponed launching four new condo projects worth 12 billion baht to 2021.
Noble Development mulled postponing the launch of two new high-priced condo projects worth a total 15 billion baht to the first quarter next year from the fourth quarter of 2020.
According to Krungthai Compass, one-third of new residential supply scheduled to launch this year by listed developers was delayed to next year.
The earlier planned prior to the pandemic worth a total 195.5 billion baht was reduced to 137.8 billion baht in the second quarter, a decrease of 35% from 2019.
Condos saw the largest decline, plunging 63% to only 21 billion baht while the low-rise segment was cut by just 16% to 116.8 billion baht.
Developers shifted to existing condo inventory, particularly ready-to-transfer units to improve their liquidity, said Kanit Umsakul, an analyst at Krungthai Compass.
"With the same price level, low-rise houses have a larger space than condos despite the greater travel distance," he said.
Mr Kanit suggested developers revise plans to do more low-rise houses as many homebuyers prefer to live farther from Bangkok, with mass transit lines covering larger expanses of Greater Bangkok.
After cutting the number of new projects being launched this year, Pruksa in the second half will re-market 19 highlight projects launched last year which had a take-up rate of more than 50%.
Most of them are low-rise houses not far from a mass transit station priced 2-3 million baht a unit for a townhouse and 5 million baht for a single detached house.
Tritecha Tangmatitham, managing director of Supalai Plc, said the company delayed launching some new condo projects to next year and replaced them with low-rise houses.
"Low-rise housing market has improved since May after the lockdown restrictions eased. The positive momentum will continue through to the end of the year," he said.
He said some buyers want to avoid density in condos.
Pamorn Prasertsan, chief of business group for townhouses at AP Thailand, said the low-rise market is from real demand. Many customers shopped around for condo units but decided to buy a townhouse instead.
Both Supalai and AP reported revenue and presales from low-rise houses outperformed those for condos in the first half.
Supalai's presales portion from low-rise houses rose to 63% from 56% in the same period last year with a year-on-year growth of 21% while condo presales dropped by half.
In May, presales from low-rise houses posted the monthly highest in the company's history due to pent-up demand in March and April.
Meanwhile, AP's presales in the first seven months was driven by low-rise houses which accounted for 85% of the total. Low-rise's year-on-year growth was 11%.
Sansiri reported a year-on-year growth of 110% in low-rise presales during January-July to 16.2 billion baht which also represented 85% of the year-end low-rise presales target.
Chanond Ruangkritya, president and chief executive of Ananda Development, said the company was restructuring its low-rise housing business portfolio to put more weight on the segment.
In June, it appointed Prasert Taedullayasatit, former president of premium business at Pruksa Real Estate, new chief operating officer to supervise low-rise housing business.
"We aim to boost low-rise sales to 20-30% of the total from 10% at present as low-rise housing market is robust," said Mr Chanond.
SEEKING NEW INCOME
Mrs Supattra of Pruksa Holding said the company will introduce precast concrete to other developers so that its factories can generate an income from the outside.
Pruksa will also tap the Chinese buyer market in the fourth quarter through agents based in China to seize strong demand for Thai properties among them.
It also offered some plots of land for sale which were earlier slated to develop condo and low-rise projects.
Sansiri was another firm that announced a land lease or sale for a plot sized seven rai near Talat Phlu BTS station where it earlier planned to develop a condo project with more than 1,500 units.
Overseas investments are alternative sources of income for many developers, including Land & Houses and SC Asset Corporation which invested in US apartments.
Noble Development plans to acquire residential units in the UK to resell to Thai and other Asian buyers, while Supalai went for residential development in Australia, Malaysia, Vietnam and the Philippines via shareholding.
Suphin Mechuchep, managing director of property consultant JLL Thailand, said the virus caused uncertainties in investment and economic sentiment and freezing investment activities in the property sector.
"The Thai property market went through the 1997 Asian financial crash, political unrest and the 2008 financial crisis very well. Prices could resume after a fall," she said.
However, tourism accounts for 15-20% of Thai GDP. If tourism does not come back, the economy will need a longer time to revive, subject to progress on a vaccine.
"Some 10 million people have been affected by the Covid-19, in terms of layoffs and salary cuts," Supalai's chairman Prateep Tangmatitham said. "The government should reopen to international tourists, otherwise the economy will crash in the fourth quarter."