Residential stagnation set to continue

Residential stagnation set to continue

Kessara Thanyalakpark, managing director of Sena Development Plc.
Kessara Thanyalakpark, managing director of Sena Development Plc.

The residential housing market remains stagnant and will take some time to rebound due to poor homebuyer sentiment, according to a prominent developer.

Kessara Thanyalakpark, managing director of SET-listed developer Sena Development Plc, said attitudes towards the pandemic and this year's lockdown were very different when compared to 2020, since the third wave has triggered a high infection curve.

"The country is in a worst-case scenario with a possible peak of 20,000-30,000 infections per day in August and September before declining," she said. "That is the official record, but in reality, it might hit 50,000."

The soaring number of new cases and the extended lockdown will cause a business slowdown, a tepid recovery in the labour market, and lower household incomes. These factors will affect homebuyers' purchasing power.

Ms Kessara said the property sector will see rising numbers of zombie companies, or businesses whose debt repayment ability was lower than their earnings. This will last until 2022.

Market concentration, with the domination of large developers, will become more obvious because of their superior cash flow compared to that of smaller companies. This trend has been seen over the past two years and is expected to continue.

"Housing demand in the short term will drop as financial institutions hardly release mortgage loans when unemployment rises to a new high," she said. "Together with soaring household debts, home purchases will be more difficult."

She expected housing demand this year to drop 10% from 2020, which saw a decline of 35% from 2019.

On the supply side, developers will incur higher costs because of a temporary lockdown of all construction sites and workers' camps last month.

At the same time, steel prices are on an upward trend which will have an impact on the condo segment, she added.

"The only positive factor would be a downward trend in interest rates, which could accelerate some homebuyers' decisions," she said. "In the medium term, the housing market will pick up as urbanisation remains lower than the world's average."

Ms Kessara said Sena plans to launch a total of 18 sites worth a combined 16.76 billion baht. However, it could opt for an adjustment if the situation does not improve.

In the first half of 2021, Sena posted 3 billion baht in housing sales as it launched only four projects in the period.

"We delayed launching four new projects from this month to next month as sentiment is still unfavourable," she said. "Of the total, 15 will be joint ventures with our Japanese partner -- Hankyu Hanshin Properties Corporation -- which can help us manage our own cash flow very well."

Sena has maintained its presales and revenue targets this year, at 11.1 billion baht and 10 billion baht, respectively.

Meanwhile, developer AP Thailand Plc announced that it will maintain its revenue target of 43.1 billion baht this year as it posted a new high of 20.5 billion baht in consolidated revenue with a net profit of 2.51 billion baht in the first half.

"Despite a volatile economy, our result in the first half outperformed the target," said AP chief corporate strategy and creation Vittakarn Chandavimol.

"It was driven by low-rise houses and condo projects. The latter was wholly from joint ventures with Japanese partner Mitsubishi Estate."

AP will continue investing 6.8 billion baht in the remainder of the year to buy new plots of land for the development of future residential projects, after spending 5.2 billion baht in the first half.

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