Developer index further decreases
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Developer index further decreases

Decline linked to interest rate hikes

Housing developer confidence continued to drop in the first quarter of 2023 after two recent interest rate hikes, according to the Real Estate Information Center (REIC).

Vichai Viratkapan, the centre's acting director-general, said the current situation index of housing developers saw a significant decline in the first quarter this year, declining to 46.7 from 51.5 in the fourth quarter of last year.

"The decrease might derive from the increases in interest rates twice in the first quarter. The first was announced on Jan 25 with a rise of 0.25% to 1.50% from 1.25% and the second on March 28 with another 0.25% to 1.75%," said Mr Vichai.

The current situation index of housing developers in the first quarter was the lowest in seven quarters since the second quarter of 2021 when it stood at 46.4.

The historic lowest point was in the first quarter of 2020 at 41.2, coinciding with the onset of the pandemic.

The index in the first quarter of 2023 on revenue, sales, investment and the launch of new phases or new projects saw a decrease of between -10.8 and -3.5 points.

However, the index on cost of development rose by 3.7 points as housing developers were more confident about development costs.

This was likely due to the increase in development costs being stable.

REIC also reported the expectations index or sentiment over the next six months which improved to 61.4 in the first quarter of 2023 from 60.5 in the final quarter of 2022.

The expectations index on revenue, sales and investment rose between 2.4 and 4.9 points as a result of the economic recovery, driven by the tourism sector and foreign investors.

"The purchasing behaviour of Chinese buyers has now shifted from speculation to long-term residence which helped increase developers' confidence in future prospects," he said.

However, developers still had concerns about employment, development costs and the launch of new phases or new projects.

This was likely because the Bank of Thailand did not extend the easing of loan-to-value limits which expired at the end of last year.

Wuttichai Chatchaiphonrat, president of the Khon Kaen Real Estate Association, suggested developers manage costs under the same standard by applying innovative solutions to maintain and enhance product quality.

"Amid high development costs, developers should avoid too much stock inventory to manage cash flow. Otherwise, it may lead to negative financial consequences," he said.

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