LPN jittery over delays to new government
Lack of confidence to hit home loans
published : 25 May 2023 at 06:48
newspaper section: Business
writer: Kanana Katharangsiporn
The delay in the establishment of the new government may lead to a lack of confidence among financial institutions, which in turn could impact the consideration and approval of home loans, according to SET-listed developer L.P.N. Development.
Varish Meemaun, financial and investor relations manager, said the delay could affect government budget spending, subsequently impacting the overall economic recovery in the second half.
"If banks lack confidence in releasing home loans or perceive that the economic conditions have not sufficiently recovered to boost purchasing power, they may tighten loan approval criteria," he said.
This could potentially impact the company's revenue this year, leading to no growth. Last year, it recorded 5.83 billion baht in revenue from residential sales, up from 4 billion in 2021.
Mr Varish said the company had a bank rejection rate of 30-40% in the first quarter of 2023, which was considered to be normal for the company.
"In some projects, approximately one-third of the buyers were unable to obtain home loan approvals," he said. "Specifically, for projects like the low-priced condo Lumpini Township Rangsit-Klong 1, half of the buyers faced bank rejections."
He said a 1% increase in interest rates could lead to an additional 500-1,000 baht per month in mortgage payments, which could affect the debt service ratio of the buyers. Consequently, some buyers may fail to obtain home loan approvals due to this factor.
In the first quarter, LPN launched three new high-priced low-rise housing projects worth more than 3.4 billion baht and recorded 2.7 billion baht in presales, representing 21% of the 2023 target of 13 billion baht.
The company has 4,000 unsold residential units that are ready to move in, with a total value of 8 billion baht.
The project with the longest duration, roughly five years, still has 20% of units remaining unsold.
"Units completed 4-5 years ago are particularly appealing because their prices have remained lower compared to newly launched neighbouring projects, which have experienced increasing land costs," he said.
Its revenue from residential sales in the first quarter of 2023 dropped 28% from the same period of last year, while revenue from service business grew 31%, driven by security and engineering services and expansion of project management to non-LPN developed projects.
"We have been steadily expanding our project management services to non-LPN projects for over six years, and this segment has continued to grow," said Mr Varish.
"One contributing factor is our new project launches have declined in recent years."
LPN's market share in the condo segment is 5%, a decrease from its peak of 10% several years ago. However, its market share in the low-rise housing segment has risen to 2% from none previously.