Residential market records tepid growth
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Residential market records tepid growth

Supalai says demand slows in Q3

The residential market this year will have lower than expected growth, primarily because of the relatively poor performance in the third quarter caused by numerous negative factors, notably higher interest rates, says Supalai.

Tritecha Tangmatitham, managing director of SET-listed developer Supalai, said residential demand slowed down from July to mid-September as homebuyer confidence dropped. Potential buyers also delayed decisions after interest rates rose, he said.

"Market performance in the third quarter was quite poor across the sector, largely because of higher interest rates," said Mr Tritecha.

"The impact from the third quarter will affect the entire year, which may result in flat growth, compared with the moderate growth we expected earlier."

Although the market improved from late September, the fourth quarter will only have a two-month window for sales activities, he said.

Travel trends changed after the pandemic, as people stop visiting residential sites to buy houses starting in early December, unlike pre-pandemic when developers could still sell their units until mid-December, said Mr Tritecha.

"Condo launches have not increased as anticipated. Several developers announced plans to launch a significant number of condo projects this year, but their actual launches fell short of expectations, primarily based on weak demand," he said.

Mr Tritecha said reliance on debentures also became more challenging because of the recent default crisis. Previously developers utilised debentures for 70% of project cost, with 30% from project finance, he said.

For some smaller firms, debentures might make up 100% of the project cost because of lower interest rates than project finance, said Mr Tritecha.

When developers are unable to roll over debentures, they turn to project finance, but securing project finance for condo development has become increasingly difficult.

Banks are now using stricter loan conditions, including a stipulation that a project must achieve a minimum sales rate of 50%, or 70% for small developers, he said.

"Achieving a sales volume of only 30-40% during the launch period may cause developers to reconsider condo development as the process takes several years to complete," said Mr Tritecha.

He said Supalai cut its launches this year from 37 worth 41 billion baht to 31 worth 36 billion.

The six postponed projects were low-rise houses that faced delays in receiving permits.

The company's presales target remains unchanged at 36 billion baht. In the first nine months this year, Supalai recorded 23.5 billion baht.

Next weekend, the company's final condo project for the year launches, Supalai Sense Srinakarin, a low-rise condo with three eight-storey towers and a total of 477 units worth 1 billion baht.

A sales rate of 50% is expected by year-end, said Mr Tritecha.

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