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No Need for Stimulus Measures to Boost Thailand Property Market

Posted by admin on October 4, 2013

No Need for Stimulus Measures to Boost Thailand Property Market

Despite an economic slowdown in the second half of this year, Thailand residential property market continues to show strong growth. Srettha Thavisin, the Sansiri president said this week.

“We do not need the government to launch any stimulus measures to boost the property market at this time,” he said.

Although the economy is expected to grow slowly, it is not clear whether the slowdown is largely because of the negative impact of the baht’s first-half appreciation on exports, which expanded only slightly during the period, he said.

The baht’s weakening in the latter half of the year could give a boost to exports and overall economic growth, he added.

“This is a temporary situation for the economy, and not for the long term. We are still confident that the economy will grow in the second half, and that the top-10 listed property companies will still show healthy financial results and net profits of more than 10%. That’s why we don’t need a government stimulus package to drive our business,” he said.

Three property bodies – the Thai Real Estate Association, the Business Housing Association and the Thai Condominium Association — had earlier proposed that the government should introduce a stimulus package for the sector, including a reduction in transfer and mortgage fees, and in special business tax, for people purchasing a first home costing up to Bt3 million.

Focus on revenue growth

Meanwhile, Sansiri’s business strategy for next year is to maintain its presales target of up to Bt40 billion, close to what it expects to achieve this year, while at the same time focusing on boosting overall revenue growth to between 10 and 15% – to Bt38 billion-Bt40 billion – Srettha said.

This year, the listed company targets revenue of Bt36 billion, up 20% from the Bt30.08 billion achieved in 2012.

The developer recorded revenue of Bt12.93 billion and net profit of Bt434.49 million in the first half of the year. Net earnings were just 3.3% of revenue in the period.

The company head added that Sansiri had changed its business strategy following the backlog of units ready for sale and waiting to be transferred to customers. The backlog now totals Bt64.23 billion, which is sufficient to generate revenue through to the end of 2016.

“By maintaining our presales at between Bt38 billion and Bt40 billion next year, we will still generate income growth averaging 10% a year, which will be better for both our operations and our shareholders,” he said.

He added that even though the company had achieved strong presales growth last year and in the first half of this year, it had faced high marketing costs, which resulted in net earnings of less than 10% of annual revenue.

Next year, however, Sansiri targets boosting net profit to more than 10% of income, which is why the new focus is on revenue and net profit rather than presales.

“This strategy will balance our costs and revenue to the point where we can show a high profit and generate the best return for our shareholders,” he said.

The revised strategy also ties in with the developer’s attempts to resolve capacity problems resulting from the labour shortage in the construction sector, he added.

Provincial expansion

The company also plans to launch residential projects in new locations, as the government’s Bt2-trillion infrastructure mega-project will open up new areas for development by property firms, Srettha said.

Sansiri will launch projects next year in Nakhon Ratchasima, Phisanulok, Chiang Rai and Rayong, which are all new provinces for the developer.

Meanwhile, it will also launch more projects in Hua Hin and Phuket, where it sees strong demand.

“We believe the economy will continue to grow next year, with interest rates being maintained or, if they do rise, increasing by just 50 basis points, which would have relatively little impact on home-buyers.

“As a result, we believe our 2014 revenue and net profit will grow by between 10 and 15% from this year’s target,” he added.

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