Thai Property Developers May Change Business Strategy as Production Issues
Rising land prices, higher construction-material costs and a labour shortage are forcing leading property developers to revise their business strategies for next year. Several companies are delaying the launch of high-rise condominium projects, focusing instead on low-rise condominiums, and some have decided to wait for environmental impact assessment (EIA) permits before launching projects onto the market.
Residential prices, meanwhile, are showing signs of increasing by between 10 and 15% in 2014 from this year’s level, property experts said.
“We are planning to launch both condominium and low-rise residential projects, including detached housing, townhouses and twin-houses, worth more than Bt20 billion in total. But for condominiums, we will focus on low-rise, eight-storey projects, as their construction takes between 12 and 18 months.
This will cut our construction period and also uses less labour when compared with high-rise condominiums,” said Property Perfect CEO Chainid Adhyanasakul.
He said demand next year for construction labourers would exceed supply, due to the start of work on the government’s Bt2-trillion infrastructure project and the Bt350-billion water-management and flood-prevention project. This will impact directly on the supply of construction labour in the market, resulting in an even greater shortage than this year. As a result, the company has had to change its business strategy and focus on the development of low-rise instead of high-rise condominiums, and also on new locations close to planned mass-transit routes that currently have lower land prices than in areas close to the existing mass-transit system, he said.
Chainid said land prices in greater Bangkok increased on average by 10% a year, while construction-material costs looked set to rise by between 10 and 15 per cent next year. These factors will boost residential prices by 10-15% next year, he added.
Sansiri president Srettha Thavisin, meanwhile, said the company would revise the scheduling of its condominium launches next year by only putting them on the market after they receive an EIA permit. “This year, we have launched more new condominium projects in Bangkok and surrounding provinces. These will take some time to construct, and we have a backlog worth more than Bt60 billion that will be enough to generate revenue through 2016. As a result, we do not need to launch more projects next year,” he said.
The developer will focus next year on building and delivering homes to current customers on time, which will enable revenue and net-profit growth of just under 10%, he added.
Supalai managing director Atip Bichanond said his company would reduce the number of new condominium launches next year by concentrating on construction of its existing projects and on-time delivery to customers.
“The labour shortage is the main problem for property firms at this time, and it will worsen next year when the government’s infrastructure projects further squeeze labour from the market,” he said.
Given the expected business environment next year, most property firms are trying to improve the management of their construction process. “We have long-term contracts with our contractors to support our construction process,” said Sena Development director Kessara Thanyalakpark. The company had to negotiate such an arrangement after being forced to delay the delivery of some of its condominiums to customers this year due to the shortage of labour, she said.
Pruksa Real Estate’s managing director for condominiums, Prasert Taedullayasatit, said the company also has a long-term arrangement with its contractors to support its new condominium projects.