* Property index has fallen 10 percent in three months
* Drop in home loans could affect earnings at Thai banks
* New project launches expected to drop 30 percent this year
By Khettiya Jittapong
BANGKOK, Feb 26 Political unrest and an
over-supplied $20 billion real estate market in Thailand are the
latest challenges threatening developers who are cancelling new
launches in the hopes of staving off a bubble.
New project launches are expected to drop as much as 30
percent this year, which should help ease concerns about
oversupply, but other sectors of the market may suffer.
The number of new housing units hit a record high last year
with a boom in condominiums, which accounted for 58 percent of
the market. This year the market, which accounts for about 5.5
percent of Thailand's GDP, is expected to contract by 2-5
percent after rising 4 percent last year. The decline has
already hit developers and could impact banks as well.
"The unrest should put a brake on a possible bubble in the
sector. What we will see from now will be more cancellations on
transferring new houses," said Naporn Sunthornchitcharoen,
president at Land & Houses PCL.
Thailand's property index has dropped 10 percent in
the past three months compared to a 5 percent fall of the
broader index. Thailand's consumer confidence and
housing demand indices dropped for a 10th consecutive month in
January, a survey showed.
"In the worst-case scenario, if the unrest persists until
June, consumer confidence will be weakened further," said Tongma
Vijitpongpun, CEO at Pruksa Real Estate Pcl, the
country's second-biggest developer. "The market will see a
contraction because no one wants to buy houses at this moment."
Pruksa Real Estate, which posted record high net profit and
revenue in 2013, now expects revenue to rise 3-4 percent this
year, the lowest since the 1997-1998 financial crisis, versus
average growth of 25 percent a year in the past decade.
Pruksa's new bookings dropped 30 percent in January as
potential buyers delayed purchases. Among the
worst performing stocks for Thai developers, Pruksa has
retreated 16 percent over the past three months. Its net income
is expected to erode by 1.85 percent over the next 12 months,
the worst estimate among local peers, according the
Land & Houses, the country's largest homebuilder, saw a 50
percent fall in December presales - the value of bookings for
property units - and is aiming for 6 percent growth in 2014, far
lower than the 20 percent rate in 2013.
High household debt and a rising rejection rate due to
stricter loan regulations have also deterred homebuyers,
especially in Bangkok.
Home loans are already slowing, potentially weakening
earnings of major banks like Siam Commercial Bank and
"We aim to lend 52 billion baht ($1.60 billion) for housing
this year, or on average 3-4 billion baht a month," said
Chatchai Payuhanaveechai, executive vice president at
Kasikornbank. "In January, we lent less than 1.5 billion baht.
That showed a 50 percent reduction from our target."
Growth of the 2.48 trillion baht home loan market has been
cut to 8-9 percent this year from 9.5 percent last year, the
Thamrong Panyasakulwong, president of the Thai Condominium
Association, voiced concerns that some developers may face
cash-flow shortages if the crisis is prolonged.
Increasing inventory and softer demand have prompted
analysts to take a cautious view on Sansiri Pcl given
the company has the most unsold condominiums on the market.
Sansiri, where foreigners make up 2 percent of customers,
has seen its rejection rate rising to 10-15 percent from the
usual 5-10 percent. It aims to launch 19 new projects this year,
down 46 percent in terms of value, and the number could be cut
further if the unrest is prolonged, the company said.
($1 = 32.5650 Thai baht)
(Additional reporting by Saranya Suksomkij and Manunphattr
Dhanananphorn in BANGKOK and Tripti Kalro in BANGALORE; Editing
by Matt Driskill)