Bangkok--18 Nov--Fitch Ratings
Fitch Ratings says Thai property developers face the risk of slowing growth as expected decreasing purchasing power is likely to suppress housing demand. Banks have become stricter on lending to individuals, as household debt has risen to almost 80% of GDP at end-June 2013. This could increase the rejection rate as well as a delay in the purchasing decisions of new customers.
On the supply side, new launches for the first nine months of 2013 rose 28.5% yoy by units and 36.2% yoy in value, according to the Agency for Real Estate Affairs (AREA). Most of the new launches are condominium projects, and a large number of projects are likely to be completed in the later part of the year. This would take condominium completions in 2013 to a record level, according to CBRE Research Thailand, Colliers International Thailand and some large developers. However, there may be some construction delays due to the continued labour shortage.
In Fitch’s view, the impact on large listed Thai developers with strong brands and well-diversified product portfolios should be limited, given their ability to adjust their product mix to maintain their take-up rates. The shift in developers’ strategies to the changing environment is also evident through the slower new launches in September 2013, as well as a shift of focus to the higher income segment. Given continued urbanisation and economic growth in Thailand, widespread oversupply risk should not be imminent. The oversupply may exist only in some locations, especially in areas where developers are targeting lower middle to low income home buyers. However, the competition among large developers is likely to intensify and may put pressure on selling prices and margins.