Thai property developers brace for challenges next year

Business operators believe they will have to adjust their strategies while the government extends the fee reduction measure for property transfer and mortgage registration for another year to stimulate the market.

Wongsakorn Prasitwipat, managing director of Property Perfect Plc, said that the real estate market next year was expected to transition to a "wait and see" mode. Entrepreneurs need to cautiously manage cash flow, cope with declining land stocks, and develop projects precisely to meet customers' demands, thereby reducing risks in dealing with rising costs, along with mortgage stock crises, he said.

In 2024, positive factors include having a government and prime minister from the business sector, potentially more business-savvy than previous leaders, he said. This is a hopeful prospect for business operators amid negative factors such as increased household debt, decreasing purchasing power, rising interest rates, and the Israel-Hamas conflict, he said.

The conflict in the Middle East indirectly affects energy prices, especially in the vulnerable oil-rich region, he said. Should tensions escalate, it would lead to higher oil prices, consequently raising construction material costs and transportation fees, triggering inflation and higher labour costs, he added.

Speaking of his company's investment plans, the focus will not be on condominium projects due to high risks compared to flat projects. Constructing buildings and waiting for their completion to transfer ownership requires a shift in focus towards flat projects, and increased international partnerships.

Any condominium developments will primarily serve as compensatory measures for expired goods. This will likely entail one project per year, valued at 1 billion baht, depending on the location, according to Wongsakorn.

Impact of debentures

He warned that it would be crucial to monitor the issue of debentures, stemming from redemption problems of various companies in the past. This had led customers holding funds back instead of investing, causing investment delays and hindering economic circulation, Wongsakorn said.

Everything negative is considered one of the factors that need close monitoring as it complicates fundraising through equity. This issue affects every company and industry and might necessitate a reduction in equity fund-raising, he added.

The business direction for the real estate sector in 2024 requires efficient cash flow management due to potential issues with fundraising, especially through equity. Requesting loans from banks (project loans) might also become more challenging due to stricter credit release regulations from developers, Wongsakorn said.

It is crucial to manage cash flows effectively, not stock too much inventory or land. Project development must align with customer needs to ensure sales, he said.

If land is purchased, development must commence immediately. This is an annual practice from before; we accumulate land waiting for future development, he said.

Since the Covid-19 pandemic, more caution is being exercised in land acquisitions, he said. Contrary to past practices, most land purchases now focus on selling to partners for development rather than acquiring and holding for future development, Wongsakorn said.