Many firms undergoing revamps to cut costs

Property firms are restructuring their businesses to reduce cost and maintain net profit margin amid rising cost in the second half of this year. 

Land & Houses managing director Anant Asawabhokhin said that net profit margin was significantly lower than last year because they cannot increase residential price to cover the rising cost as the market is faced with high competition from existing property firms and newcomers in the market.

Anant said property firms have to find ways to cut cost and invest in other property businesses such as retail and hospitality to balance their portfolio as net profit margin has dropped significantly. 

Meanwhile, Pruksa Real Estate, which faced a hard period during floods last year, is also revising its business model to cover its business risk and reduce rising cost.

Pruksa Real Estate president and CEO Thongma Vijitphongpun said that he had started to restructure the business since last year’s floods, by integrating its business units under the committee system when deciding to buy undeveloped land or the procurement system. This helps the company reduce business risk in buying undeveloped land that may not have the potential to be developed into residences. 

The company has also revised its construction process to reduce the damage from construction process error. This helps the company manage cost in the long term, he said. 

Sansiri president Srettha Thavisin said the company is using the prefabrication system to build residential projects after opening its first prefabrication plant this year. This will speed up its construction process and help the company generate faster returns than the conventional system. This will also drive up its net profit margin more than 10 per cent this year. 

“Although the cost of the prefabrication system is not lower than the conventional system, we can save time in delivering our residences to our customers, which means greater liquidity. This will help us to use cash to invest and develop new projects for sale," he said. 

Meanwhile, property firms are expanding their investments upcountry to drive up sales and net profit margin. 

Supalai’s managing director, Atip Bichanond, said that the company has expanded its investment upcountry where the company sees strong demand and also less competition when compared with Bangkok. 

Pruksa Real Estate director and chief business officer Prasert Taedullayasatit said the company has expanded investments upcountry since 2010 to balance its portfolio and give upcountry people a choice to buy residences.

“When we expand our investment upcountry, home-buyers will get quality residences at a reasonable price,” he said.

He added that the upcountry market also has less competition when compared with Bangkok.

Meanwhile, the Agency for Real Estate Affair (AREA) reported that the demand to buy residences in Bangkok had recovered since the second quarter of this year for both low-rise and high-rise residences at prices not more than Bt3 million per unit. The popular location to buy a condominium is still Central Business Districts (CBDs) such as Sukhumvit, Silom, and Ratchada. 

The demand to buy low-rise residences – both single detached house and townhouse – is located in western Bangkok and Chao Phraya River. 

CBRE Thailand also said that the Bangkok property market has seen significant recovery from the effects of the floods.

CBRE Thailand’s research said that the demand to buy residences in flood-hit locations is recovering, particularly for the low-end to middle market, but the high-end market is recovering slowly.

The research shows that the prices of condominiums are rising due to higher land and construction costs. CBRE believes that for a fixed budget, most of the family market will consider townhouses in a good location several kilometres away from a mass-transit station in a suburb rather than a one-bedroom condo in the city that is in a similar price range. Nevertheless, there will be continued demand for small condos from singles and couples and for weekday occupation by children attending central city schools and for second home use.

Colliers International Thailand also sees signs that Bangkok condos have been recovering since last year. 

Colliers International Thailand’s research shows that more than 14,170 units were launched in the first quarter of this year, while only 5,160 units were launched in the fourth quarter of last year. Of the 9,000 additional units, some 60 per cent are located along mass-transit lines, especially on Ratchadaphisek and Rama IX roads, while 27 per cent – more than 3,760 units – are located no more than 200 metres away from Skytrain or subway stations. They offer selling prices averaging Bt51,500 per square metre or less than Bt3 million per unit.

Following the research house survey, property firms also show growth in presales in the second quarter of this year and they believe that the market is recovering in the second half of this year.