Listed developers determined to boost performance after low Q1

While 11 of the 20 developers posting financial results for the first three months reported a year-on-year rise in revenue, only seven reported that their net earnings had increased during the period.

Of the listed residential developers to show a profit increase, AP (Thailand) posted net earnings of Bt559.59 million, up 120 per cent from the same period last year, while Supalai reported a net profit of Bt903.14 million, 33.33 per cent higher, year on year.

SC Asset Corp reported a net profit of Bt159.73 million for the first quarter, representing a 87.5-per-cent surge from the same period last year, while Golden Land Property Development made Bt99.92 million – up 80 per cent from the first three months of last year.

Grand Canal Land posted net earnings of Bt333.05 million, a whopping 200 per cent higher than a year ago, and Areeya Property reported a net profit of Bt23.69 million, up 15 per cent.

Last but not least, Sena Development reported a net profit of Bt75.42 million to the stock exchange, a year-on-year increase of 133 per cent.

However, the other 13 companies

reported profit falls of various sizes in the first quarter, having faced rising land and construction-material costs during a tough period in which they could not raise their sales prices, while they also had to spend more on marketing to boost sales.

Moreover, although the policy interest rate was cut during the quarter, the move by the Bank of Thailand did not drive market growth.

"The interest-rate cuts [during the first half] will boost the market in the second half of the year, when the commercial banks start to reduce their lending rates. Until now, they have not cut their loan rates following the Monetary Policy Committee’s decision to cut the country’s benchmark interest rate by a total of 50 basis points so far this year," said Thai Condominium Association president Prasert Taedullayasatit, who is also managing director of Pruksa Real Estate.

With the market still showing signs of only slight growth during a period of lower purchasing power and the banks restricting the provision of mortgages amid high household debt, some listed residential developers have launched promotions by joining with banks to offer special home-loan interest rates to speed up sales.

Some have also revised their portfolio from the middle-to-lower-income market to the middle-to-upper-income segment, where people generally still have sufficient purchasing power to buy a home, while some are also expanding their market overseas via roadshows to make up for lower domestic sales.

The average rejection rate for mortgage applications currently stands at 30 per cent.

"We revised our business strategy to focus on the upper-income market early this year, having seen demand for homes priced below Bt5 million drop during a period when the banks are restricting the provision of loans to customers as they see household debt rising," said SC Asset chief executive officer Nuttaphong Kunakornwong.

Roadshows to boost sales

The company plans to go on road-show for its luxury condominium, Saladaeng One, in Singapore and Hong Kong in the third quarter in a bid to boost sales, he said.

Pace Development Corp CEO Sorapoj Techakraisri said the company had achieved sales success at its luxury condominium, Nimit Luang Suan, and Ritz Carlton Residences in the first quarter, boosting its presales for the period to Bt13.5 billion.

This shows that demand at the luxury end of the market is still growing strongly with both domestic and foreign buyers investing, especially in luxury residences in the central business districts of Bangkok, he said.

Meanwhile, Ananda Develop-ment, which posted revenue of Bt1.39 billion for the first quarter –22.34 per cent down from the same period last year – has tried to boost sales by launching a promotional campaign, "Ananda Easy Day", that offers special prices for home-buyers making a reservation at any of its 12 projects by the end of this month.

"We’re offering a no-monthly-instalments deal for the first year in the Bt3-million-and-under segment. This is a way to clear stock and also to speed up sales by our company shouldering the cost of this campaign," said Pruksa’s Prasert.

Sansiri has introduced a "Now or Never" sales promotion, letting home-buyers stay for free for the first two years at its residential projects, of which it has 40 nationwide, ranging from single family homes to townhouses and condominiums.

The sale, which runs until June 30, also offers discounted prices of up to Bt1 million on Sansiri properties.

Asia Plus Securities executive vice-president Terdsak Thaweethiratham said the main problem facing property business at this time was the overall drop in |purchasing power, which had forced developers to launch promotional campaigns to boost sales following |a first-quarter decline in revenue |and net profit at many of the companies.

However, he is still confident that listed property firms will post better financial results over the remainder of the year, as significant backlogs of already-sold homes will be transferred to customers, especially during the second half.

According to Asia Plus Securities research, up to Bt110 billion of the combined Bt253-billion backlog of listed developers will be transferred in the final nine months of the year.

This will boost their full-year revenue above the 2014 level, although presales could still fall due to lower purchasing power, he added.