Focus on Foreign Roadshows to Offset Sluggish Domestic Sales
Leading property developers have turned their attention to overseas roadshows as a means of generating sales at their residential projects, during a period of low overall purchasing power and only slight growth in domestic demand.
One of the main drags on the domestic market is the fact that the banks are continuing to severely restrict the approval of mortgages to potential buyers in the middle- to lower-income market, with rejection rates of up to 50 per cent at some institutions.
Despite the baht having appreciated 2.41 per cent from 36.07 per US dollar at the end of last year to around 35.20 currently, residential prices in Thailand still present an attractive proposition for foreign buyers, especially business investors from Hong Kong, Singapore, China, Taiwan and Europe, many of whom wish to expand their investment in Asean by using Thailand as the base for their head office in the region.
Some foreign buyers also see residential property in Thailand as a good investment for the long term, with prices in the Kingdom – especially in Bangkok – still lower than those in their own country.
Aliwassa Pathnadabutr, managing director of CBRE Thailand, said domestic residential demand had continued to expand only slightly in line with prevailing economic conditions in the first half of the year, as a result of which most developers were attempting to tap into new demand from foreign buyers interested in expanding their investment in Thailand and other Asean countries.
“Holding roadshows to introduce projects overseas is the new market strategy for driving presales, by focusing both on customers buying a second home and investors planning to buy a property to rent out for long term,” she said.
Surachet Kongcheep, associate research director of Collier International (Thailand), said Thai residential projects were still priced lower than in Asian economies such as Singapore, Hong Kong and China, which made them attractive to buyers from these markets, as well as from other countries.
Meanwhile, the Thai government has a policy to develop the country’s infrastructure and link the transportation system, not least in greater Bangkok via extended Skytrain and underground rail routes, expressways and motorways, all of which will boost residential prices in the future, he said. This is why foreign investors are very interested in projects close to the mass-transit system, he added.
“This presents a new market for property firms to introduce their projects, especially condominiums, to foreign buyers at a time when domestic demand has dropped,” Surachet said.
Sansiri’s senior executive vice president for high-rise business, Uthai Uthaisangsuk, said Thai condominium prices continued to be lower than prices in other key Asian markets. For example, Hong Kong has an average condominium price of Bt600,000 per square metre, while Bangkok’s most costly condos cost Bt400,000 per square metre at most.
Sansiri is one of the leading developers to have opted for an overseas roadshow strategy to generate condominium sales, having first done so last year.
The firm achieved foreign condominium sales worth Bt3.5 billion last year and now targets sales of Bt5 billion this year after the success of its roadshow to Hong Kong and Singapore early this month, when it chalked up sales worth Bt1 billion for its latest condominium project, the Line Asoke-Ratchada.
Insufficient domestic demand
“We have had to expand our market overseas after witnessing strong demand in foreign markets, as domestic demand is showing only slight growth,” Uthai said.
SC Asset Corp is another developer that has adopted the road-show strategy for condominium projects, having showcased its luxury projects in Malaysia, Hong Kong, Singapore and Taiwan.
“Bangkok condominium prices are still up to four times lower than those in Singapore. This presents an opportunity for foreign investors to invest here, as a result of which we have expanded our customer focus from the domestic market to overseas markets for our luxury projects,” chief executive officer Nuttaphong Kunakornwong said earlier in the year.
Nusasiri, meanwhile, is another listed developer planning to take the foreign roadshow route, in Hong Kong, Malaysia, Singapore, Taiwan and Myanmar.
“We want to boost our sales overseas following the drop in domestic demand,” CEO Visanu Thepcharoen said.
High rejection rate
Atip Bichanond, president of the Business Housing Association, said domestic demand was actually still quite strong, but the problem was that the banks were applying strict criteria when considering mortgage applications for homes priced below Bt3 million.
As a result, the rejection rate in this market segment is in some cases up to 50 per cent, which impacts directly on developers as they cannot transfer sufficient units to customers and have to put such properties up for resale, he explained.
Moreover, although the government’s “Baan Pracha Rath” programme offers a special financial package for those buying a home at the lower end of the market – for housing costing no more than Bt1.5 million per unit – most potential buyers in this category are continuing to face problems when it comes to qualifying for bank approval for a home loan.
Government Saving Bank president Chatchai Payuhanaveechai said that up to 50 per cent of “Baan Pracha Rath” mortgage applications had been rejected, with customers disqualified mainly on grounds that they have insufficient purchasing power to pay monthly installments on a home loan.
Source: The Nation – 24 June 2016