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Developers advised to be alert in 2019

BoT upending property game with new rules

People browse housing models offered by the National Housing Authority on Monday. (Photo by Apichit Jinakul)

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Residential developers should seek strategies to cope with the Bank of Thailand's new requirements on mortgages, be cautious of new supply and manage financial liquidity as the new lending rules and rising interest rates will hit demand next year.

Therdsak Thaveeteeratham, executive vice-president for research at Asia Plus Securities, said more stringent lending rules scheduled to take effect on April 1, 2019 will be a key concern for the property sector next year.

"The new lending rules will slow demand next year," he said. "We have not seen any strategies or measures from developers to deal with the new rules since the rules were announced early last month."

The period before the rules go into effect will see the drainage of residential stock, said Mr Therdsak. After that, the market will see a slowdown, affected by both new lending requirements and higher interest rates.

He said condo demand is partially fuelled by speculators and investment buyers as yields from condo investment are more attractive than bank's deposit interest rates. However, this demand will shrink as yields from condos decrease and interest rates trend upwards.

"Developers should be more cautious in planning launches next year as demand will be weak and the housing stock is quite large," Mr Therdsak said.

As of the end of September 2018, the housing inventory of 12 large listed developers totalled 502 billion baht, up from 496 billion in the second quarter of 2018 and 480 billion in the third quarter last year.

Of the 502 billion baht, 209 billion is for condos and 293 billion for low-rise houses (single houses, duplex houses and townhouses), up from 194 billion and 285 billion, respectively.

Mr Therdsak said this housing inventory or units remaining unsold were in large amounts, while the new lending rules may have a strong impact on some homebuyers.

As a result, developers should make through and careful predictions for presales next year before planning new supply launches.

"Developers may shift to greater development of low-rise houses in high-priced segments as they are not as impacted by the new mortgage lending rules," he said.

During the first nine months of the year, 15 SET-listed developers recorded a combined presales of around 280 billion baht, up from 232 billion baht in the same period last year. They aim to have 360 billion baht by the end of the year, up from 321.3 billion baht the year before.

For presales in January-September 2018, 46 billion baht was from joint venture condo projects. They were from large developers that mainly had joint ventures with Japanese real estate firms.

The partnerships comprised Ananda Development-Mitsui Fudosan, AP Thailand-Mitsubishi Estate, Sansiri-BTS Group Holdings and Sansiri-Tokyu Corp, Sena Development-Hankyu Realty and Origin Property-Nomura Real Estate.

Last Tuesday SC Asset Corporation Plc reported a joint venture with Nishi-Nippon Railroad Co, one of Japan's largest private railroad companies headquartered in Fukuoka, in SC NNR 1 Co to develop a condo project in Bangkok.

"Having overseas partners can help with funding, diversifying risks and a marketing arm to draw demand from foreign buyers as relying on local demand alone does not suffice," he said.

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