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Pruksa – committed to constant growth

admin — Mon, 02 Aug 2010 04:00:05 +0000

PRUKSA REAL ESTATE PLC’S president & chief executive officer Thongma Vijitpongpun.
“To achieve our revenue target of Bt100 billion in 2017, we have to be a multinational firm,” Thongma Vijitpongpun, president and chief executive officer of Pruksa Real Estate, the market leader among listed property firms with pre-sales of Bt20 billion in the first half of this year, said in an interview with The Nation’s Somluck Srimalee last week. He shared his ideas on how he is managing his business in order to achieve this goal.
How do you intend to become a multinational firm?
We have set up a team to study how to expand our business overseas. Vietnam, the Maldives, and India are the locations of our pilot projects, which will start to generate income this year. However, they will generate less than Bt500 million, compared with our pre-sales target of Bt29 billion this year.
We also are studying home-buyers’ behaviour and demand in Indonesia and Oman.
Indonesia has the potential to be the next country for our business expansion, because it has a growing population and the purchasing power to buy residences. Meanwhile, Oman’s potential depends on research. This project was initiated at the suggestion of an Omani businessman we invited for a visit in the first half of this year.
In China, we also have strong interest to expand our investment, but under China’s rules, when you develop a residential project, you have to use local constructors. As a result, if we expand our investment in China, we may only be involved in management and sales projects.
Why did you set the business goal of being a multinational firm?
That was not our business plan when we started in 1993. At that time, we thought that if we could drive our sales to nearly Bt1 billion, we would be a success. Then we faced the financial crisis of 1997, and the question became one of how to survive.
After that, we set yearly business targets until two years ago, when we asked ourselves how to drive our business with sustainable growth averaging 25 per cent a year in a way that would not be disrupted by cyclical problems like economic crises, political problems, etc.
To manage our business to achieve that goal, our team decided that we have to manage our business risk by expanding our business both here and overseas. This will balance our business risk. This follows our business expansion from the lower-income market 10 years ago, to the middle and upper income markets.
Currently, our customers cover all segments. That’s why the company was not badly hurt by the political problems in the second quarter of this year, and was able to achieve pre-sales of Bt20 billion in the first half of this year, which exceeded estimates.
Following this model, if we want to maintain business growth of 25 per cent every year from now till 2017 that means we have to expand overseas. The company also has to balance its income by targeting 60 per cent from the domestic market and 40 per cent from overseas by 2017.
Why have you set your business growth target at 25 per cent?
In my experience, most businesses have a life cycle: from starting, to high growth, to stable growth, to decline. With Pruksa Real Estate seeing strong growth, if we do not do anything, we will decline. If we don’t want to be like that, we have to change our business strategy from year-to-year business plans to setting a goal of sustainable growth averaging 25 per cent a year.
This goal is a challenge for us. If we want to achieve it, we will have to change ourselves. All related parties, such as shareholders, staff and customers, will benefit in the long term.
As management, we are committed to creating wealth for all parties, not just for ourselves.
[Pruksa recorded pre-sales of Bt20 billion in the first half of this year and plans to launch 50 to 60 new residential projects this year.]
How are you preparing your business structure to support your business growth plan?
We review our business structure all time. We have decentralised our management from the president and CEO to six senior executive vice presidents. Three of the six are authorised to manage multi-residential brands, and the other three manage back-office affairs, including construction systems, prefabrication manufacturing, accounting, information technology, etc.
Meanwhile, all of our multi-residential brands have business units to take care of the brand. The company now has 15 business units authorised to manage business units by themselves.
This business model is easy to manage and supports our expansion. Our overseas organisational structure will be flexible and depend on the rules in each particular country.
We have set up training systems and promote our staff to focus on their natural abilities.
What risks do you face and how do you manage them?
In the more than 15 years since I founded this business, I have faced at least two economic crises, and multiple political changes. These have been the major risk factors, but we have survived and recorded strong growth every year by learning how to manage risks on an event-by-event basis.
For example, in 1997 we faced the financial crisis. Our business strategy focused on how to survive the crisis. We didn’t suffer foreign-exchange losses, and we were focused on the lower-income market, which was less affected by that crisis than other sectors.
Then Thailand faced the global recession in 2008, which didn’t affect us too badly because our customers now cover all market segments.
The key to managing our business risk is managing cash flow and monitoring the market at all times. When we know who our customers are, we can manage our business in line with customer demand.
For example, in 1997, we focused on townhouses. In 2001, we entered the market for single detached houses. In 2002, we developed prefabrication systems to speed up construction of residences, reducing management costs and speeding up cash flow by allowing us to transfer ownership to our customers within 120 days.
In 2009, we started to expand our business overseas to balance our portfolio.
Expanding our investment overseas also limits our investment, because we must have sufficient capital in case our expansion results in a loss.
That is not always a successful formula, but it depends on the environment.
Do you have any plans to move into other property sectors such as hotels, offices, or retail?
For the time being, we remain focused on residential projects, in which we have long experience.
Who are your main competitors, now that you are the market leader?
We are our own main competitors. We don’t think of competitors as being out there in the marketplace. Strive constantly to improve: That’s my motto. It has been since the day I got into this business

Bangkok property sales strong despite political unrest

admin — Mon, 02 Aug 2010 03:58:39 +0000

BANGKOK — Investments in Bangkok’s property sector were robust in the first half of 2010 despite protests that paralyzed parts of the capital and ended in a looting and arson rampage, a leading property broker said Tuesday.

“For the past six months, investment activity in the Bangkok property market was buoyant,” said Umpon Thepnumsommanus, director of investment at the property services company Jones Lang LaSalle Inc.

The firm said it handled transactions worth 3.5 billion baht (US$109.4 million) during the six-month period.

Violent anti-government protests were staged in Bangkok from March 12 to May 19, leaving 90 people dead, 1,885 injured and culminating in a looting and arson rampage that left 36 buildings in flames.

The good news was that the unrest might have persuaded some property owners to sell their assets at reduced prices, Jones Lang LaSalle said.

“As the political unrest that intensified between April and May softened investor sentiment, sellers adopted a more compromising approach with their asking prices, allowing faster sales transactions,” Umpon said.

Bangkok property owners are somewhat notorious for never reducing their selling prices, no matter how severe the economic or political crises battering the kingdom.

Another factor hastening sales during the first half of the year was the approaching expiration of the government’s property stimulus package, such as reduced transfer fees on transactions.

“Many sellers became more flexible during the negotiation process in order to complete the sale and have the property transferred in time prior to the expiry of the property stimulus package on June 30,” Umpon said.

While property sales were strong in politically challenged Bangkok, they were “subdued” in Thailand’s coastal holiday destinations such as Pattaya, Phuket and Samui, the company said.

Jones Lang LaSalle noted that sales at Thailand’s beach resorts have traditionally been dominated by foreign investors, who have been bearish since the global financial crisis hit in late 2008.

Q House enters Bangkok’s condo market with Casa

admin — Fri, 16 Jul 2010 09:29:51 +0000

Casa Ville

Casa Ville, a subsidiary of Thailand’s leading property developer Q House, is jumping headlong into Bangkok’s competitive condominium market with the launch of its 8-storey project – Casa Condo Ratchada-Thaphra.

Located on a two-rai plot of land very close to both the BRT and BTS rapid transit systems, the THB540 million (US$16.7 million) project consists of two residential buildings, featuring studio and one-bedroom units ranging in size from 25 to 59 square metres. Price start from THB60,000 (US$1,855) per sqm.

The project is expected for completion and ready to move in by Q3/2011, and pre-sales open on July 17-18.

SOURCE: Property-Report

Affordable in demand, but foreigners “off the radar” in Bangkok

admin — Fri, 16 Jul 2010 09:16:36 +0000

Research from global real estate advisor DTZ has revealed that demand for affordable condominiums in central Bangkok remains strong, despite the recent political instability. However, the company cautions that foreigners are likely to remain “off the radar”, especially for luxury property projects, until the situation becomes more certain.

Bangkok Real Estate

The report noted that activity in Bangkok’s Central Business District (CBD) residential property sector waned with the disruption from the political riots which took place during the quarter. The majority of real estate activity was concentrated in peripheral fringe and suburban locations near to the mass transit lines.

Demand for smaller one- and two-bedroom (40 sqm to 70 sqm) affordable units, which are usually priced below THB80,000 (US$2,470) per sqm, remained upbeat despite the political woes.

CBD condominium rents averaged THB452 (US$13.97) per sqm per month in Q2 2010, reflecting no change quarter-on-quarter. The overall average capital value for the CBD condominium market was also stable, registering no change over the quarter to stand at THB82,740 (US$2,548) per sqm.

Low Ming Tze, Senior Manager of DTZ Thailand Research, said: “New launches within the CBD will be very selective. With the uncertain political and economic conditions, developers are more cautious in initiating new projects. More time is being taken to conduct due diligence studies prior to launching a new project.”

She added: “Buying activity over the next quarter will largely be dominated by domestic purchasers – both end users and speculators. Foreign investors are likely to remain off the radar, particularly for luxury projects, until there is more certainty in the political situation.”

‘Delay condo launches,’ cautions REIC

admin — Thu, 15 Jul 2010 07:11:33 +0000

Launches of new middle-market condominium projects should be slowed due to signs of an oversupply in the segment, says Samma Kitsin, director-general of the Real Estate Information Center.

Developers planning to launch new condominiums with units priced from 50,000 to 79,999 baht a square metre should put off or delay the launches to next year, he said.

“Uncertainty remains in the market,” said Mr Samma. “The global economy is unsteady and interest rates are on an upward trend.

A recent REIC survey found developers are planning to launch 60,000 condo minium units in the second half.

The REIC yesterday released its half-year condominium price index, which surveyed 100 condominium projects in Bangkok in March and April and compared prices with those in last year’s second half.

The condominium price index for all segments in the first half of this year was 101.43, up 1.43% from last year’s second half. The largest increase was in units priced between 50,000 and 79,999 baht a sq m, which rose by 3.42% to 103.42.

“The mid-priced segment is real demand. Investment or speculation is very slight,” said Mr Samma. “Buyers in this segment were less affected by the economic slowdown and political prob lems.” Developers of middle-market projects were able to control the market, so prices were rising higher than in other segments.

Meanwhile, the price index of units priced below 50,000 baht a sq m was 101.47, rising by 1.47%, as buyers are highly price-sensitive. In the high-end segment, with units priced from 80,000 baht per sq m, the index declined by 0.29% to 99.71 as most buyers were foreigners who were scared off by local politics and had their spending power clipped by the global economic crash.

“The index’s average growth of 1.43% showed a healthy, good market. A bubble will be signalled by double-digit growth in the index consecutively for three or four years like what happened in the US from 2001 to 2005,” he said.

The housing-developer sentiment index in the second quarter was at 49.9 points, the first decrease since last year’s first quarter and down from 59 in the first quarter of this year. Listed companies’ sentiment posted the largest decrease, from 67.6 to 53.7, while the index of non-listed firms dropped to 46.2, from 50.5.

The developers’ expectation index for the next six months was 68.9 points, up from 63.4, with listed firms at 77.5, up from 70.5, and non-listed firms at 60.3, up from 56.3.

“Most developers predict improvements in all factors except cost of development, which will be on an upward trend by year-end,” Mr Samma said.

Plus says local demand healthy

admin — Wed, 14 Jul 2010 03:12:49 +0000

Despite the expiry of tax incentives and continuing political uncertainties, Thailand’s property market still has bright prospects in the second half, thanks to the improving domestic economy, according to the brokerage Plus Property.

The industry in the latter half would continue to be driven by strong local demand while foreign buyer sentiment would remain poor as western economies are sluggish, said Anukul Ratpitaksanti, deputy managing director for asset management.

“Since the beginning of the year, there was much worry over the impact of the political turmoil, but the overall market in the first half turned out to be better than expected,” he said.

The tax breaks, which expired yesterday after being extended twice, helped spur demand and offset the poor sentiment caused by politics.

Plus Property recorded transactions worth 1.5 billion baht in the first half, compared with 2 billion for all of last year. Sixty percent of last year’s transactions came from rental projects and 40% from sales.

The company forecasts its sales will grow by 15% to 2.3 billion baht this year.

Mr Anukul said the industry, however, still hoped the government would continue its support in terms of tax cuts to keep stimulating the market, which could also benefit the economy and related industries.

While foreign buying has been weak for three years, the rental market is still doing well, particularly in tourist destinations, Mr Anukul said.

The condominium rental market in Bangkok is also expected to remain stable given the large amount of new supply in the past few years. Existing condos have reduced rental rates to stay competitive with new projects.

Average monthly rental rates of condominiums near mass-transit stations such as Phra Khanong or Taksin are estimated at 10,000 to 30,000 baht a month or 300-500 baht per square metre. Those in the CBD areas such as Sukhumvit sois 24-26 cost about 600-800 baht per sq. m.

Rental yields of condominiums in Bangkok have eased to 5-6% per year when compared with 8-9%, but Mr Anukul said they remain attractive when compared with bank interest.

He added that there was only a small gap between yields of new projects and existing ones as new projects are facing rising costs of land.

Real demand makes up half of the condominium market in Bangkok while the other half is demand for investment.

The Lat Phrao to Ratchadaphisek area came first in the market this year in terms of new condo supply, with about 70 projects introduced in the last five years.

Plus Property currently has 15,000 listings worth 150 billion baht in hand. Of the total, 40% belongs to its parent company Sansiri Plc, and others include 500 land plots.

Condo market to expand as Asean unites

admin — Tue, 06 Jul 2010 03:45:12 +0000

The condominium market will continue rising and reach its peak from 2015 onward as the Asean Economic Community allows more expatriates to work in the services sector in the country, says Issara Boonyoung, president of the Housing Business Association.
The far-reaching liberalisation pact will open up opportunities for regional investors to hold more than a 70% stake in service businesses in Thailand, and will allow more mobility of foreign workers.
“Foreign chambers of commerce in Thailand are pushing for the extension of the residential leasehold period to over 30 years,” Mr Isara said. “This will reverse shrinking foreign demand in properties.”
Condominiums started to play a major role in the first quarter of 2008, as seen by the higher quarterly transfers of units than low-rise registrations.
However, year-end total transferred condominiums in 2008 numbered 31,535 units, still lower than low-rise registrations of 50,520 units.
In 2009, registrations of low-rise units dropped to 43,971, while condominiums rose to 46,486, the first time condos were higher.
For the first four months of this year, 13,520 low-rise units and 17,525 condominiums were transferred.
Mr Issara said several factors supported the growth of condominiums, including smaller family sizes of 2.5 persons per household on average, down from seven a decade ago. Condos are also popular as second homes.
About 40% of transactions in the condominium market are resale units, underscoring their appeal as in investment.
Prices per square metre for units in all price ranges except the super-luxury sector have risen significantly in the past few years. For example, units first offered at 30,000 baht per sq m have risen to 50,000 baht.
Development costs have also risen due to higher prices for land and construction materials, scarcity of land plots and limitations of construction.
Despite rising prices, some condominiums still recorded good sales as developers adjust unit sizes to fit buyers’ pocketbooks. Units as small as 22 sq m have sold out rapidly.
“The maturity of the condominium market will be reflected in unit price maturity: the price that buyers cannot afford,” he said.
In a related development, new data showed 111 residential projects were launched in the first five months of the year with 28,374 units worth 65.02 billion baht, said Agency for Real Estate Affairs (AREA).
The agency found that while there were 45% more units year-on-year, the value dropped 5% due to a lower average price per unit of 35% to 2.291 million baht, down from 3.504 million baht.
Pruksa Real Estate launched 24 projects over the period, 22% of total projects, with 8,630 units (31% of the total) worth 11.834 billion baht (19%).
Based on current figures, AREA forecast the launch of 266 new residential projects this year with 69,233 units worth 156.05 billion baht.
Source : bangkokpost.com

Sena puts off Lat Phrao condo launch

admin — Fri, 25 Jun 2010 04:55:04 +0000

Sena Development Plc (SENA) may delay launching a new condominium in Lat Phrao due to poor sentiment after the recent political violence, according to executive director Kessara Thanyalakpark.

Despite the strong demand in the Lat Phrao area, the condominium will now be launched in the first quarter of next year, instead of the fourth quarter of this year.

The company will evaluate the supply and competition in the area again before making a final decision, she said.

Sena’s presales dropped by 20-30% in the second quarter, compared to the first quarter.

However, it is confident of achieving revenue growth of 20% for the whole year to 1.5 billion baht.

Currently, the company has a sales backlog of 1.1 billion baht, around 800 million baht of which would be realised this year.

The company also plans to launch six projects worth a combined 3.5 billion baht this year.

Ms Kessara said Sena had set the budget for land purchases at between 700 million baht to 1 billion baht. So far, it has spent 280 million baht buying plots in urban areas.

However, the company plans to aggressively expand its role in the rental business and is now studying the investment feasibility in a rental apartment with commercial spaces in the Charoen Krung area.

The project, of which construction may commence late this year, will generate revenue of approximately 20 million baht a year, or not exceeding 5% of total revenue, after its completion at the end of 2012.

At present, Sena has only one rental apartment on Phahon Yothin Road which generates income of only 1-2% of total revenue.

“We are studying to determine whether we purchase some golf courses as well,” she added.

The company reported revenue of 333 million baht in the first quarter, down 5% year-on-year, while its net profit was 80 million baht, up 19% year-on-year.

SENA shares closed yesterday on the Stock Exchange of Thailand at 1.91 baht, unchanged, in trade worth 4.42 million baht.

SOURCE: Bangkok Post

AP plans 15 projects in H2

admin — Fri, 25 Jun 2010 04:48:58 +0000

Asian Property Development Plc plans to launch 15 new projects worth a combined 24 billion baht in the second half of the year, despite an influx of new housing supply coming into the market.

Deputy chief marketing officer Vittakarn Chandavimol said the developer remained confident in both the country’s economy and a recovery in housing demand in the second half, after the market had slowed in the last two months due to the political crisis.

“As long as there are no layoffs, the local economy will remain strong,” said Mr Vittakarn.

“Demand for low-rise units is very good while our supply is going to be out of stock, so more than a half of the new projects will be single houses and townhouses.”

Seven townhouse projects and five single-house projects will be developed on Kalapapruek, On Nut, Suksawad, Ratchapruek and Vacharapol roads.

The projects will comprise 1,300 townhouse units and 1,000 detached houses with a combined value of 14 billion baht.

The other three projects will be condominiums with a total of 2,300 units worth a combined 10 billion baht. They will be located on Soi Ari 2, Sathon Road and Sukhumvit 50, he said.

“We will compete [with the high volume of new supply] with location, faster construction and cost controls,” said Mr Vittakarn.

Asia Plus Securities said housing competition in the second half would be tougher as 14 listed developers planned to launch about 160 new projects worth a combined 200 billion baht.

AP expects presales of 7-8 billion baht in the first half, after recording 5.4 billion in the first five months.

In the first quarter, the developer posted sales of 3.62 billion baht, but this dropped to 1.8 billion during April and May due to seasonal effects and the impact of the political crisis.

As of May 9, AP had a sales backlog of 14 billion baht, 70% to 80% of which will be realised within this year, said Mr Vittakarn.

Demand for low-rise units was very strong as the company had nearly closed sales at its Baan Klang Krung Sathon townhouse project, which was just launched on June 12, he said.

The 900-million-baht project is located on a nine-rai plot on Charoen Rat Road near Sathon Road, comprising 90 three- and four-storey townhouses priced from 9-20 million baht.

AP shares closed yesterday on the Stock Exchange of Thailand at 5.05 baht, unchanged, in trade worth 55.687 million baht.

Prices rise in Bangkok condominium sector, says report

admin — Fri, 25 Jun 2010 04:13:37 +0000

Bangkok Property

Despite the ongoing political instability prices for condominiums in Bangkok have not dropped – and in some cases they’ve been rising as demand from local buyers continues to drive the sector.

Research from CB Richard Ellis (Thailand) showed the majority of condominium sales during the first quarter of 2010 came from Thai nationals – not only as end users but also as buy-to-rent investors.

The Bangkok Condo Market Focus report noted that property developers are almost all focusing on new launches of one bedroom units. The amount of unsold developer inventory in recently completed projects and projects to be completed in 2010, together with resales prior to completion, will slow the launch of new real estate projects for 2- and 3-bedroom units downtown.

“Developers are going to focus on smaller units to keep the total price down, but there appears to be having been a move away from studios to one-bedroom units,” the report concluded. “There was a significant increase in numbers of new projects launched in peripheral areas, and in many cases there were strong sales.”

The report found the average achieved resale price of units in completed upscale and above units increased by 18.4 per cent year-on-year. The majority of new supply in Q1 consisted of one-bedroom units, followed by two-bedroom types.

Other key findings of the report were:

During Q1 2010, the total supply of downtown Bangkok condominiums reached 67,176 units (up 3.2 per cent quarter-on-quarter and 15.8 per cent year-on-year) an increase of 2,109 units (six projects).
During Q1 2010, the average asking price for an off-plan condominium unit (high-end and above) in downtown Bangkok was THB156,460 per sqm (US$4,835), an increase of 19.2 per cent quarter-on-quarter or 3 per cent year-on-year.
A total of 1,759 units in four projects in the downtown area were launched during Q1 2010, with the majority of new units targeting the high-end market.
The average achieved re-sale price of units in completed upscale and above buildings increased by 18.4 per cent year-on-year to THB121,805 (US$3,760) per sqm. Central Lumpini was the area with the highest average achieved resales price level (THB143,338 per sqm).