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A successful local developer is monitoring the political and economic situations before selling its latest project Noble Development Plc is gearing up to repeat its success in selling out all the units of its condominium in Phahon Yothin within hours of its launch earlier this year with a new development in Sukhumvit Soi 26 just 180 metres from the Phrom Pong BTS station. Company president Thongchai Busrapan said the company had already purchased the land plot in the prime Sukhumvit soi and had named the new development Noble Refine. However, he has not fixed the timing of the launch because he is waiting for the right opportunity. "We are monitoring the political and economic situation and will start selling when it's stable," he said. Noble defied gloomy market conditions when it closed the sales of its 930-million-baht Noble Reform condominium within four hours of its launch on March 1. The average price of the 198 units was 95,000 baht per square metre. This resounding success was partly due to the project's location near the entrance of Soi Ari, but also because it tapped the middle- to high-end segment where this company is ensconced. As Mr Thongchai sees it, the ultra-luxury segment of the market and the lowest rung have been hit hardest by the current global economic downturn. These expensive condominiums priced from 150,000 to 200,000 baht a square metre attracted foreign buyers, among them speculators who thought they would make money by flipping the units. They reasoned that even though prices were high by Thai standards they were much cheaper than in cities such as Hong Kong and Singapore. However, now that the buildings have been completed and they have to take transfer many are opting to resell their contracts. "So there are quite a lot of resales going on and the price is quite low, even lower than what they previously paid. To put it simply, they are willing to take a loss," said Mr Thongchai. The situation is no better at the other end of the market where there are condominiums for sale at less than one million baht a unit because the still-tangible demand has been curbed by difficulties buyers face getting loans approved. "The same unit is sold to many buyers because they don't take transfer," he explained. "It is sold but the loan is not approved so they have to sell again. So this is something they are facing but luckily we don't work in that segment at all." Mr Thongchai does not expect the economic situation to improve in the second half of the year because it does not look different from the first six months - no signs of recovery but at the same time no deterioration either. The impact on property prices varies from segment to segment, with the luxury end having already plunged substantially, but the lowest rung only a little bit. Prices have been steady in the middle bracket. Although prices of luxury condominiums are down, Mr Thongchai expects this to be temporary because there is a limited supply of units being sold at cheaper prices and Thais do tend to snap up good deals that come their way. But a key problem is that some of these units are large, around 200 to 300 square metres, and very few people can afford to buy them no matter how attractive the offer. While the government has helped the property market by slashing the special business tax from 3.3% to 0.11% and transfer fee from 2% to 0.01% for one year, Mr Thongchai thinks it could implement more measures to help this industry and others. One of these measures would be cutting interest rates. "I think there is room for interest rates in Thailand to go down further. Our savings rate is quite low while our lending rate is still high, therefore the spread should be reduced. "Let me also touch on the exchange rate, this is also involved. The baht is looking a bit too strong - if we are dependant on exports and tourism we cannot have this strong a currency, it makes us uncompetitive." Mr Thongchai added that the issuing of government bonds - something that is occurring worldwide as governments borrow to spur the economy - does increase the pressure on businesses because government bonds are seen to be the least risky. If corporations want to likewise issue bonds they have to offer higher interest rates than the government. Discussing the widespread trend to slash salaries this year, Mr Thongchai said that fixed percentage reductions can be the wrong way to go about it. If a person is earning 100,000 baht and this is slashed by 10,000 baht he still has 90,000 baht left, and this is substantial. But if the management goes and cuts 1,000 baht from the salary of a person earning 10,000 baht the impact is severe. He is also concerned about Thai politics, pointing out that the problems which have dragged on for a long time seem unending and new pressures are now emerging. His concerns centre on the next election, specifically if an amnesty is announced and the Thaksin Shinawatra loyalists are able to come back. He fears this would lead to the yellow shirts demonstrating again. "It's like a never-ending movie - the provincial people elect a government and Bangkok people throw it out, back and forth like this repeatedly. "There is talk about reforming politics and amending the constitution, but I don't know how far we can pin our hopes on this because this time the rift is deep and touches on fundamentals. "In the old days we said that changing the regulations would make things transparent and lead to justice, but today it might not be about transparency and justice anymore. It seems that people who really like the red shirts are in the majority in the country. So how are you going to continue boycotting them, keep detaining them and filing lawsuits against them. "Can this really be enforced? This is the big question mark for our country." Mr Thongchai warned that infighting could lead to Thailand missing the opportunity to surge ahead together with other Southeast Asian countries plus China and India, an alliance which some economists foresee will drive the global economy forward because these countries have suffered the least damage during the global economic crisis. |
