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Townhouses hot as price gap narrows

Friday, 30 May 2008

Low costs could lure condo buyers source: Bangkok Post May 28 2008 Townhouses could become an increasingly attractive alternative to condominiums as rising construction costs force developers to increase unit prices by 15%, says Teerachon Manomaiphibul, chief operating officer of the listed developer Property Perfect Plc (PF). "Townhouses in the same location [as condominiums] or located a bit farther from mass transit will be a choice for homebuyers as their prices and condominium prices nearby are nearly the same," he said yesterday. He said construction costs had risen by 20% since last year for low-rise units bu were up 30% for high-rise condominiums. Prices of condominium, for which construction accounts for 50% of unit prices, need to rise by 15%. "Developers cannot sell condominium units at the same prices as those in the same locations offered last year or those offered in previous phases as prices of steel - a main component in condominium construction - have soared," said Mr Teerachon. He estimated there was a sales backlog worth 40 billion baht in the condominium market at an average of two million baht a unit, of which 30% have already been constructed. For unbuilt units, developers may face problems as contractors may decide to leave the jobs as costs soar. For the rest of this year, PF plans to launch six projects worth 16.5 billion baht. They will include two condominiums worth four billion baht each - Metro Park Sathorn Phase III with 2,000 units and Metro Park Ratchada with 1,250 units. Mr Teerachon said new prices for Metro Park Phase III would start at 50,000 baht per square metre, up from 36,000 to 39,000 baht for Phase II and 30,000 to 33,000 baht for Phase I launched since 2005. The company will also open a townhouse project in the Pattanakarn area with 599 units worth two billion baht, and three single-housing projects: 194 units worth 750 million baht in the Suvarnabhumi area, 486 units worth 2.35 billion baht in the Ratchapreuk area; and 342 units worth 3.35 billion baht in the Rama IX area. Townhouse growth will be brisk this year for Property Perfect with an expectation of 900 units newly registered, up from 200 in 2006 and 400 last year. After raising prices of low-rise units by 5% late last year, PF plans to increase them another 2% in June as it needs to pay contractors more. "There may be greater damage if they [contractors] leave the job." Mr Teerachon said high oil prices and inflation would pressure interest rates this year and they could rise by 50 basis points by the end of the year. The company will ask its board to approve a debenture issue worth two billion baht and convertible debentures of US$30 million for private placement. Both lots would be issued by the third quarter.PF reported a first-quarter net profit of 158 million baht, up from 5.9 million in the same period last year, on sales that doubled to two billion baht year-on-year. Mr Teerachon said the company's gross profit margin in the first quarter of this year dipped to 26.49% from 28.24% a year ago as the company sold housing units to a property fund which generated lower margins than a normal sale. PF shares closed unchanged yesterday on the Stock Exchange of Thailand at 4.78 baht, in trade worth 349,000 baht.

 

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