Thursday, October 27, 2011

Demand for low-rise homes expected to drop

Demand for low-rise homes expected to drop

Housing demand is expected to plunge in the near term, particularly for low-rise projects in flood-stricken areas such as Chaiyaphruek, Ratchaphruek, Bang Bua Thong, and Rangsit in Pathum Thani.


DBS Vickers Securities (Thailand) said the flood crisis would chiefly affect Property Perfect, Land & Houses, Quality Houses and Pruksa Real Estate, which have low-rise developments in those areas. Meanwhile, LPN Development could benefit the most, given that fears of severe floods recurring in Bangkok in the future could sway demand towards condominiums in the city.

"And the problem could be compounded by the fact that the fourth quarter normally sees the most new launches" of housing developments, the securities house said.

After the floods in the outskirts of Bangkok affected a large number of low-rise housing projects, DBS expects presales and transfers to tumble in the current fourth quarter as the floods show no signs of subsiding.

Pruksa Real Estate director and chief business officer Prasert Taedullayasatit accepted that the company had to revise its presale and revenue target in the current final quarter of the year.

"It is too early to estimate the losses from the flood but we are monitoring this event and will revise our business plan," he said.

Somsakul Limsuttaphan, assistant managing director of Plus Property Co, the property-management arm of Sansiri, said flooding in Bangkok would also encourage many to look for a second home in resort cities such as Hua Hin and Pattaya.

During Oct 21-25 Between last Friday and this Tuesday, as the floods reached Bangkok, the company was approached by more than 150 clients demanding short rental contracts in Hua Hin. For a short stay of less than three months, they were looking for units with monthly rents of Bt25,000-Bt55,000.

Plus Property has also witnessed increasing demand for rental units in Pattaya.

"The floods in Bangkok and peripheral provinces should spur residential demand in Hua Hin and other resort destinations, now that they realise the necessity of a second home for refuge. We believe that more projects in the cities will be launched and projects with systematic management and permission for pets will be in high demand," Somsakul said.

The Agency for Real Estate Affairs estimated residential damage at Bt74 billion, or 25 per cent of the value of flooded properties. So far, 329,569 houses are flooded and another 166,225 are at risk.
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