As the impact of the pandemic slows the townhouse market, developer Frasers Property Home (Thailand) or FPH is shifting to luxury single detached houses as well as adding a condo development business.
Chief executive Saenphin Sukhee said the townhouse market was hard hit by Covid-19 as the majority of buyers were low-income earners, many of whom had a high level of household debt.
“Before the pandemic, we tried to increase townhouse sales as much as possible without pre-screening, as we thought the more units were sold, the more customers would be able to get mortgages approved,” he said.
However, the pandemic affected many low-income earners. Several of them either lost their jobs or changed careers, putting mortgage approval out of reach.
Higher house prices caused by rising costs for land and construction materials, driven in part by the Russia-Ukraine war, led to borrowing difficulties for low-income earners, said Mr Saenphin.
In 2021, customers seeking to purchase a townhouse had a mortgage rejection rate of 80%. The rate declined to 50-60% last year.
Yet the mortgage rejection rate for buyers seeking to purchase a single detached house was only 30%, he said.
“It is no longer useful to pump up sales of townhouses because of the high mortgage rejection rate from banks, particularly as the easing of the loan-to-value limit ended,” said Mr Saenphin.
FOCUS ON SINGLE HOMES
The company adjusted its strategy last year, switching from townhouses to single detached houses, a segment in which customers enjoy higher purchasing power and are less affected by economic slowdowns, he said.
Of the 11 new projects worth a combined 17.5 billion baht the company plans to launch this year, seven are single detached house projects, up from six last year and three in 2021.
Only two new townhouse projects are slated for this year, down from six in 2022 and five the year before.
Mr Saenphin said the company’s revenue grew by 2% last year, helped by a 66% uptick in the number of transfers of single detached houses, from 2.73 billion baht in 2021 to 4.52 billion last year.
Single detached houses were a key driver of the company’s net profit growth of 63% to 1.47 billion baht in 2022.
In 2023, FPH aims to generate 13 billion baht in revenue, up 14% from 11.4 billion in 2022. The largest portion, accounting for 39% of the total, is projected to come from sales of single detached houses.
Revenue from townhouses is expected to account for 32%, down from 60-70% before the pandemic, he said.
PITCH TO WEALTHY BUYERS
As the purchasing power of homebuyers in the luxury segment remains strong, FPH, a residential development arm of Frasers Property (Thailand) Plc or FPT, plans to launch at least five projects with high-priced single detached houses.
These include The Royal Residence projects with units priced between 60-150 million baht in two locations.
One project is in the Kaset-Nawamin area, which it acquired in December 2021 from TCCCL Sena Co, a subsidiary of TCC Group owned by the Sirivadhanabhakdi family, who are also the major shareholder of FPT.
TCCCL Sena launched The Royal Residence in 2008 with 79 units priced 35-120 million baht on a 76-rai plot on Prasert-Manukit Soi 27 in the Kaset-Nawamin area. At present, 31 units remain unsold.
Another project is on Kallaprapruk Road, which will be a new development, said Mr Saenphin.
The other three projects with high-priced houses comprise the Alpina brand, with each unit costing 40 million baht and higher, The Grand, with units costing between 20-30 million baht, and Grandio, with units priced at 20 million baht per unit.
“Land prices in the city rose 70-75% during the period 2020-2022, pushing the prices of single detached houses higher,” he said.
“However, 67% of consumers purchasing one of our single detached houses used cash to receive the unit transfer.”
NEW CONDO APPROACH
As the tourism sector is set to rebound strongly this year with the reopening of China and at least 20 million foreign arrivals projected, Mr Saenphin said FPH anticipates a return of foreign buyers, particularly from China.
“The condo market should resume after a slowdown over the past two years,” he said.
“We plan to enter the condo market this year through our own developments and project takeovers, aiming for a leap in growth.”
Mr Saenphin said if the company’s deal to acquire a condo developer is completed by the middle of this year, FPH should be able to realise revenue from condo sales this year as the developer conducted due diligence on ready-to-transfer units.
With regard to new developments, FPH is looking for locations within 300 metres of a mass transit station or shopping mall. Attractive areas include Eastern Bangkok, the inner city, Lat Phrao, Ratchadaphisek, Ram Intra and Thon Buri, he said.
The first condo project FPH plans to develop is under the Klos brand on Ratchadaphisek Soi 7 in Bangkok’s Huai Khwang area.
It is an eight-storey building with at least 100 units measuring 25-28 square metres and priced at 130,000 baht per sq m. The project is scheduled to be launched in the second half of this year, said Mr Saenphin.
The second condo project is slated for launch next year and is located on Lang Suan Road, he said. It is an old non-condo building.
FPH just acquired the remaining 60% stake to become the outright owner and it plans to develop a high-rise condo there.
“Our revenue in 2021 from townhouses was 30-40% lower than the projection. It recovered to 10% below the target last year. It should recover once lower-class consumption rebounds, likely in the second half of the year after the general election,” said Mr Saenphin.
