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 Issara Boonyang, vice-president of the Housing Business Association, says that larger developers should continue to remain cautious in terms of expanding their housing projects since the recent interest rate adjustment would at best help to reduce capital costs. He said property sales this year could be about 4,000 short of last year's total of 70,000.
Issara said commercial banks had already eased the amount of loans they extend to small- and medium-sized developers since 1997's financial crisis so debt levels tended to be higher at present among the larger property development companies. In light of this, Issara said he felt confident that small- and medium-sized developers had already made some adjustments, such as putting a freeze on new projects, making adjustments to the products they are offering, as well as making pricing adjustments. Such steps had so far proven to be fairly effective, he said.
Most developers had already considered making these kinds of adjustments, Issara said. Minimizing the size of a project could help bring forward the end of the sales period, while reducing the interest to be paid on loans taken out by the developer to build the project, Issara said.
Another tactic is to produce smaller homes since the prices of construction materials have soared over recent months amid higher oil prices and a significant rise in inflation. This also meant that developers can produce more affordable homes, which will be more attractive to consumers already demonstrating greater caution in light of the current economic and political climate.
Issara said the debt levels of small- and medium-sized developers had tended to ease in general since banks had already reduced their loans. This means small- to medium-sized companies in the property sector were less likely to face closure, he said.
 
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Taking stock
Larger developers boasting good liquidity were in a position to raise their debt levels, which is potentially dangerous, he said. Building up too much housing stock due to a misplaced understanding that it needs to be done to satisfy customer demand demonstrates negligence and such poor management of housing stocks could ultimately lead to a larger developer going bust, Issara warned.
Issara stresses that stock management is something all developers can use effectively to manage their businesses.
The main capital requirement for developers is for land acquisition and the installation of various systems within the home. The latter seems to be leading to higher construction costs due to the onset of higher transportation costs amid rising oil prices, Issara said. Administrative costs were factored in as an interest rate cost, he said.
Overall, Issara says developers need to reduce their housing stocks, minimize the size of their projects, as well as controlling the price of their properties. This would enable management to become more dexterous, while finally leading to a reduction in capital.
Commenting on expectations regarding government interest-rate measures, Issara said it was unlikely to have a major impact on the housing market. He said the expectation that these measures would lead to a reduction in loans from banks to small- and medium-sized developers might not actually be the case. He said all kinds of property developers were becoming equally capable of making continuous adjustments in line with overall economic conditions, suggesting that they will have the ability to cope despite the lagging economy.
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