Sumitra Wongpakdee, managing director of property research and consultancy Terra Media and Consulting, noted that a sluggish market has forced developers to make significant changes this year. “Many developers have turned to price reductions and promotional campaigns to boost sales, even if it means sacrificing profit margins to meet their annual revenue targets,” she explained.
In the first nine months of 2024, 35 listed housing developers reported a combined net profit of 20.8 billion baht on revenue of 223 billion baht, down from 38.5 billion baht in net profit and 331 billion baht in revenue for all of 2023.
The net profit margin decreased to 9.3%, down from 11.6% at the end of 2023 and 13.1% in 2022, according to Terra. The total revenue for these developers is projected to drop by 5-8%, reaching approximately 300 billion baht by the end of 2024.
Only a few developers are likely to achieve their annual goals, with some reaching over 63% of their targets in the first nine months, while others lagged, achieving only 36-38%.
According to Kasikorn Securities, 12 listed developers under its analysis reported a combined net profit of 7.5 billion baht in the third quarter, reflecting an 8% year-on-year decline and a 2% decrease from the previous quarter. While results matched market expectations, they were disappointing as there was no quarter-on-quarter growth, despite considerable condo backlog transfers in the prior three months.
The overall net profit for the first nine months of 2024 fell by 20% year-on-year to 21.3 billion baht and is predicted to plunge by 11% by year-end, as reported by Kasikorn Securities.
In the third quarter, these 12 developers, particularly those involved in joint ventures, experienced a significant increase in transfer value compared to both year-on-year and quarter-on-quarter, driven by the transfer of condo backlogs. However, intense competition in the low-rise housing sector has resulted in a decline in the gross profit margin for residential properties.
These developers saw a decrease of 1.0 percentage point year-on-year and 0.5 percentage points quarter-on-quarter, reaching a four-year low of 30.6%. Due to ongoing challenges, cash flow management strategies have become crucial, with slower project development leading to reduced housing stock that helps manage interest-bearing liabilities and enhances cash flow.
Kasikorn Securities indicated that the housing market remained under pressure in the third quarter due to weak demand. Increased competition further squeezed profit margins, highlighting the need for effective cash flow management throughout the sector.
While condo backlog transfers and a seasonal increase in fourth-quarter transfers are expected to improve profits, challenges remain. Several developers have downgraded their projections for 2024 project launches, anticipating a 16% year-on-year decrease in the value of new projects, totaling 314 billion baht.
Fourth-quarter profits are likely to stand out, supported by high transfer volumes, seasonal effects, and the condo backlog, according to Kasikorn Securities. The expiration of tax incentives for homes priced below 7 million baht is expected to provide a further boost before year-end, though no immediate catalysts are in sight.
A favorable shift in macroeconomic conditions, along with reduced interest rates and declining loan rejection rates, will be vital for increasing sales and profits in 2025, which may rekindle investor interest, as noted by Kasikorn Securities.
