Survival strategies for developers
Price cuts will only take you so far in a slow property market. By Onchanok Nawapruek
Aside from price wars and aggressive discounts in the condominium market, which have been ongoing since 2019, real estate developers need new strategies to hit their sales targets this year, especially for nearly completed projects where sales remain flat.
Affordability has become one of the determinants for success for condominium projects. Recently Supalai introduced a new sales model that targets high-income customers by offering discounts of up to 35-40% from freehold prices for 30-year leases, making projects in prime locations more affordable.
Ananda downgraded and relaunched its Ideo Q Phahol Saphan Kwai condominium with an average asking price of 139,000 baht per square metre, 40% lower than originally planned, expanding its buyer base.
Amid slow market conditions, reducing prices and relying on sales alone might not be enough. To generate recurring income, LPN has announced a plan to rent out unsold units in completed projects to help alleviate the common fee burden as well as increase the overall liveliness of its projects. Pruksa, meanwhile, has been focusing on profitability by cutting marketing costs.
According to CBRE Research, up to 84% of future Bangkok downtown condo units sold in 2019 were from new launches, while sales in older projects were slow. Successful developments were those near shopping malls and schools, as seen with Chapter
Chula-Samyan and Park Origin ChulaSamyan, with more than 80% of units sold. In both projects, buyers were predominantly end-users and buy-to-rent investors who saw clear rental demand in the area.
Another high-potential location is the riverside, where the view itself is a premium offering. This location is also the site of more retail developments to serve the upcoming residential developments in the area.
Chapter Charoennakhon-Riverside, launched at the beginning of 2019 and within two kilometres of Iconsiam, is sold out. Subsequently, The Key Rama III, launched at the end of 2019 by Land & Houses near Terminal 21 Harbour, sold 84% of units despite the slow market last year.
Looking at successful projects, the common themes are affordable pricing in attractive locations with clear characteristics. Successful developers this year will most likely be those fast enough to adapt to today’s competitive market. They must be more thoughtful with product design and focus on undersupplied locations with opportunities for growth.
They also have to adjust to changing sales strategies and promotions to satisfy demand as it is a buyers’ market. In the end, it may not be the strongest that survive but those that are most responsive to change.
‘‘ Looking at successful projects, the common themes are affordable pricing in attractive locations with clear characteristics.