Whose side are you on?

L.P.N. Development GroupI really feel sorry for the local developers because nobody can compete with L.P.N. Development Group – believe it or not, they have already reached the 20th floor at Lumpini Park Beach Jomtien by the end of october 2012. Within a year’s time they have managed to put around 5000 condominium units on the local market. They are creepy good at construction – if Pattaya were a business this would be seen as a hostile takeover. L.P.N. simply work too fast, producing too many units in a very short period of time. 5000 units constitute a very high percentage of the total number of new units – you cannot expect that many units to be absorbed by the market and still pretend like nothing happened.

This will have an effect, this will make life a lot more difficult for the local developers and they will have to work much harder – in the long run only the best will survive. The rules of the game have changed dramatically since 2011. The property market has grown increasingly crowded with the arrival of developers from Bangkok and even developers from abroad like the Indian based Universal Group that in october 2012 launched a 1500-unit condominium project called Seven Seas Condo Resort Jomtien. The Bangkok based companies like Sirisa Group, Sansiri, L.P.N. Development Group and Q House have recently entered the property market in Pattaya and their presence is being felt within the local community. The uninvited guests have eaten more than half of the cake and they have appetite for more.

Does it matter who we support? Not really. The market forces of supply and demand will deal with this issue. But please note that the local developers do support the local community with a substantial amount of money. They sponsor events, happenings, newspapers, magazines, local businesses and they support local charity. Most of the local developers do live here in Pattaya and I am sure if somebody wanted to have a talk with some of the bosses you would probably just need to knock on their door – the same cannot be said about the newcomers.

I was in Bangkok for a couple of weeks during October 2012 touring Bangkok’s Motorway System including Motorway route 9 also known as the Outer Ring Road. Big companies and developers do as expected advertise alongside the motorways but you will not find advertisements from even a singe developer from Pattaya. Why not, can somebody please explain that to me. Why do developers from Pattaya stay away from their biggest market?

Why do they pay for expensive weekly advertising in local newspapers and magazines when they can pay the same for a roadside billboard advert in Bangkok and reach hundreds of thousands of people every day? It get the feeling that Bangkok is considered enemy land by developers from Pattaya – the exception is Raimon Land that has a foot in each camp – Raimon Land even advertise on national TV, it looks like the company is run more professionally.

Competition is good as it helps to improve everything. But I think L.P.N. Development and Q House use their own money to build, that is part of the reason why they can work so fast. The local development companies normally don’t want to use their own money to build, they use money supplied by investors, that is to say money from people that purchase a condo. The first year after a project has been launched usually no construction will take place. After one year they will start the piling that may last up to 6 months and after that another break until the main building contractor enters the scene. After two years the investor may have paid up to 80 – 90% of the full amount of the condo purchase price and by then there will be very little to show at the construction site. Dragging the time out as much as possible will give the developer time to sell more units, after all this business is about selling units. This way the developer will also be able to collect interest on the payments – interest from a 500-unit development will constitute a substantial amount of money.

Doing business this way has been good for the local developers until now because all the developers have used the same business model. This way the developers can minimize the risks involved and stand a fairly good chance at gaining profits – should the project fail the developer will not be held personally responsible and he will most likely not end up bankrupt. Basically the main idea about off-plan developments is to minimize the risks for the developer – the ones risking their savings are the investors, but they do so freely in the hope that they will get a condo at 30% below the market prices.

The problem with this business model is that it is slow and time consuming. No one can prevent the developers from using this business model and spend 5 years or more on a project but if the competing developers from Bangkok are using a far more time efficient business model they will end up producing a lot more units and quickly dominating the property market – basically the newcomers will be eating most of the cake, harvesting the rewards over and over again and this is what we are witnessing these days.

The local developers may not all be the best of friends – it is to be expected that when doing business you might often end up with some enemies. I don’t know how deep the wounds are but maybe it is time to bury the hatchet? We are facing an invasion of unprecedented proportions by developers from Bangkok and something needs to be done, at least we need to talk about what is going on. It looks like I am the only one concerned about this issue but maybe somebody is talking behind closed doors? So here I go again, talking to myself as if I was a general in the US army, preparing for a war that may exist only in my mind….

Published 31 October 2012 by a remarkably remarkable storyteller.

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