Timing issues in the world of property business

In this article we will talk about the importance of launching a new condominium project at the right time. Choosing the right timing when launching a new project is of extreme importance.

Let’s go back in time to when the BTS Sukhumvit Line opened in December 1999. Back then it consisted of seventeen stations from Mo Chit to On Nut. It was predicted that a lot of new condominium developments would be launched in a short period of time. However, people overestimated the changes that would take place in the following two years and at the same time they underestimated the changes that would take place in the following 10 years.

All these hundreds of new projects that have popped up along the BTS Sukhumvit line were not launched at the same time. Imagine for a moment that was the case, then the property market would have crashed immediately. Probably around 10 – 15 projects were launched on a yearly basis. 15 years later in 2014 the developers are still launching new projects along the old BTS line.

The developers need to look at the market conditions and determine whether or not the time is right. Are we in a period of robust economic growth and high employment or are we in a period of uncertainty and lack of confidence in the economic future?

The developers have to understand that they can’t all launch at the same time and in the same area. They must strike when the iron is hot, when they feel they are riding the high waves.

In Pattaya awe are seeing a pattern where developers are launching new projects simply because the competitors are launching. Furthermore they are launching in the very same part of town and the prices per square meter for these projects are nearly identical. Same units sizes, same location and same prices.

In 2014 the Bangkok based developers have taken a step back from the Pattaya market. Obviously they don’t feel it is time to launch new projects at the moment. It is a pity because they added some confidence to the local property scene. It may appear to them that, at least for the time being, the shine has disappeared from the local industry.

The Bangkok based developers are mostly listed companies which need to act responsibly. They can’t get involved in high-risk investments because they use the shareholders’ money to invest. If things go wrong there will be questions to answer and the value of the shares will likely be affected.

The rules are very different for the locally based developers which are not listed on the stock exchange. They are not held accountable for anything and unhappy investors often have no influence or knowledge of what is going on.

“The amount spent on a showroom and marketing is peanuts compared to the amount they stand to gain”

Basically the local developers can launch any time they might want to. Believe it or not, the risk they run is negligible. The investment in land will never be lost. Given the right location it makes more sense to invest in land than in gold. Prices for land have more then doubled in just a few years time. All they can lose is the money spent on a showroom and on initial marketing material and advertising. The amount spent on a showroom and marketing is peanuts compared to the amount they stand to gain.

As opposed to what is believed the risk is NOT high from a financial point of view. The company’s reputation might take a hit and that might have consequences in the long run.

Published 23 September 2014

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