Frasers Property sees macroeconomic challenges hitting Thai residential sales
Yong Jun Yuan
FRASERS Property said it is engaging in ongoing active management of its residential product mix and features to capture pockets of demand amid macroeconomic challenges.
In a business update for the third quarter ended Jun 30 on Tuesday (Aug 8), Frasers Property cited several news articles pointing to a tough macroeconomic environment in Thailand. Factors that would affect its business included high household debt levels, higher interest rates and a sluggish real estate market.
Data provided by Thailand’s National Economic and Social Development Council showed household debt accounting for 86.9 per cent of the country’s gross domestic product (GDP) in the fourth quarter of 2022. (See *Amendment note)
“Without debt restructuring measures, household debt is predicted to remain at around 84 per cent of GDP by 2027, posing risks to household consumption and economic recovery,” it said, adding that the Bank of Thailand raised its policy rate by 50 basis points to 2 per cent between January and June this year.
Still, it noted that single-detached housing projects remain a key focus for new launches as the group tries to capture the affluent market segment, which is less affected by negative economic factors.
This includes Alpina Rama II, a luxury single-detached housing project that the group launched in the most recent quarter.
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For the nine months ended June 2023, the company settled 1,421 units, sold 3,245 units, and has unrecognised revenue of S$0.04 billion, with 218 contracts on hand in Thailand as at Jun 30.
Still, Frasers Property said it continues to see strong industrial and logistics performance in Thailand, with occupancy remaining high on strong leasing appetite.
It noted warehouse and factory portfolio occupancy rates of above 85 per cent, and net leasing growth of 204,601 square metres over the nine months ended June 2023.
Furthermore, its built-to-function warehouse facilities, which are partially pre-built with basic facilities, sustainability and technology features, have allowed for shorter time from customer confirmation to delivery.
Industrial and logistics leasing conditions across Australia and Europe also remain strong.
The group said that it saw strong leasing activity, with renewals and new leases of about 421,000 square metres in Australia and about 114,000 square metres in Europe for the nine months ended June 2023.
While the uncertain macroeconomic environment is driving yield softening due to elevated interest rates, this has been offset in part by continued rental growth, the group said.
“Despite macro uncertainty, investors remain keen to increase long-term allocation to logistics assets given positive fundamentals,” it added.
Meanwhile, Frasers Property remains confident in its Singapore development projects, noting that the increases in the Additional Buyer’s Stamp Duty that took effect in April this year are not expected to have a material impact on its current projects.
As for the group’s hospitality segment, it continues to see healthy demand in the Asia-Pacific region.
The group added that healthy demand from both leisure and corporate sides mainly benefited properties in Singapore, Australia, Japan and Malaysia.
Average occupancy rates (AOR) rose 19.7 percentage points to 75.9 per cent for the nine months ended Jun 30, while average daily rates (ADR) were up 34.8 per cent to S$225.20. Revenue per available room (RevPAR) climbed 82.1 per cent to S$171.
As for the group’s Europe properties, it noted that the region continues to face headwinds due to the ongoing war in Ukraine, manpower challenges, higher energy costs and inflationary pressures.
ADR for the group’s hospitality properties in Europe improved in local currencies, but declined as the Singdollar appreciated against the local currencies.
AOR for properties gained 9.1 percentage points to 76.5 per cent, while ADR fell 4.5 per cent to S$228.60 and RevPAR rose 8.4 per cent to S$174.80.
Shares of Frasers Property closed flat at S$0.85 on Tuesday, before the update was released.
*Amendment note: The paragraph has been edited to clarify that the figures refer to Frasers Property’s residential portfolio in Thailand only.
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