Frasers Property faces a challenging business environment in Thailand

The developer noted that the Bank of Thailand had raised its policy rate to 2.5 % in September 2023, up from 1.5 % at the beginning of that year, with the rate remaining the same since then.

“High interest rates, increase in minimum wages and construction material prices, and stricter assessment of housing loan applications are key risk factors for the real estate sector in 2024,” it said.

The developer also pointed out that strategic diversification across housing segments has helped to drive sales in Thailand amid residential market headwinds.

By focusing on cost control, it has successfully reduced average material costs by 10 % year on year through efficiency improvements in the materials bidding process. Adjusting construction methods and outsourcing management are the next areas of focus, it added.

For the nine months ended June, the company settled 1,241 units, sold 1,131 units and had unrecognised revenue of $50 million, with 248 contracts on hand in Thailand as of June 30.

Frasers Property said its industrial and logistics portfolio in Thailand continues to maintain positive momentum, with an average occupancy rate of 87 % for its warehouses and factories.

Strong leasing demand for factories on the back of the expansion of the electronics and automotive sectors had contributed to a net leasing growth of 48,222 sq m over the nine months in the financial year 2024, it said.

The developer added that demand for warehouse facilities continues to keep pace with the expansion of the e-commerce and logistics sector, although strong supply is expected in 2024. Industrial and logistics leasing conditions across Australia and Europe also remain strong.

The group said it had achieved strong leasing activity, with renewals and new leases of about 168,700 sq m in Australia and about 48,600 sq m in the European Union in the third quarter.

“Industrial and logistics as an asset class largely remain real estate investors’ top pick due to its perceived stability and growth potential,” it added.

Meanwhile, Frasers Property remains confident in its Singapore residential projects. It said it had secured a new government residential site at Lorong 1 Toa Payoh through a joint venture with a 25 % stake. The project is expected to be launched in the first half of 2025 and will yield about 777 units.

Frasers Property noted that although home prices in the Republic have remained resilient, developers are more cautious on land bids given the increase in housing supply to cater to local housing demand.

As for the group’s hospitality segment, it continues to see healthy demand in the Asia-Pacific region – it opened four new properties and signed eight new management agreements in Bangkok and Greater China. Average occupancy rates rose 0.9 percentage points to 76.8 % for the nine months ended June 30, from the corresponding period a year ago.

Meanwhile, average daily rates (ADR) were down 1.6 % at $221.60. Revenue per available room (RevPar) was also down 0.5 % at $170.10.

The declines in ADR and RevPar were due to the impact of the depreciation of the Japanese yen against the Singapore dollar on the Japan portfolio, it explained.

As for its properties in Europe, the Middle East and Africa, the group noted that the elevated geopolitical tensions in the Middle East continue to present challenges and risks.

ADR for the group’s hospitality properties in that region improved 1.9 % to $233 in the first nine months of the financial year 2024, when compared with the same period in 2023. RevPar was also up 1.7 % at $177.80.

But the group said the improvement in ADR and RevPar was partially offset by the fall in long-stay and leisure demand in its British portfolio.

Shares of Frasers Property closed down 0.6 % at 78 cents on Aug 8.

The Straits Times

Asia News Network