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8 Apr 2009

Real Estate and Construction

Construction Material & Home Décor Products: New Campaigns to Stimulate Spending (Current Issue No.2151)

Entrepreneurs in the retail construction material and home decoration business are now facing a serious challenge amid a deepening deterioration in the Thai economy. Falling disposable incomes have forced consumers to forego purchases of new homes and decorative items, as well as spending on home maintenance. This has inevitably affected real estate developers, forcing them to delay new projects, not to mention the impact it has on building contractors and construction companies. As a result, entrepreneurs in the wholesale market for construction materials and home décor products are shifting their focus to retail customers.
KASIKORN RESEARCH CENTER (KResearch) expects that in 2009, the retail market for construction materials, home decoration and maintenance items should reach around THB300-307.5 billion, growing only 0.8 percent, or contracting 1.5 percent, versus the growth of 7.3 percent in 2008. Factors that may help bolster the market should come from personal income tax breaks and the reduction of real estate transaction fees, wherein homebuyers may use the money saved from these measures to buy more home decoration products and services.
However, KResearch views that construction materials and home décor products in 2009 will face many negative factors. It is expected that the economy will shrink 1.5 – 3.5 percent this year, decreasing from the growth of 2.6 percent in 2008. This represents the first contraction since 1997, which is expected to cause 1.5-1.7 million job losses – representing unemployment of 4.0-4.5 percent – the highest rate since the economic crisis in 1997. This factor has affected consumer confidence and lessened their purchasing power. As a result, it is expected that consumer spending might vary 0.0 to -1.0 percent this year, which would inhibit the growth of construction materials and home décor business; right now, there are no supporting factors assisting the market.

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