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25 Jun 2014

Real Estate and Construction

Potential for Revival in Construction Materials due to Clearer State Policy (Current Issue No. 2516 Full Ed.)

The construction material market may not see high growth this year because it depends largely on construction industry prospects. During 1H14, public and private sector construction activity decelerated. Given protracted political uncertainty, budgetary disbursements for government projects have been delayed, particularly for new projects. Private sector projects have also been stalled because business confidence is flagging amid undecided state investment policies. Our economy has not only lost momentum, but is also facing impediments like slowing purchasing power and inflation, thus consumers have slowed buying or investing in the real estate sector.
However, if the National Council for Peace and Order (NCPO) can begin planned megaprojects during 2H14, budgetary disbursements should then proceed. The NCPO is working on a comprehensive investment policy, so we can expect a better investor climate later on. Accordingly, private construction companies could then follow through with investment plans that would in turn give the construction material industry a boost.
We can also expect buoyancy in the market with the help of two other factors: 1) Growth has been witnessed in construction materials for use in repairs, owing to series of natural disasters during 5M14 that caused damage to buildings, such as an earthquake in Northern Thailand and air-mass thunderstorms which are typical in summer and cause heavy rains. Higher demand for materials used in repair work will likely help break off the downward trend; 2) Sales of construction materials in border provinces and their vicinity have been growing, thanks to urbanization and growth in hardware stores there. Development of Infrastructure and other related facilities within the CLM (Cambodia, Lao PDR and Myanmar) has been advantageous to that. Thai products sell well in those nations, so more consumers from there make a trip to Thailand to buy these materials now that transportation has improved.

Considering the above advantages and disadvantageous, we at KResearch project that total construction material sales this year will be perhaps THB580-592 billion, edging up 0.1-2.2 percent over 2013 (when growth was forecast at 4.0 percent).

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