Right from the start of 2020, the Thai economy has been battered by a barrage of negative factors, beginning with PM2.5 dust and the coronavirus, until the Monetary Policy Committee (MPC) resolution had to cut the policy interest rate to 1% per year, the lowest in history, due to forecasts that GDP would be lower than expected
One of the hardest-hit sectors is the real estate business. Krungthep Turakij interviewed “Chanond Ruangkritya”, Chief Executive Officer and Managing Director of Ananda Development Public Company Limited, a real estate developer specializing in condominiums along electric train routes, about the state of the property market in 2020
Drawing on two decades of business experience weathering numerous economic crises, Chanond gives a straightforward assessment of the overall property market in 2020: conditions appear likely to be worse than in 2019, in line with the current state of the overall economy, which still has no positive factors coming in to stimulate it
“What is good right now? The construction business, which was expected to do well, but the 2020 budget still hasn’t been disbursed. Suppose it comes out in March — it would take another 6 months to flow into the economy, meaning business opportunities are lost for 9 months out of the 12 months of the year”
Given the trend of negative factors, Chanond estimates that hardly anyone will dare to launch new projects, because people are not in the mood to buy. This year’s GDP figure was revised down to 2.2% from the original forecast of 2.8%. If it falls any further, there will be almost nothing left to build psychology that stimulates purchasing power — in other words, there are no positive factors this year, “Chanond” reiterated
“The GDP equation today is left with only G (Government Spending), which is public sector investment, because C (Consumption), private sector and public consumption, I (Investment), private sector investment, X (Export), and M (Import) are all gone. Only G remains as the last component. Even though 40% of Ananda’s customers pay in cash, the mood right now isn’t there because only negative news keeps coming in. Even with cash in hand, without the mood to spend, everything contracts”
Chanond views that in 2020 business must be conducted with “caution”, likening it to a Formula One race where every team pours in full budgets to develop engines, but on race day it rains heavily — the plans laid out and the technology invested in become meaningless
The current property market situation is the same. No matter how well you plan or how good the technology you invest in, under abnormal circumstances, competition requires skills and experience in adapting to the situation. You must be Agile at all times. Those who can adapt will survive; those who cannot will not make it
“You must stay alert and mindful to keep up with the changing situation. Plans must shift from Plan A to B to C to D to F. The important thing is that everyone must know how to adapt themselves to survive amid abnormal circumstances. In this era, having a 12-month or 3-5 year business plan no longer works. It should be down to just 3 months to allow more flexibility, because the situation changes all the time. Plan for 6 months, look ahead at most 2 years, and review every 3 months. The cycle of plans is faster. In this era, you should not plan beyond 3 months”
The CEO of Ananda admitted that in the first 3 months of this year we had to endure and be patient. Don’t do anything flashy; you have to be very conservative. It’s like rain falling — we are racing drivers who must race in the middle of a storm, so we must be more careful not to skid off the curve. Steady the car first, watch the timing, stay focused. Currently, Ananda has 5-6 projects ready to launch, like having bullets in hand ready to fire, but we must wait and see the situation
“Don’t get stuck thinking that once you’ve said something you can’t adjust. A CEO’s duty is to adapt, like a racing driver holding the steering wheel. Whether to press or ease off the accelerator is up to you. Even if people shout that you’re terrible, you must not listen — you must stay focused”
Meanwhile, in the case of the IDEO Q Phahol-Saphan Khwai project, a high-end brand that lowered its specifications over the past year and rebranded as IDEO at a price of 149,000 baht per sq.m., down from over 200,000 baht per sq.m., the suppliers helped reduce material prices so that construction could continue. Everyone helped each other keep the project moving forward
“The Saphan Khwai project case is considered an approach to adapting to the changed situation. If anyone thinks we lost our form, I don’t care whether we lost our form or not. Even though my subordinates said it could be done but it would be very exhausting, I don’t want my subordinates to be exhausted like that, because a good business should not go against nature. It’s like driving constantly in the rain without watching the curves — it’s dangerous. A good business must follow natural circumstances. You can no longer be afraid of losing face or form”
As for Ananda’s business approach, it still places importance on “location” near electric trains. Chanon views location as the blue chip of property, the crucial heart of the business, but admits that a good price is the main raw material for developing a project. It used to be 20% of cost but has now risen to 50% of total cost
This is why he refuses to cut prices or sell at a loss (not playing a price war), because he is confident that the chosen locations remain a selling point with an advantage over competitors, but he may run promotions with free gifts or reduced specifications, similar to the IDEO Q Phahol-Saphan Khwai project
“The business thinking from day one until today, as Ananda enters its 21st year, has the same foundation. Everything moves in cycles. I don’t think I have an ego. Everything changes according to the cycle, but I may do things faster than others because I see opportunities. When the water comes, hurry to scoop it up. When the sun shines bright, run at full speed. When the storm hits, conserve your strength. Once the storm passes, come back and race again”
Meanwhile, there are plans to expand the businesses in the portfolio toward new platforms and new technologies, along with expanding recurring-income businesses to supplement, such as serviced apartment business, including the Dusit Central Park mixed-use project, by acquiring a 5% stake and developing a mixed-use project for the first time
Together with the BTS-U City Group on 200 rai of land on Bang Na-Trad, in mid-2020, it is in the process of studying information to propose plans and other real estate projects by bringing in technology in the form of platforms to serve customers in various forms
Currently, the company has 8,000 million baht in cash at the parent company, and 14,000 million baht combined with subsidiaries, ready to invest in interesting mergers and acquisitions (M&A) or investments in Real Estate Investment Trusts (REITs) that are office rentals, but the residential real estate sector still carries risks because of the problem of high household debt, with still no light at the end of the tunnel in sight
Thank you for the image and news from Krungthep Turakij (Bangkok Biz News)
