Inventory-to-sales ratio in 2019 rose to 2.5x, the highest in 10 years
Inventory and pre-sales pressure
We expect a sharp rise in inventory and challenging funding outlook to trigger fierce price competition in Thailand's residential property sector. We forecast developers' pre-sales to decline 30-50% year over year in 2020 and anticipate a slow recovery in 2021 given the deteriorating household income and unemployment outlook.
Huge industry inventory glut puts pressure on margins
Total inventory rose from 88,000 units in 2009 to 194,000 in 2019, with condominium (condo) inventory rising the most (34% year over year to 92,000 units in 2019). The inventory-to-sales ratio rose sharply to 2.5x, the highest level in 10 years. With an increasingly challenging funding outlook for second-tier developers, we expect the sector's EBIT margin to be under pressure and forecast a 2% decline over 2019-22. Our checks suggest price discounts of 30-60% in the condo segment.