Business Confidence Index of Residential Development Operators in Bangkok and Surrounding Areas – Q1 2024

  • In Q1 2024, the index stands at 48.3, marking a continuous decline for five consecutive quarters.
  • There is a clear trend indicating that confidence is expected to improve following government measures to stimulate the real estate sector.

REIC reports the Business Confidence Index of Residential Development Operators in Bangkok and Surrounding Areas. The current situation index for Q1 2024 is at 48.3, showing a slight increase but still below the neutral level of 50. This index has remained below the standard level of 50 for five consecutive quarters, reflecting a lack of confidence in sales, performance, and operational costs, particularly among Non-Listed Companies. Although the confidence index for the next six months stands at 57.3, slightly down from the previous quarter, the government's five economic stimulus measures in the real estate sector are expected to boost operators' confidence in the remaining three quarters of 2024 regarding investment, new project development, sales, and overall performance.

The Real Estate Information Center of the Government Housing Bank or REIC reports that the Current Situation Index for Q1 2024 is at 48.3, an increase compared to Q4 2023, which was at 47.6, and a year-on-year increase from 46.7. However, the confidence level remains below the neutral mark of 50.0, indicating that operators still have low confidence, despite a slight increase. Concerns about the current business situation persist.

Dr. Vichai Viratakphan, Inspector of the Government Housing Bank and Acting Director of the Real Estate Information Center stated, "In 2023 and Q1 2024, the overall confidence level of operators has been below the standard level of 50.0 for five consecutive quarters. However, we see a slight increase in confidence from the end of 2023. This is due to ongoing concerns in various areas, including investment at 48.6, sales at 45.9, performance at 43.5, and operational costs at 40.3, resulting in the Business Confidence Index for residential development operators in Bangkok and surrounding areas remaining below the neutral level of 50. Nevertheless, operators still express confidence in launching new projects and/or new phases at a level of 59.0 and in employment at a level of 52.4."

There are signs of improvement from the previous quarter in several areas, including new project launches and/or new phases, which increased to 59.0 (from 55.5), employment rising to 52.4 (from 50.7), sales increasing to 45.9 (from 45.1), and performance rising to 43.5 (from 41.8). However, investment decreased to 48.6 (from 50.7) and operational costs fell to 40.3 (from 41.5), remaining below the neutral level of 50.0.

When analyzing confidence by operator group, it was found that the current confidence index for public companies or Listed Companies in Q1 2024 is at 52.5, up from 48.1 in the previous quarter and above the neutral level of 50.0. This indicates that Listed Companies are beginning to regain positive confidence in the current business environment, especially regarding new project launches and/or new phases, which increased to 65.0 (from 56.3), investment rising to 55.0 (from 54.2), employment increasing to 55.0 (from 52.1), and sales rising to 52.5 (from 45.8), except for operational costs (inversely) which decreased to 40.0 (from 43.8).

Meanwhile, Non-Listed Companies in Q1 2024 have a confidence index of 41.9, down from 46.8 in the previous quarter, remaining below the neutral level of 50.0, indicating that Non-Listed Companies still have low confidence in the business environment for Q1 2024 due to various negative factors. This is reflected in the declining confidence of Non-Listed Companies across almost all areas, with sales dropping to 35.9 (from 44.1), performance falling to 37.5 (from 50.0), investment decreasing to 39.1 (from 45.6), and new project launches and/or new phases dropping to 50.0 (from 54.4), except for operational costs (inversely) which increased to 40.6 (from 38.2).

Table 1: Current Situation Index


Source: Real Estate Information Center, Government Housing Bank

 

Chart 1: Current Situation Index

Source: Real Estate Information Center, Government Housing Bank

For the Business Confidence Index of residential development operators in Bangkok and surrounding areas over the next six months (Expectations Index) is at 57.3, down from 60.0 in the previous quarter but still above the neutral level of 50.0, indicating that operators maintain a positive outlook on the real estate business situation in the next six months. When considering each area, the confidence in launching new projects and/or new phases is at 68.4 (up from 66.6), while areas with decreased confidence include sales at 66.4 (down from 68.4), employment at 54.0 (down from 56.1), and operational costs at 34.4 (down from 37.4).

When categorizing operators by company type, Listed Companies have an expectations index for the next six months of 60.0, down from 63.1 in the previous quarter, indicating that Listed Companies still have confidence in the real estate business but slightly decreased. In each area, the confidence in launching new projects and/or new phases increased to 77.5 (from 70.8), while areas with decreased confidence include sales at 70.0 (down from 70.8), performance at 62.5 (down from 68.2), investment at 60.0 (down from 70.8), employment at 52.5 (down from 56.3), and operational costs (inversely) at 37.5 (down from 41.7).

Meanwhile, Non-Listed Companies have an index of 53.1, down from 55.4 in the previous quarter, indicating that Non-Listed Companies still have confidence but slightly decreased. In terms of specific areas, confidence in investment increased to 60.9 (from 60.3), and employment increased to 56.3 (from 55.9), while areas with decreased confidence include sales at 60.9 (down from 64.7), performance at 56.3 (down from 60.3), new project launches and/or new phases at 54.7 (down from 60.3), and operational costs (inversely) at 29.7 (down from 30.9).

"Since the Business Confidence Index report for residential development operators in Q1 2024 was surveyed before the announcement of economic stimulus measures through the real estate sector on April 9, 2024, it reflects the thoughts and confidence of operators prior to the government's announcement. The measures cover the extension of the reduction of transfer fees and mortgage fees to 0.01% each (totaling 0.02%) for homes priced up to 7 million baht and low-interest loans, which will be significant factors in boosting confidence across all areas for operators in the remaining three quarters of 2024 regarding investment, new project development, sales, and overall performance," Dr. Vichai concluded.

Table 2: Expectations Index for the Next Six Months

Source: Real Estate Information Center, Government Housing Bank

 

Chart 2: Expectations Index for the Next Six Months

Source: Real Estate Information Center, Government Housing Bank

 

Data Collection Method

The Real Estate Information Center of the Government Housing Bank has designed a questionnaire to create the "Business Confidence Index of Residential Development Operators in Bangkok and Surrounding Areas" on a quarterly basis, starting from Q4 2007.

The confidence index is divided into the Current Situation Index and the Expectations Index for the next six months, each consisting of six questions regarding company performance, sales, investment situation, employment, operational costs (inversely), and launching new projects and/or new phases.

In processing the data, the center gives more weight to listed companies in the stock market (Listed Companies) over non-listed companies (Non-listed Companies) in a ratio of 60:40, as more than 60% of residential projects currently for sale in Bangkok and surrounding areas are from listed companies. The sample surveyed consists of operators developing residential projects in Bangkok and surrounding areas across five provinces: Bangkok, Nonthaburi, Pathum Thani, Samut Prakan, Samut Sakhon, and Nakhon Pathom.

Interpretation of Results

The neutral value of the index is 50.0. Therefore, if the index value is above the neutral level, it indicates that operators have confidence and a positive outlook on the business situation. Conversely, if the index value is below the neutral level, it indicates that operators have decreased confidence and a negative outlook on the business situation.