Risk Characteristics of The Set-registered Real Estate Development Companies during 2014-2019

Abstract

The real estate business is claimed as a high-risk sector due to high investment and returns.  Nevertheless, the business mechanism can create multiplier effects in the economy in terms of employment. This research focused on exploring the risk characteristics of real estate development companies registered in the Stock Exchange of Thailand (SET) during 2014-2019. Research data was collected from annual reports (Form 56-1) of 25 companies, classifiable into 3 big, 7 medium, and 15 small companies. The analysis was conducted by grouping terms and collating risk characteristics. Comparison of company sizes and changes of risk characteristics were also analyzed in each period. 

The results of this study indicated that 1) The risk characteristic of real estate development companies have been increasingly disclosure in annual reports in every year. The highest of disclosure risk type was Enterprise Risk, especially a risk related to economic and political fluctuation and access to capital. 2) The risk of real estate companies mostly happened during pre-development. In this phase, the developers need to pay attention carefully  in feasibility study stage before investing in project development. 3) During the year 2014-2019, the small companies had mostly disclosure the risks in fluctuated economy and the costly of construction cost while the medium sized companies had mostly disclosure the risks in the scarcity of contractors , labors and finding the sources of fund. Lastly the big companies had mostly disclosure the risk in high investment cost, land acquisition and lack of highly skilled contractors and labors.

            The findings indicated the risk characteristics of real estate development companies registered in the SET during the period of high economic, social, and political fluctuations, which is the one of real estate business cycle. With correct knowledge of the said risks, real estate entrepreneurs would gain advantages in assessing future risks and developing hedging plans to mitigate the potential losses that could have a broad impact on the economy and society.