Residential property
New supply and pre-sales back up in August
Residential property
In August, the housing market woke up with a 46% MoM jump in new launches after halving MoM in July. Aggregate presales grew well at 45% MoM on strong condo take-up. 8M15 presales are at 62% of our 2015F. Though August was good, we expect a QoQ drop in presales in 3Q15, rising in 4Q15, with 7% HoH presales growth in 2H15. Property stimulus is a catalyst; benefiting most will be LH, LPN, PS, SIRI.
New supply was back up in August. AREA reports greater new supply in Bangkok and vicinity in August with a high 46% MoM growth in new launches to Bt26.4bn - after halving MoM in July. Large new launches by PRIN, PS and QH pulled up low-rise supply by 50% MoM, while ANAN, MJD, PS and BTS Sansiri Holding One, a 50:50 JV of BTS and SIRI, were the major source of new condos (+43% MoM). This brought 8M15 new supply to Bt255.1bn, +23% YoY. Condo took 63% of this, up from 45% in 8M14. Take-up rate of new launches was good at 37% in August vs. 34% in 8M15.
Better presales momentum MoM. Aggregate presales for the seven lead property developers (AP, LH, LPN, PS, QH, SIRI, and SPALI) rose strongly 45% MoM to Bt15.8bn in August. Condo presales jumped 80% MoM, backed by good response to The Line Sukhumvit 71 (100% sold) from BTS Sansiri Holding One and The Plum Condo Central Station from PS (90% sold). Low-rise presales grew a solid 25% MoM. In 8M15, total presales are at Bt121.4bn, +47% YoY, mostly condo (+57% YoY); this is 62% of our 2015F.
SIRI and PS winners, LPN and SPALI losers. In August, SIRI’s presales leapt 246% MoM to Bt3.3bn thanks to the sell-out of The Line Sukhumvit 71. PS was the runner up with presales growth of 76% to Bt4.6bn on the sale of 90% of The Plum Condo Central Station. At the bottom were LPN and SPALI, whose presales contracted MoM at 25% and 11% respectively, as neither launched a condo. It is worth noting that LH’s August presales were the highest so far this year despite no new launch in the period.
Pre-sales weak in 3Q15, stronger in 4Q15. We expect presales to slip QoQ in 3Q15 to Bt45bn and then rise to Bt56bn in 4Q15 in tandem with new launches. This implies aggregate presales were highest in 2Q15. We estimate a small 7% HoH growth in presales in 2H15. This implies 2015 growth of 25% YoY to ~Bt196bn.
What about property stimulus? With a high multiplier effect of 2.5-3.0x spending, measures to stimulate property sales is commonly used to bring Thailand’s economy back up. The government has in the past used: a) cut taxes and fees; and b) zero interest plus fee cut or tax deduction of 10% of housing value for first-home buyers. We see these measures as aiding backlog transfers and helping get rid of completed inventory rather than creating new demand/presales, especially for new condos, for which construction is unlikely to be completed before the scheme expires. Benefitting most are LPN and SPALI in terms of transfers, and SIRI, LPN and LH with the most finished inventory available for sale and immediate transfer. In the immediate term, clients will put off transfers in anticipation of government help.
Sector picks: AP and SIRI. We select AP for its higher three-year profit growth outlook with undemanding valuation of 1.0x PBV, and SIRI for its strong revenue in 3Q15 and presales in 4Q15 plus cheap valuation, trading at a10% discount to BV.
