Residential Property

Residential Property

Presales slip QoQ in 3Q12, rise in 4Q12. As expected, presales for the top seven fell
11% QoQ to Bt39.6bn in 3Q12, bringing 9M12 presales to Bt124.2bn, +23% YoY, 77% of
their targets. With more new launches and greater weighting towards condos, we
expect presales to increase in 4Q12. We see upside risk for presales for AP, LH, and LPN
due to their conservative original forecasts and better demand than anticipated; PS
and QH will meet estimates. SIRI and SPALI should achieve their twice-revised targets
of Bt40bn (+84% YoY, +25% from original) and Bt19bn (+38% YoY, +11% from original).
Growth through provinces. While housing demand in Bangkok and vicinities is
expected to grow at normal rate of 5-10%, demand for developer-built housing in
provinces will experience greater growth, driven by urbanization. As the urban
population and income grow, so does the demand for housing – and for developerbuilt
houses. This is where the primary growth for developers will come from down the
road. In our universe, LH, LPN, PS, QH, SIRI, and SPALI already have a substantial
presence in the provinces, only AP is still Bangkok-bound, but it will launch its first
provincial project in 2013. All will raise their exposure to the provinces in 2013.
Low interest rate environment. The BoT is likely to keep its interest rate low in
order to boost the economy. We do not expect this to encourage strong demand, as,
based on our study, the correlation between interest rate and housing demand is
weak. At the same time, a low interest rate environment could help raise homebuyer
affordability given the method of calculating installment payments. This could,
however, simply offset the rise in housing prices brought by cost increases.
Minimal impact of LTV implementation. Effective on January 1, 2013 (postponed
from January 1, 2012), loan-to-value for low-rise houses priced below Bt10mn/unit will
be limited at 95% from previously no limit. In our view, this will have little impact on
demand as Thais normally have savings and, in some cases, banks could still lend 100%.
Minimal impact of expiry of government stimulus package. Three government
stimulus measures (tax refund for first-home buyers who buy a home priced below
Bt5/unit, soft loan for flood victims and three-year zero percent mortgage rate for
first-home buyers buying housing priced below Bt1mn/unit) will expire soon, but we
expect this to cause few ripples. In our view, none of these packages helped boost
demand, though they did smooth deed transfers.
Sector picks: QH, SIRI and AP: QH remains our favorite based on its operational
turnaround and cheap valuation, while SIRI is a growth with good visibility.We
like AP because of its better 2013 outlook and visibility.