Residential Property

Residential Property  

Lining up with our July 7 report on presales of the seven largest developers, a survey by AREA indicates that political calm brought YoY recovery in demand and supply in 1H15, though there was a slip HoH. Condo by nature highly reflective of sentiment and new supply, encourages fluctuations in demand, the opposite of low-rise, which deals with more stable real demand. We expect housing demand and supply to rise HoH in 2H15 backed by planned new launches. We also believe the market will shift back to the mid- to low-end segments. We like AP and SIRI. 

Demand up YoY, but down HoH in 1H15. The most recent survey by AREA shows growth of 26% YoY in overall housing demand in Bangkok and vicinity in 1H15 to 44,480 units, but a fall of 16% HoH. This can be explained by the political unrest that weakened demand in 1H14, with demand coming back in 2H14 upon restoration of calm. In 1H15, demand wavered HoH on economic and consumer uncertainty but was still higher than in 1H14.   

Condo is pivotal. Condo demand hinges on sentiment and new launches and this causes volatility. In 1H15, condo demand grew a strong 34% YoY, but shrank a sharp 23% HoH. Low-rise housing demand reflects real demand and was more stable. In 1H15, condo dominated at 58% of the market versus 54% in 1Q14 and 63% in 2H14.  

Strong growth in high-end condos. In unit terms, new supply of housing priced above Bt20mn/unit surged 12.5x YoY and 269% HoH, in tandem with substantial growth in high-end demand of 192% YoY and 63% HoH (or +285% YoY and +137% HoH in value terms). This is due solely to new high-end condos: new supply had dried up in the past several years, creating pent-up demand, which was then absorbed. The major 

high-end projects were Saladaeng 1, Nimitr, Diplomat 39 and Q Sukhumvit.  

Unsold stock up. As a function of higher new supply than demand, unsold stock edged up 6% HoH to 174K units in 1H15 because of the rise in condo stock. New condo supply slipped 7% HoH but demand fell 23%, resulting in an 18% rise in condo stock. New low-rise supply fell 20% in 1H15, but demand weakened only 4%, resulting in a 1% drop in stock. Because of the postponement of some condo projects from 2014 plus shorter site preparation time (6-8 months for condo versus 12 months for low-rise) as well as the fact that purchasing a condo is less complicated than low-rise, condo supply flooded into the market more quickly than low-rise.   

Backloaded new supply and demand in 2H15. We expect housing demand to rise HoH in 2H15. This will be backed by the planned launches of the top seven that dominate the market, providing 50-60% of the total. The list of planned launches indicates new supply will shift back to the mass market of mid- to low-end segments in 2H15.  

Top pick: AP and SIRI. We prefer mid-end developers to low-end ones. We select AP and SIRI for their strong presales and revenue in 2Q15. We like AP for a higher pace of profit growth in 2015-2017.