Residential Property

Residential Property  

 

New launches/presales diverged in February  

 

Moving in opposite directions, while new launches in February shrank 20% MoM, aggregate presales for the top seven developers gained 35% MoM. Presales in the 2M15 were Bt20.5bn, -10% YoY, with the 4% rise in demand for low-rise helping offset the 35% drop for condo. SIRI and SPALI led. We expect greater presales growth in 2Q16 and 3Q16 when more condos are launched. Our favorite remains LH. 

 

Fewer new launches in February. According to AREA, new launches fell 20% MoM in February to 5.3K units with low-rise jumping 73% MoM to 3.5K units, accounting for 66% of the total, while condos fell 61% MoM. In value terms, there was a small reduction of 3% MoM as developers focused on the higher-end segment, especially condo. This pulled up average unit price to Bt3.7mn from Bt3.0mn. Take-up rate rose to 27% in February from 21% in January. In 2M16, new launches numbered 11.9K units (-27% YoY) with sales value of Bt39.6bn (-36%) YoY. In terms of units, condos dominated at 54% but in terms of value, took only 46% since the projects were at the lower price end.   

 

Improved presales momentum. Presales moved against the tide, rising 35% MoM to Bt11.7bn for the top seven developers (AP, LH, LPN, PS, QH, SIRI and SPALI). However, the relatively few launches in January and February brought presales to Bt20.5bn, a 10% drop YoY, and only 10% of 2016 target.  

 

Low-rise gain, condos lose. In 2M16, aggregate low-rise presales grew 4% YoY to Bt15.0bn (73% low-rise and 27% condo) thanks to strong presales at SPALI (+133% YoY) and QH (+16% YoY). SPALI’s comes off very low comparative presales in 2M15 as its projects in Rayong failed to bring in strong presales. Condo presales shrank 35% YoY to Bt5.4bn as a result of just one launch, 

 

Lumpini Ville Ratchapruk-Bang Waek

 

 (by LPN) in January, with a disappointing take-up rate of 20%. Outperforming peers, presales for SIRI and SPALI grew 184% and 34% YoY respectively. 

 

Look for accelerated presales in 2Q16 and 3Q16. We believe developers will concentrate on deed transfers and presales of finished condo stock and low-rise - for which deeds are transferred shortly after being sold – until April to benefit from the property tax cut, which expires in April. Condo launches will kick in from 2Q16. 

 

Top picks: LH. We like LH, as its earnings are turning the corner to a growth cycle in 2016-2017 with good core profit growth of 18% in 2016 and 23% in 2017. With record backlog of Bt20.4bn, LH’s earnings visibility is improving and forecast risk is reduced.