Residential Property

Residential Property  

 

New launches – both in terms of units and of value - shrank YoY and 

QoQ in 1Q16. This supports our contention that government housing incentives helps smooth deed transfers, but does not generate new demand. Aggregate presales climate was better with a slip of only 3% YoY. Our favorite remains LH. 

 

1Q16 new launches subdued YoY. According to AREA, new launches fell 12% YoY in March to 8.8K in terms of units and 24% YoY to Bt36.8bn in terms of value. This meant new launches in 1Q16 fell by 22% YoY and 13% QoQ to 20.8K in terms of units and 31% YoY and 30% QoQ to Bt76.4bn in terms of value. Meanwhile, take up rate was sluggish at just 25% in 1Q16 versus 47% in 1Q15. This supports our view that the government property incentive scheme – which expires in April - helps smooth deed transfers but does not create new demand.   

 

Market shifted to mid-end segment. New launches of product priced above Bt3mn/unit was unchanged YoY at 8.6K units in 1Q16 but average selling price fell to Bt6.3mn/unit from Bt9.2mn/unit. Super luxury housing shrank to just 153 units in 1Q16 from 1,011 units in 1Q15. This is a good sign since demand is sparse at the top of the pyramid. This segment is dominated by condo.  

 

1Q16 presales holding up YoY. Aggregate presales for the top seven developers (AP, LH, LPN, PS, QH, SIRI and SPALI) in March inched up 6% YoY, but jumped 38% MoM to Bt16.2bn (70% low-rise and 30% condo) due to far stronger momentum in both condo (+54%) and low-rise (+32%). Low-rise presales in March were the second best since January 2015. This lifted 1Q16 aggregate presales to a small decrease of 3% YoY to Bt36.7bn (72% low-rise and 28% condo), held up by the 9% growth in low-rise presales that helped offset the shrinkage of 24% in condo presales. 1Q16 presales average 17.0% of our full year forecast: SPALI has reached 22%, LH 20%, PS 19%, QH 19%, AP 15%, LPN 14% and SIRI 12%).  

 

Still look for brighter outlook in 2Q16. We expect more condo launches to help boost presales. Based on plans by the top seven developers, at least Bt25bn in condos will be launched in 2Q16 versus only Bt5.4bn in 1Q16 – which was from LPN and SIRI.   

 

Top pick: 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. It is also upheld by its focus on the sustainable demand from the low-rise segment.