Property Sector note – Prices surge across the board

• In 1Q21, condo sales volume grew 169.7% yoy in Hanoi but declined 30.9% yoy in Ho Chi Minh City (HCMC).
• We see the rise in land prices of suburb in both HCMC and Hanoi regarding the infrastructure project development in these areas.
• We reiterate our Overweight rating on residential sector. Our top picks are VHM, NLG and KDH.

Lacklustre HCMC property market with low sales volume of condo
The 1Q21 HCMC new condo supply plunged 52.9% year-on-year (yoy) to 1,709 units; leading to a drop of 30.9% yoy in sales volume (about 2,624 units). We obverse that there was no new affordable housing project launched within recent five quarters. Take-up rate surged to 153.5% in 1Q21 (+77.0% pts quarter-on-quarter), indicating that housing demand still stays high. The average condo primary price in HCMC climbed +2.9% qoq/+14.6% yoy to US$2,219 per square meter (psm) in 1Q21.

Sales volume of condo in Hanoi recover significantly
The sales volume of Hanoi condo market in 1Q21 strongly bounced +169.7% yoy to 4,152 units driven by ample new launches of 4,421 units (+93.7% yoy). Mid-end segment continued to dominate the market with new supply increase of 447.7% yoy to 3,527 units, accounting for 79.8% of total new supply. Take-up rate was stilled positive at 93.9% (-3.4% pts qoq). The average condo primary price in Hanoi inched up +3.5% qoq/+7.0% yoy to US$1,461 psm in 1Q21.

Ready-built houses dry up in HCMC but flourish in Hanoi in 1Q21
In 1Q21, the HCMC new supply of ready-built houses fell 51.0% yoy to only 170 units; this dragged down sales by 75.2% yoy. In contrast, the Hanoi new supply witnessed a significant recovery (+714.5% yoy to 393 units) and transaction volumes rose 106.0% yoy to circa (c.) 300 units. Primary prices recorded an increase of 4-7% yoy in HCMC while Hanoi recorded a four-year high (US$5,628 psm on average), given their limited supply.

Land prices surge in secondary market
We see the dramatically rise in land prices in Dong Anh (+75.5% yoy), Thanh Tri (+25.6% yoy), Cu Chi (+27.7% yoy), Hoc Mon (+21.1% yoy). Land prices in these areas rose rapidly mostly driven by 1) announcement of master plan for Red River and 2) planning for urbanizing Hoc Mon, Binh Chanh, Nha Be, Cu Chi and Can Gio into urban districts, in tandem with the proposal on establishment of Northwest City comprising Cu Chi and Hoc Mon.

Our top picks are VHM, NLG and KDH
We reiterate our Overweight rating on residential sector. Re-rating catalyst is recovery in new supply. Downside risk is 1) lower-than-expected new supply due to regulatory delays, and 2) continuous upward trend in construction material prices. Our top picks are VHM, KDH and NLG, in view of their positive presales outlook in FY21F and their huge ready-to-use land bank.

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