Property development & Investment – Poised for a strong recovery ahead – Sector note

• Lacklustre 3Q21 sales volume in both HCMC and Hanoi due to stringent social distancing measures.
• We expect a strong recovery in 2022F transaction volume driven by increases in new supply and solid housing demand with high take-up rates.
• Our top picks are VHM, KDH, DXS and CRE.

Lacklustre 3Q21 sales volume in the South due to the stricter lockdown

The 3Q21 HCMC condo market witnessed a sharp drop in both new launches (-70.0% yoy) to 1,600 units and sales volume (-68.4% yoy) to 1,582 units, a five-year low. The new supply of ready-built houses was still struggle with only 10 units, down 99.2% yoy. We see secondary prices in 12/22 districts fell by 0.5%-9,2% qoq but still increased on yoy basis. Meanwhile, the average condo primary price climbed +17.0% yoy on average to US$2,271 per square meter (psm).

COVID-19 resurgence blocked the recovery of Hanoi residential market

Unlike HCMC, the 3Q21 Hanoi new condo supply stayed relatively flat of -0.6% yoy to 3,483 units. However, sales volume plunged by 33.4% yoy due to higher contribution of low take-up rate segment and disrupted sales activities. The 3Q21 Hanoi new ready-built house supply was flourishing, with +877.8% yoy (c.440 units) in new launches and +206.0% yoy (410 units) in sale volumes. Likewise HCMC, we see the discounts on secondary prices on qoq basis but still increased on yoy basis. The average condo primary price rose 15.9% yoy on average to US$1,542 per psm.

FY22F outlook: poised for a strong recovery ahead

We expect the residential market to recover in 2022F, based on three factors: 1) a broad-based recovery of macro fundamentals propelling the property market in 2021F; 2) housing purchasing decisions underpinned by affordable mortgage interest rates; and 3) a surge in new supply thanks to the loosening of regulatory bottlenecks.

Hospitality property: the worst is already behind us

We believe that hospitality property will recover quickly in the future on the back of Covid-19 vaccines presence along with recovery of the Vietnam tourism. The headwinds from the pandemic may be over in the hospitality property market from end-2021.

Our top picks are VHM, KDH, DXS and CRE

Re-rating catalyst is recovery in new supply. Downside risks are 1) prolong pandemic could restrict marketing and sales activities, and 2) further upward trend in construction material prices. Our top picks are VHM, KDH, DXS, CRE, in view of property market recovery and their positive FY22F presales outlook

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