Property Development & Investment – Increased headwinds weigh on outlook

• Sales activities might speed up while land bank acquisition activities will slow down, altogether to cool down the prices in the rest of 2022, in our view.
• We see increasing headwinds weighing on sector outlook, including: 1) rising interest rate to effect on housing purchasing decisions, 2) material prices hike that could drive up housing prices and 3) tightening bank loans into property sector and stricter supervision in corporate bond issuance.

HCMC: softer prices increase, shrinking new supply

According to CBRE, the 1Q22 HCMC new condo supply plunged by 48% yoy to 884 units, the lowest level seen since 2013, leading to a drop of 53% yoy in sales volume (1,247 units). Average condo primary price increased 7.7% yoy, softer than that of +14.6% yoy seen in 1Q21, and 6.9% yoy in 4Q21. In landlot segment, average secondary prices slew down ~5% yoy in 1Q22, Cu Chi is the only area to experience a sharp land prices hike of 72.7% yoy following a proposal to be upgraded to City.

Hanoi: prices to grow healthily but new supply to slump

1Q22 condo sales volume rose 16% yoy to c.4,800 units while new supply fell by 20.3% yoy to 3,525 units. Average condo primary price increased healthily 13.3% yoy to US$1,655 psm in 1Q22. The new supply of ready-built houses also declined by 24.7% yoy to 296 units in 1Q22. We believe the outbreak during Feb-Mar 2022 in Hanoi had blocked the residential construction activities. In landlot segment, secondary prices of 12/15 districts in Hanoi dwindled in 1Q22, down 7.7% qoq on average, but still inched up 5.7% yoy.

We see more headwinds than positive catalysts

We see increasing headwinds weighing on sector outlook, including: 1) rising interest rate to effect on housing purchasing decisions, 2) material prices hike that could drive up housing prices and 3) tightening bank loans into property sector and stricter supervision in corporate bond issuance. Re-rating catalyst is recovery in new supply. Downside risks are 1) tighter-than-expect funding, 2) higher-than-expected inflation and interest rate, and 3) further upward trend in construction material prices.

Faster presales and slower land acquisition ahead amid tighter funding

In the context of tightening bank loans into property sector and stricter supervision in corporate bond issuance, we believe developers will face challenges in funding in the next couple of quarters. Thus sales activities might speed up while land bank acquisition activities will slow down, altogether likely to cool down the housing prices in the rest of 2022, in our view. Property developers that have larger available-for-sale products and healthier balance sheets will still enjoy sustainable earnings growths over FY22-23F.

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