Residential Property – Rate cut will spur demand

We are more positive on the residential sector in 4Q24 into 1H25 upon a cut in interest rates and greater consumer confidence. The rate cut will help bring 4Q24 presales to the year’s highest and 2024 growth to 8%. We expect 2025 to be a good year with presales growth of 12% and new launch growth of 13%. Our top picks are AP and SIRI (upgrade to Outperform) backed by high backlog to support growth, inexpensive valuation and good dividend.

Rate cut from 4Q24 underwriting demand recovery. INVX expects interest rates to be cut 100 bps to 1.50% by the end of 2025, with the first cut in 4Q24. As residential demand has been shown to be sensitive to interest rate in the past - in 2023, when interest rate shot up 100 bps, presales dropped 6% - we expect presales to pick up once the rate starts to step down in 4Q24.

Presales to jump from 4Q24 ... We forecast 2024 presales growth of 8%YoY to Bt191.6bn with 4Q24F to be the highest quarter with at least 6-10% growth QoQ, backed by lower interest rate and higher consumer confidence. Then in 2025 we expect 12% growth to a six-year high of Bt210-220bn, on 13% growth in new launches to ~Bt22.50bn, a new high, with value to close to that of 2023. We expect condos to become more active as a lower interest rate is likely to bring back investment demand in this segment.

We are more positive on group earnings in 2025. After weak group earnings in 1H24F from low consumer confidence and a high rejection rate, we expect earnings to grow HoH in 2H24, particularly in 4Q24. We forecast net profit for all companies under coverage at Bt25.2bn (-17.5%), on revenue of Bt174bn (+0.6%). In 2025F, total backlog on hand will be Bt17bn and given a recovery in demand and lower loan rejections, we estimate a 9% growth in revenue and 10% growth in net profit in the year.

Top pick. In our scorecard for the residential sector in 2H24 into 1H25, we incorporate presales growth, backlog, secured revenue, EPS growth, dividend yield and valuation. This gives us two top picks: AP, backed by high backlog and good valuation, and SIRI, backed by presales growth, solid backlog and good dividend yield plus an extra gain from divestment in 2H24 that is not yet in our projection. SPALI, on the other hand, faces lower backlog and less secured revenue in 2025.

Key risks and factors to monitor. 1) Inventory management, as supply is high and absorption coming back slowly, 2) increase in minimum wage. Factors to monitor: further stimulus such as extending the leasehold for foreign buyers to 99 years or expand foreign holding in condos to 75%, which we view as positive for selected locations and developers. Key ESG risks are GHG emission, waste & water management, and EIA assessment (E), product quality management, health & safety policies (S).