Real estate stocks will directly benefit from the Bank of Thailand (BoT)'s decision to raise the loan-to-value (LTV) ratio for mortgage lending to 100% to revive the property sector, said analysts from Maybank Kim Eng Securities (MBKET).
The analysts said the BoT has raised its LTV threshold to 100% from 70-90%, effective for housing loan contracts from Oct 20 this year to Dec 31, 2022.
The easing of the LTV rule will have a huge positive effect on the real estate sector.
The broker expects revenues and net profits of property companies to enjoy rapid growth next year.
"We expect each property company will have a more positive outlook for 2022 and analysts are likely to upgrade their earnings forecasts. Interesting stocks from the sector include AP which has the lowest price-to-earnings ratio (P/E) for 2021 at around six times, followed by Supalai (SPALI) with a P/E of 7-8 times and Land and Houses (LH)," said one of the analysts.
The analyst said both real estate and service businesses through associated companies will likely see double-digit profit growth next year.
This measure -- announced by the BoT last week -- was a surprise as property developers had been asking for relief over the past two years but to no avail, the analyst said.
Amid the current fragile economic outlook due to rising household debt, higher energy prices and weaker-than-expected GPD growth, commercial bank lending measures will remain strict.
However, many banks will be ready to provide loans to middle- to upper-end segments with high purchasing power who will benefit fully from this measure.
In addition to LTV, the BoT also reduced transfer and mortgage registration fees to 0.01% for homes priced below three million baht per unit.
The reduction will expire at the end of the year.
However, the government is expected to continue the project until the end of 2022 and raise the price ceiling to 5 million baht per unit. This will cover 65% of the properties sold by major listed developers, the analyst said.
Meanwhile, the government's new policy to provide 10-year long-term visas to middle- to high-end foreigners and allow them to purchase property in Thailand is also boosting their purchasing power.
According to the Real Estate Information Center (REIC), the new property projects to be launched and sold next year will recover by 60% and 22%, respectively, next year.
REIC had initially expected a revenue and profit growth of 7-8% in 2022, down from 10-11% in 2021.
However, with the easing of LTV rules, analysts are expected to upgrade the revenue and profit forecasts.
Risks for the industry next year include rising building material prices and uncertainty regarding the economic recovery in 2022.
Wilasinee Boonmasungsong, research director at Globlex Securities, said real estate stocks will benefit from the BoT's easing of LTV rules which makes large-cap property stocks with low P/E attractive.
Her top picks from the group include LH stocks, Quality Houses, AP Thailand, SPALI, Sansiri, Origin Property, Lalin Property, Pruksa Holding and L.P.N. Development.
In addition, tourism-related and transportation stocks will also benefit from the country's reopening to tourists from 46 countries from Nov 1, she said.
Interesting tourism stocks include Minor International, Erawan Group, Central Plaza Hotel, Asset World Corp, S Hotels and Resorts, Airports of Thailand, Asia Aviation and Bangkok Airways.
For transportation, department store, restaurant and retail stocks, she recommended Bangkok Expressway and Metro, BTS Group Holdings, Central Pattana, Central Retail Corporation, MBK, After You, MK Restaurant Group, Zen Corporation Group, CP ALL, Berli Jucker and Siam Makro.