The Real Estate Stock Rally: What’s Behind the Surge?

The stock market soared during the August 20 trading session, led by real estate stocks. The two giants, VHM and VIC, surged by nearly 2%, significantly contributing to the overall index’s gain.

The spotlight was on DXG and PDR as they simultaneously hit the daily limit-up with buying interest far exceeding selling pressure. Meanwhile, SGR and HPX, among smaller-cap stocks, also painted the town red with notably improved liquidity.

Not to be outdone, a slew of other real estate stocks, including CEO, DIG, NVL, DXS, NDN, KBC, and NLG, shone brightly with gains ranging from 2% to 8%.

Liquidity in this sector was also vibrant, with DIG, NVL, DXG, PDR, and VHM ranking among the most actively traded stocks across the market.

According to VNDirect’s real estate sector analyst during the August 20 session, the market’s money flow in the first half of the year did not heavily favor real estate stocks. As a result, stocks in this sector, such as NVL, DXG, DIG, and CEO, underwent a downward trend during this period.

However, companies with a proven track record of strong sales performance, successful corporate restructuring, and promising growth prospects due to their ability to expedite land clearance and complete land use fee payments under the government’s old land price framework, managed to maintain stable stock prices relative to the VN-Index. Examples of such companies include NLG and KDH.

The performance of real estate stocks can be partly attributed to the typical lag in the sector’s financial results during the first half of the year, which fails to generate sufficient positive sentiment among investors.

In the second half, VNDirect’s expert anticipates a boost in market sentiment as companies accelerate their home delivery operations, reflected in their financial results. Several enterprises have already announced their plans to focus on product deliveries in the latter half of the year, including Vinhomes (Vinhomes Ocean Park 3, Sky Park, Golden Avenue), Nam Long (Akari, Can Tho, Southgate), and Khang Dien (The Privia), to name a few.

Nevertheless, it will take more time for the supportive policies and the new Real Estate Laws to exert their positive influence on investor sentiment in the stock market. In the short term, the new laws may have mixed effects on the real estate market. On the one hand, some localities have started applying a new land price framework, which risks raising land prices significantly to match market rates, thereby creating additional financial strain on businesses and making it challenging to cool down housing prices.

On the other hand, more favorable regulations for homebuyers, such as the requirement for developers not to collect more than a 5% deposit and the expanded scope of homeownership rights for foreigners, will positively impact homebuyer sentiment.

Strong Uptrend in Real Estate Stocks Unlikely in the Second Half of 2024

Overall, VNDirect’s analyst believes that a robust uptrend in real estate stocks is unlikely in the second half of 2024. Instead, a slow and gradual recovery is expected as the market witnesses improvements in the operational and financial performance of these companies.

Investment opportunities in this sector will be diverse, and companies with a proven track record of successful project implementation, solid legal compliance, robust presales performance, healthy financial standing, and prudent leverage usage will offer potential investment avenues during this period.

KDH and NLG are assessed as companies with promising growth prospects in the upcoming period due to their efforts in expediting land clearance and land use fee payments for large-scale projects in populous areas of Ho Chi Minh City and its neighboring satellite cities. The strategic locations and the companies’ well-established reputations ensure the successful sales and profitability of these projects, setting the stage for substantial revenue streams and healthy profit margins for KDH in the coming years, backed by a robust project development plan.

On the other hand, enterprises without new product launches in the near future will continue to face financial challenges and legal procedure-related obstacles to obtaining the necessary approvals for sales due to the increasingly stringent regulations. Investors are advised to thoroughly evaluate the financial health and the ability to complete legal procedures for ongoing projects to make informed investment decisions regarding real estate companies.