Housing dream remains strong<\/strong><\/p>\n\n\n\n According to the results of the recently released Residential Real Estate Price Index, residential prices as a whole grew by 10.2% year-on-year (YoY) and 1.4% quarter-om-quarter (QoQ). The bulk of the growth compared to last year was generated by single detached\/attached houses (+17.0%) as well as duplexes (+22.1%). <\/p>\n\n\n\n When looking at QoQ progression however, prices in the former still saw a climb of 4.7% while the latter suffered a 16.4% claw back in prices. Townhouses and condos meanwhile saw only single digit YoY upticks of 1.8% and 1.2% respectively. Sequentially, condo prices would drop by 5.1%. All in all, this tells us that residential demand is shifting more heavily towards housing while interest in vertical projects remains diminished.<\/p>\n\n\n\n Migration outside of NCR<\/strong><\/p>\n\n\n\n Further examination of the demand trends show that more residential buyers are making their way outside of Metro Manila\u2019s confines. While residential prices in Metro Manila did grow by 7.3% relative to last year, they fell by 4.3% QoQ. <\/p>\n\n\n\n On the other side of the spectrum, prices for developments in areas outside of NCR saw robust gains of 11.4% YoY, with a further expansion of 4.4% relative to 4Q 2022. The region of CALABARZON seems to be capturing much of the demand given that it accounts for the largest share of residential real estate loans granted during 1Q 2023 at 34.5%.<\/p>\n\n\n\n Long-term upside for WLCON and ALI remain<\/strong><\/p>\n\n\n\n The strong emergence of housing demand outside of the nation\u2019s capital should continue to sustain both WLCON and ALI\u2019s long-term growth prospects. <\/p>\n\n\n\n In terms of business strategy, ALI seems to have caught onto the shifting behavior of residential buyers as evidenced by the heavier proportion of horizontal projects (58%) in its 1Q 2023 development launches. Likewise, we note that 50% of the company\u2019s landbank is situated in CALABARZON itself, which would indicate a strong likelihood that the company plans to grow its presence in the area. <\/p>\n\n\n\n In the same vein, WLCON has also been prioritizing locations outside of Metro Manila, particularly in Luzon. This increases our confidence that in the long-run, prospects for both companies remain solid. Nevertheless, short to medium term risks for both players continue to abound. <\/p>\n\n\n\n For ALI, weak sentiment for vertical projects may continue to make their presence known in coming quarter\/s. When looking at monthly sales takeup for 1Q 2023, one can see that the figures continue to lag pre-pandemic levels. In contrast, SMPH\u2019s reservation sales for the same period already outclass its 1Q 2019 comparable by 101%. <\/p>\n\n\n\n For WLCON, we remain concerned with rising costs associated with its continued store openings. Although sales could see better performance in coming quarters, it may not be enough to make up for the double-digit growth that we may likely see in operating costs. As such, we would advise investors to accumulate slowly on these names.<\/p>\n\n\n\n