Singapore Property - Phillip Securities 2016-10-03: Yet to see the bottom

Singapore Property -  2016-10-03: Yet to see the bottom Singapore Property

Singapore Property - Yet to see the bottom

  • Normalised HDB supply until 2018 expected to be sufficient to meet demand – after record low supply from 2006-2010. 
  • Limited land sales for ECs to limit supply from 2017.
  • Private Property: Improved sales volume in recent quarters driven mainly by RCR and OCR; sales mix is likely to continue. 
  • Stubborn inventory of unsold units is likely to deter upside in average selling prices. 
  • RCR properties appear to be most attractive based on current gross yield and historical price performance. 
  • Growing vacancy rates and more completions on the back of a weaker market puts pressure on overall rental market. 
  • Performance of Singapore residential properties lag behind foreign markets. 
  • Share price performance of developers is primarily driven by sales volume but no major catalyst to unwind existing property cooling measures 
  • We have an "Underweight" view on the Singapore Property Sector.


Singapore’s property has always been a popular investment vehicle for locals and foreigners alike. 

  • The Asian “insatiable hunger for bricks”, metropolitan culture, stable political and economic system of Singapore has drawn in investors over the years. 
  • Since suffering a c.25% drop in the property price index during the Global Financial Crisis (GFC), property prices and sales volume recovered remarkably in the 2 years from 2009 before a slew of cooling measures were implemented by the Government. 
  • Over a five-year horizon from 1Q11 (around the start of a slew of cooling measures), current residential property price index has returned to near the level it was at since 1Q11.



How do we view this?


Stubborn inventory of unsold units and lacklustre demand amidst dour sentiment likely to continue to deter upside in average selling prices.

  • We highlight that the recent uptick in sales volume over the last 2 quarters was due to two factors: various marketing schemes by developers, and the continued sales momentum in selected Outside Central Region (OCR) launches that was supported by low interest rates.
  • However, sales volumes remain way below the heyday seen before the GFC or during 2010-2011 after the recovery. We expect the government’s continued clampdown on foreigner influx, increasing indebtedness in household balance sheets and more favourable foreign property markets to continue to impact interest and affordability in local property.
  • Share price performance of developers is primarily driven by sales volume but no major catalyst in sight.

The implementation of the various property cooling measures has drastically dried up sales volume. 

  • We do not expect the lifting of the cooling measures until at least 2H17, in light of the gradual and manageable fall in home prices so far, especially with the relative strength in prices of OCR properties. In light of this, we do not see major catalysts in sight for a big uptick in sales volume.

We have an "Underweight" view on the Singapore Property Sector.

  • We believe we have yet to see the bottom for Singapore’s property prices. Nonetheless, we are cognisant of the fact that many developers are diversifying their income streams from outside of Singapore. 
  • We advise clients to perform bottom-up analysis on the various developers and prefer developers with exposure outside of Singapore.




Peter Ong Phillip Securities | Tan Dehong Phillip Securities | http://www.poems.com.sg/ 2016-10-03
Phillip Securities SGX Stock Analyst Report BUY Maintain 7.30 Same



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