SG Residential Sector - OCBC Investment 2017-09-28: 3Q17 URA Price Index To Show First Rebound In 4 Years

SG Residential Sector - OCBC Investment 2017-09-28: 3Q17 URA Price Index To Show First Rebound In 4 Years Singapore Home Prices Property Developer Stocks Market Outlook CITY DEVELOPMENTS LIMITED C09.SI UOL GROUP LIMITED U14.SI WHEELOCK PROPERTIES (S) LTD M35.SI

SG Residential Sector - 3Q17 URA Price Index To Show First Rebound In 4 Years

  • 3Q17 URA data to mark end of Real Estate bear.
  • Recovery likely started in late June.
  • Home prices to be flat in 2017 and up 3%-8% in 2018.



Key inflection point marking the end of the property bear 

  • The URA will be reporting its 3Q17 update for its private residential property price index shortly. The flash estimate will be announced on next Mon 2 Oct and the official statistic on 27 Oct. 
  • From our analysis of caveats lodged to date, we expect 3Q17 figures to show the first rebound in home prices in four years – which will be a key inflection point marking the end of the Singapore housing bear. 
  • While the consensus is that the bottom in the property market lies shortly ahead, we believe that the trough is in fact behind us and Singapore home prices likely hit their cyclical lows in mid-Jun 2017.


Budding recovery likely began in late Jun 2017 

  • Our view is further bolstered by three observations. 
    • First, we note that the URA’s flash estimate for 2Q17, which excludes caveats lodged in the last few weeks of June, came in at -0.3%, and this was subsequently adjusted upwards to -0.1% when the official statistic was reported (and all caveats in June were accounted for). This implies that home prices improved in the last few weeks of June and, given firm market conditions, the burgeoning uptrend likely continued into 3Q17. 
    • Second, sales volumes and take-up rates in the primary market further strengthened over Jul and Aug 2017. Total new home sales in these two months increased 35% YoY to 3,672 units while the take up rate (total sales/total launches) also improved to 193% from 131% over the same period last year. The total number of units that are launched and unsold in the market has also fell from 5,828 units as at end Jun 2017 to 4,294 units as at end Aug 2017. 
    • Finally, our channel checks show that price expectations of developers and home sellers in the secondary market have risen over the last few months. Prices at new launches have similarly moved up; to illustrate, the median price of units sold at Symphony Suites at Yishun, which has been selling steadily through the last few months, increased from S$1,023 psf in Jun 2017 to S$1,035 psf in Jul 2017 and finally to S$1,071 in Aug 2017.


Forecasting SG home prices to be flat in 2017 and increase 3% - 8% in 2018 

  • We forecast for Singapore home prices to be mostly flat in 2017 and to appreciate 3% - 8% in 2018, as the rental market begins to pick up and macro-economic conditions remain firm.
  • Maintain an OVERWEIGHT rating on the property sector. 
  • Our top picks are 
    • City Developments [Rating: BUY, Fair Value Estimate: S$12.39], 
    • UOL Ltd [Rating: BUY, Fair Value Estimate: S$9.01] and 
    • Wheelock Properties (SG) [Rating: BUY, Fair Value Estimate: S$2.27].




Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2017-09-28
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 12.390 Same 12.390
BUY Maintain BUY 9.010 Same 9.010
BUY Maintain BUY 2.270 Same 2.270



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