Maybank Kim Eng Research 2015-07-16: Singapore Property - Soft sales in June, rising inventory.

Soft sales in June, rising inventory 

  • Developers sold 375 private homes and 110 ECs in June. 357 in mass market, 79 in mid-range and 49 in the high-end. 
  • Botanique at Bartley topped the charts with 59 units sold. 
  • Review of cooling measures likely. Overweight Developers, we prefer Wing Tai (BUY, TP SGD2.37), Ho Bee (BUY, TP SGD2.75) and City Developments (BUY, TP SGD11.40). Mass market home prices have the greatest downside in our view. 

Soft sales figures in a quiet month 

  • Latest URA data showed that 375 private homes (down 42% MoM) and 110 executive condominiums (EC) (down 48% MoM) were sold by developers in June. 
  • Including the 110 EC units, 357 units were sold in the mass-market (Outside Central Region). 
  • The high-end (Core Central Region) and mid-range (Rest of Central Region) recorded sales of 49 and 79 units respectively. 
  • Botanique at Bartley (UOL) topped the chart with 59 units sold. 
  • Lakeville (HK Land) and The Panorama (Wheelock) were tied at second place with each selling 25 units. 
  • Leedon Residence (Guocoland) was the top seller in the high-end segment with 12 units sold. 
  • The highest unit price of SGD3,527 psf was achieved at Ardmore 3. 

Inventory count rose due to more ECs 

  • Driven by the addition of two EC projects - Brownstone (CDL JV) and Signature at Yishun (JBE) - unsold inventory rose 2.7% MoM to 25,970 units (20,731 private homes, 5,239 ECs). 
  • We reiterate our view that mass-market home prices have the biggest downside due to the rising inventory count. 
  • Of the 15 GLS sites sold that have yet to receive their sales permit, 11 are in the mass-market (c.4,800 units) and will aggravate the market surplus. 
  • The remaining four sites (c.2,150) are in the mid-range. 

Review of cooling measures likely, OW Developers 

  • We continue to Overweight Developers as falling home prices should give the government more room to review its property cooling measures. Furthermore, it will be cognizant that rising vacancy rates and the build-up in unsold inventory could drive a sharp fall in home prices as interest rates normalize. 
  • Hence, we expect some of these measures to be tweaked in the year ahead and expect developer stocks to react positively to it. 
  • Wing Tai (BUY, TP SGD2.37), Ho Bee (BUY, TP SGD2.75) and City Developments (BUY, TP SGD11.40) are our preferred stocks. 

(Derrick Heng, CFA)

Source: http://www.maybank-ke.com.sg