Singapore Property - Maybank Kim Eng 2015-10-08: Impending price fall could set the stage for a lifting of measures

Singapore Property - Maybank Kim Eng 2015-10-08: Impending price fall could set the stage for a lifting of measures Singapore Property WING TAI HLDGS LTD W05.SI  HO BEE LAND LIMITED H13.SI  CAPITALAND LIMITED C31.SI  OUE LIMITED LJ3.SI  CITY DEVELOPMENTS LIMITED C09.SI 

Impending price fall could set the stage for a lifting of measures 

  • Government rejects developers’ appeal to extend project completion deadlines. We expect developers to lower asking prices soon. More pressure on home prices. 
  • But price falls may set the stage for a lifting of cooling measures in 2016. 
  • Maintain OVERWEIGHT on developers. 

Sector past the worst of policy tightening. 

  • Appeal rejected The Business Times reports that property developers’ call to the government to extend their project-completion deadlines has been turned down (report). Recall that the government implemented an additional buyer’s stamp duty (ABSD) on 8 Dec 2011 on residential properties at 10% of their purchase prices. It subsequently raised this to 15% on 12 Jan 2013. 
  • Unlike home buyers who need to pay the duty upfront, developers were given a remission on the land purchased as long as they complete and sell all units within five years. They would need to pay the duty with interest for the site if they fail to comply. 

Developers to lower prices? 

  • We believe that developers will start lowering their asking prices soon. Given a challenging market, development risks could increase as they approach their project deadline of five years. Using GLS sites sold since the implementation of ABSD, we estimate that 32 homes with project deadlines in 4Q16 remain unsold. This rises above 3,000 units for those with deadlines in 2017. As such, we expect further downward pressure on home prices, with the biggest downside for the mass market. 

Sets stage for lifting of measures 

  • We believe that this would set the stage for a lifting of property cooling measures in 2016. While a change in measures may not necessarily arrest home-price declines, we believe it could trigger a rebound in sales volume, removing a key overhang for developers. 
  • With our universe trading at a 48% discount to RNAV and 0.59x P/BV, we continue to see a favourable risk-reward tradeoff. Maintain OVERWEIGHT.


Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-10-08
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 2.25 Same 2.25
BUY Maintain BUY 3.05 Same 3.05
BUY Maintain BUY 3.95 Same 3.95
HOLD Maintain HOLD 1.92 Same 1.92
BUY Maintain BUY 11.25 Same 11.25


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