Singapore Property - DBS Research 2017-05-16: Strong Sales Momentum Continues

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Singapore Sector Outlook Property Developers Stocks CAPITALAND LIMITED C31.SI CITY DEVELOPMENTS LIMITED C09.SI UOL GROUP LIMITED U14.SI FRASERS CENTREPOINT LIMITED TQ5.SI

Singapore Property - Strong Sales Momentum Continues

• Strong sales momentum for second consecutive quarter, mostly from new launches.
• Secondary sales posted second highest volumes after a record in Mar 2017, mostly in central region.
• Potential relaxation of land supply soon? 

Apr 2017 recorded third highest primary sales since 2014 with c. 2,000 units sold. 

• Despite lower new launches (-25% y-o-y), primary sales in Apr 2017 rose 49% y-o-y, as private homes sales doubled while Executive Condominiums (ECs) fell 32%. However, this was 18% q-o-q lower compared to the record high sales achieved in Mar 2017, a level not seen since 2014. 
• As expected, sales were largely from new project launches such as Seaside Residences (419 units) and Artra (126 units), while sales on existing projects improved, such as Sol Acres (EC; 122 units), Parc Riviera (90) and Commonwealth Towers (85) which were among the top 5 best sellers.

Strong secondary private homes sales (+37%); second highest after Mar 2017 record high. 

• Similarly, secondary transactions in Apr 2017 grew 34% y-o-y largely from private homes (+37%) while EC sales fell 33%. Secondary sales were largely in the Central region with the top 4 projects listed as Pollen & Bleu (34 units by UIC / Singland), Gramercy Park (13 units by City Developments), Leedon Residence (12 units by Guocoland), and One Balmoral (11 units by Hong Leong Holdings). 
• Total sales (primary + secondary) grew 44% y-o-y (private: +75%; EC: -32%).

Will euphoria continue in 2H17? Potential increase in land supply? 

• We have seen positive sentiment returning to the property market as shown in the record sales (primary + secondary) in the last two months. 
• Property developers are bringing forward their new launches to catch the ‘euphoric’ wave, however, we note that 1Q17 property price index (PPI) was still on a downtrend (though it may not have incorporated the full impact from the relaxation of property measures), and new property launches are likely to taper off in 2H17. 
• With strong sales volume and dwindling residential supply, the government may increase land supply soon to prevent potential overheating. We continue to track sales volume and believe sustainable strong volumes are a prelude to a recovery in property prices.

Developer picks. 

• While most Singapore developers have rerated following the positive sentiment in the Singapore property market, our top picks are UOL Group and Frasers Centrepoint Ltd, as beneficiaries to the potential relaxation of property measures in Singapore.

Rachel TAN DBS Vickers | Derek TAN DBS Vickers | http://www.dbsvickers.com/ 2017-05-16

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