SG Residential Sector - OCBC Investment 2017-06-14: Resale Prices Rebound In May

SG Residential Sector - OCBC Investment 2017-06-14: Resale Prices Rebound In May Singapore Property Residential Sector CAPITALAND LIMITED C31.SI WING TAI HLDGS LTD W05.SI WHEELOCK PROPERTIES (S) LTD M35.SI

SG Residential Sector - Resale Prices Rebound In May

  • May resale prices and volume up.
  • Led by CCR and RCR segments.
  • En-bloc market could drive prices.

Resale prices rebound led by high-end and mid-tier segments 

  • According to flash estimates from SRX Property, resale prices of non-landed private homes rose 0.4% MoM in May 2017. 
  • The rebound was strongest in the high-end and mid-tier segments, as resale prices in the core central region (CCR) and rest of central region (RCR) rose 1.1% MoM, while mass market resale prices (outside central region or OCR) dipped 0.4% MoM. 
  • Transaction volumes similarly improved in May with 1,235 non-landed private homes sold – up 17.4% MoM over April 2017 and a whopping 57.7% YoY over May 2016. 
  • Through our channel checks, buyer sentiments have clearly improved after the latest tweaks to the property curbs in March 2017 where some measures relating to the SSD and the TDSR were relaxed. 
  • We believe these changes were, on a net basis, supportive of the physical market and continue to forecast for general home prices to reach an inflection point by 2018.

Collective sales market could stoke general recovery 

  • While the physical oversupply situation in the domestic residential market will balance out only in 2018 and after, we recognize that an increase in collective sale transactions could bring forward the recovery in home prices as developers move quickly to replenish their land banks, which for many now lie at multi-year lows. 
  • The general dynamics of collective sale transactions are systemically positive for the market – under a typical en-bloc sale, homes are taken out of the physical supply for an extended period (as the old development gets demolished and redeveloped over four to seven years) while previous home owners, flush with cash and credit headroom, often re-enter the market rapidly to re-establish their exposure. 
  • Just earlier this month, we saw MCL Land’s en-bloc acquisition of Eunosville for S$765.8m, which including an estimated S$194m differential premium translates to a bullish S$909 psf ppr. This came on the heels of the Oxley-led consortium’s en-bloc acquisition of Rio Casa for S$575m and brought the year-to-date total to S$1.5b – already past the S$1.0b and S$380m annual totals seen in 2016 and 2015, respectively. 
  • We maintain an OVERWEIGHT rating on the property sector and our top picks are CapitaLand [Rating: BUY, Fair Value: S$4.07], Wing Tai [Rating: BUY, Fair Value: S$2.37] and Wheelock Properties (SG) [Rating: BUY, Fair Value: S$2.27].

Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2017-06-14
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