Singapore Property - Maybank Kim Eng 2017-07-10: REDAS Seminar Sound Bites

Singapore Property - Maybank Kim Eng 2017-07-10: REDAS Seminar Sound Bites Maintain POSITIVE Singapore Property Sector S-REITs

Singapore Property - REDAS Seminar Sound Bites 


  • We joined the Real Estate Developers’ Association of Singapore’s (REDAS) Property Market Update Seminar 2017 held on 7 Jul 2017, together with consultants and other industry participants. 
  • Contrary to a more cautious stance from the REDAS’ President in his opening address, market sentiment has improved significantly YTD, helped by strong system liquidity, and robust (record) bids in recent government land tenders. These themes, we believe, together with the abating supply across the various subsectors and supported by new economy demand drivers, continue to reinforce the investment theses for the developers and S-REITs
  • Our large-cap BUYs remain CDL, UOL, CCT, KREIT, AREIT and MINT.

Implications of strong capital flows 

  • Strong capital flows and their implications to Singapore’s property market were a recurring theme during the seminar. Developers lament the aggressive land bids by foreign developers that have priced out local players. Despite keen participation in recent land tenders, there can only be one winner for a site. This leaves a large amount of capital on the sidelines waiting to be deployed into the next land parcel. 
  • Given relative value and implementation of stamp duties on foreign homebuyers in other markets, consultants flagged the potential return of foreign homebuyers in Singapore. Consultants highlighted that strong liquidity has led to a trend of compressing cap rates for commercial properties across major markets with investors now ranking Australia and Japan as their favoured investment destinations.

Consultants flagged a rebound in office rents 

  • Interestingly, consultants highlighted that office rents have already started to rebound in 1H17. Nonetheless, they caution that subsequent rent hikes will be constrained by stronger supply in 2021 from the potential office supply from the redevelopment of Golden Shoe and Central Boulevard site. They see relative value in Singapore’s occupier market with annual office occupancy cost of SGD102 psf roughly half that of Hong Kong.

Moving beyond ‘disruptions’ in retail, hospitality 

  • There was wide discourse on disruptive influences (ecommerce, ‘sharing economy’) on the retail and hospitality segments, with consultants open-handedly sharing on new concepts in mall design (experiential/visual enhancements, museum-retail hybrids, integrated logistic services), ‘seamless’ shopping, and proliferation of ‘capsule’ hotels. 
  • Key findings from a 2017 retailer survey — while 44.2% (33.3% in 2016) acknowledged the importance of developing and maintaining an online sales channel, 86.5% (90.5% in 2016) still considered the presence of physical stores as crucial to operations — reinforce the relevance of traditional ‘bricks and mortar’ models. 
  • Meanwhile CBRE remains optimistic on hospitality, and forecasts hotel RevPARs will recover in 2019 as supply tapers off.

Derrick Heng CFA Maybank Kim Eng | Chua Su Tye Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2017-07-10
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 12.050 Same 12.050