Singapore Property Sector - DBS Research 2017-06-30: 2H17 GLS ~ More Land For Developers

Singapore Property Sector - DBS Vickers 2017-06-30: 2H17 GLS: More Land For Developers Government Land Sale 2H17 Singapore Property Developers UOL GROUP LIMITED U14.SI CITY DEVELOPMENTS LIMITED C09.SI

Singapore Property Sector - 2H17 GLS: More Land For Developers

  • As expected, government adds new land sites in 2H17 GLS by 9% h-o-h.
  • Confirmed list up 22% h-o-h; implying government remains keen to prevent an “overheating” in land prices.
  • Positive signals for Singapore property.
  • Top picks are UOL and City Dev.

What’s New 

Government injects more supply in 2H17 GLS on strong property sales. 

  • Following the ongoing robust land tenders (close to 4,000 residential units land tenders were awarded in 1H17, +63% h-o-h), the government has increased 2H17 GLS (bi-annual review list) by 9% h-o-h to slightly more than 8,000 residential units. 
  • The last time the government released more than 8,000 units was in 1H15 of which 4,000 residential units were awarded then.

Bigger replenishment to confirmed list to prevent potential overheating. 

  • The confirmed list increased 22% h-o-h to 2,800 residential units while the reserve list was up 3% h-o-h at 5,300 units. The implies that the government is injecting supply in the immediate future amidst robust demand and dwindling unsold stock to prevent the property market from overheating, as we have been highlighting.

Replenishing Beach Rd commercial site with Sengkang Central mixed development; no new hotel sites. 

  • With the recent launch of the Beach Road commercial site (88,000 sqm GFA), the government added another mixed development site at Sengkang Central (next to Buangkok MRT station) with 13,300 sqm commercial GFA (estimated bus interchange facilities of 10,000 sqm) and 700 residential units. 
  • Woodlands Square mixed development site saw the retail cap reduced to 3,000 sqm from 8,000 sqm in 1H17 (vs 55,000 sqm commercial GFA) while residential units increased by 40 units to 315 units. There are no new sites for hotel/hospitality.

More new sites at the central region could garner keen interest. 

  • Interestingly, we saw that the government has released more sites in the central region which we believe would garner strong interest among the developers, e.g. new land site in the confirmed list is Handy Road (close to Plaza Singapura), and in the reserve list are Cuscaden Road (Orchard Boulevard's upcoming MRT) and Silat Avenue with some 450sqm of retail space (Tanjong Pagar). 
  • Given robust sales in the CCR in recent times and limited new supply in the CCR region, we expect keen interest for these land sites.

Government says “cooling measures remain necessary”...

  • Shortly after the release of 2H17 GLS, Monetary Authority of Singapore (MAS) Managing Director, Mr Ravi Menon said “It is not time yet to ease the cooling measures. They remain necessary,” following the release of the MAS annual report, as reported by Business Times and Straits Times.
  • “Adjustments made to property cooling measures earlier this year do not signal the start of an unwinding of those measures...property cooling measures remain ‘necessary’ as the Singapore residential property market continues to moderate and recent project launches have seen relatively good take-up”, as reported by the media.

...we remain positive on the property sector.

  • Nevertheless, we remain positive on the Singapore property market on the positive sentiment, continued support from the government at these levels as they manage and monitor the property market, prolonged low interest rates and potential positive spillover impact from cooling measures implemented within the region.
  • With increase in land supply, we believe that these would be positive catalysts for the developers if they are successful in replenishing their land banks. However, given the increased competition from both local and foreign developers, we believe land prices will remain lofty. 
  • In addition, developers which had added to their land banks ahead of the current increased competitive climate will have an advantage over the rest.
  • Our top picks among the Singapore developers are UOL and City Dev.

Rachel TAN DBS Vickers | Derek TAN DBS Vickers | http://www.dbsvickers.com/ 2017-06-30
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