Singapore Property Market
Property Developer Stocks
CAPITALAND LIMITED
SGX:C31
UOL GROUP LIMITED
SGX:U14
CITY DEVELOPMENTS LIMITED
SGX:C09
GUOCOLAND LIMITED
SGX:F17
BUKIT SEMBAWANG ESTATES LTD
SGX:B61
HO BEE LAND LIMITED
SGX:H13
OXLEY HOLDINGS LIMITED
SGX:5UX
Singapore Property - Buying Opportunity
Housing recovery intact; remain POSITIVE
- With the demand-supply outlook still supportive of a housing recovery, we expect the recent home-price rally to continue and see buying opportunities during the current share-price weakness.
- Speculative buying is near its historical low while existing measures continues to ensure financial prudence amongst property buyers. As such, we see no need for further policy tightening.
- We attribute 5M18’s soft developer sales to a lack of new launches, not a sign of market weakness. We believe housing demand remains strong, going by healthy overall volumes, including secondary market transactions.
- Remain POSITIVE on the sector with UOL as our top pick among the large caps and GuocoLand among the mid-caps. Risks include a sharp rise in interest rates and property price falls.
- Sector benchmark CDL trades at 21% discount to RNAV vs parity in the early stages of a property upcycle.
Stocks & physical prices diverge
- Despite a 7% rebound in home prices YTD, developer stocks have shed 4%. With the demand-supply outlook still supportive of a housing recovery, we see this divergence as an opportunity to raise sector exposure.
- We forecast annual net supply of just 5,300 units for 2018-20E vs the market’s long-term average absorption of 11,400 units. Furthermore, replacement demand from the 6,000+ households displaced by en-bloc deals announced since 2017 will soak up a large part of this supply. Given this, we expect lower vacancy over the next few years.
Further tightening likely not necessary
- We see no need for further policy tightening. While the housing market is recovering, we believe it is not overheating.
- Sub-sales are near their historical low, at just 1.5% of transactions. Intact cooling measures implemented after GFC should continue to keep prices and exuberance in check.
- Lastly, we believe gradual increases in interest rates are natural dampeners for the market.
Soft sales not a sign of weakness
- URA reported that developers sold 1,121 private homes in May. This brought new-home sales to 3,431 units in 5M18, down 38% from 5M17. As we attribute the y-o-y drop to limited launches in the early part of 2018, we do not read it as a sign of market weakness.
- We believe housing demand remains strong, as evidenced by healthy overall volumes, including secondary market transactions. We maintain our new-home sales forecast of 12,000 units for this year, expecting a stronger 2H18 to provide re-rating catalysts.
Derrick Heng CFA
Maybank Kim Eng
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https://www.maybank-ke.com.sg/
2018-06-18
SGX Stock
Analyst Report
4.100
Same
4.100
10.850
Same
10.850
14.200
Same
14.200
3.000
Same
3.000
8.550
Same
8.550
SGX Stock
Analyst Report
3.300
Same
3.300
0.560
Same
0.560
