Property Development & Inventory - CGS-CIMB Research 2021-08-17: Brisk Home Sales In July 2021

Property Development & Inventory - CGS-CIMB Research | SGinvestors.io UOL GROUP LIMITED (SGX:U14) CITY DEVELOPMENTS LIMITED (SGX:C09)

Property Development & Inventory - Brisk Home Sales In July

  • July home sales were up 46.7% y-o-y and +82.2% m-o-m to 1,589 units.
  • We raise our 2021F homes sales projection to 11k-12k and lift our home price expectations to +5-7% from end 2020
  • Reiterate sector Overweight on valuations. Sector top picks: City Developments (SGX:C09) and UOL Group (SGX:U14).

Strong mom recovery in July home sales

  • Jul 21 monthly home sales came in at 1,589 units (1,744 units, excluding Executive Condominiums (ECs)). Excluding ECs, volume transactions were 46.7% higher y-o-y and 82.2% above Jun 21 level, thanks to the launch of Pasir Ris 8, which met with an 86% take-up rate and accounted for 26% of July sales.
  • The sales rate in July continued to outpace new launch volumes. Other top selling projects for the month include Normanton Park, Midwood and Sengkang Grand Residences.
  • Outside Central Region (OCR) projects made up 64% of monthly volume transactions; city fringe projects made up 28% of sales; while projects in the Core Central Region (CCR) accounted for another 8% of volume sales.

Raising our 2021F new home sales projection to 11k-12k…

  • Transactions in the first seven months of 2021 totalled 8,192 units, up 60.6% y-o-y and made up 81-91% of our full-year expectations of 9,000-10,000 units. As such, we raise our 2021F new home sales projections to 11k-12k.
  • Based on planned launches highlighted by property agencies, there is potentially another 13 new private condominium and EC projects to be launched in the rest of 2021F and another 19,384 of unsold units (at end-2Q21) in the pipeline.
  • Meanwhile, according to Singapore Real Estate Exchange (SRX) data, the resale market picked up in July, with 1,817 units changing hands, which is 22.5% higher m-o-m and up 68.2% y-o-y, due to active transactions in the Outside Central Region. Demand was underpinned by the still-low interest rate environment, in our view.

…and revising our home price performance expectation to +5-7%

  • According to URA 2Q21 price index, private residential prices rose 0.8% q-o-q in 2Q21, bringing 1H21 increase to 4.1% vs end-2020.
  • Similarly, SRX reported that private resale home prices improved 5.9% year-to-date July, from end-2020 level.
  • With demand outlook remaining brisk, we raise our home price expectation for 2021F to +5-7% from 0-5% previously. We anticipate prices to stay supported by continued buying interest. Overall, we expect prices to pace economic recovery as developers move inventory.

Reiterate sector Overweight

  • Developers’ valuations still look inexpensive to us, trading at a 46% discount to RNAV, close to 1 standard deviation below long-term mean discount. With the residential market still enjoying brisk transaction activity, we prefer developers with visible residential pipelines and strong balance sheets that would enable them to tap into any opportunities during this slower cycle.
  • Our preferred picks are City Developments (SGX:C09) and UOL Group (SGX:U14).
  • See peer comparison table for SGX listed property developer peers including Frasers Property (SGX:TQ5), GuocoLand (SGX:F17), Wing Tai (SGX:W05), Hongkong Land (SGX:H78) in report attached below.
  • Sector re-rating catalysts: good sell-through rates for new launches.
  • Downside risks: faster-than-expected interest rate hikes, and property cooling measures which could dampen demand for housing.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-16
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