Property Development & Inventory - CGS-CIMB Research 2021-09-15: Slower August Home Sales

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

Property Development & Inventory - Slower August Home Sales

  • Aug home sales declined 3.4% y-o-y and 23.5% m-o-m to 1,215 units.
  • Year-to-date sales volume remains robust, underpinned by active buying interest.
  • Reiterate sector Overweight on valuations. Sector top picks: City Developments (SGX:C09) and UOL Group (SGX:U14).

August home sales impacted by tighter restrictions

  • Aug 2021 home sales came in at 1,322 units, or 1,215 units excluding Executive Condominiums (ECs). Excluding ECs, volume transactions were 3.4% lower y-o-y and 23.5% below Jul 2021 level, impacted by heightened COVID-19 restrictions. The sales rate continued to outpace new launch volumes in Aug.
  • The top selling project for the month was Watergardens at Canberra, accounting for 22% of Aug’s volume sales. Other top selling projects for the month include Normanton Park, The Florence Residences and Midwood.
  • Outside Central Region (OCR) projects made up 59% of monthly volume transactions, followed by city fringe projects with 28% while projects in the Core Central Region (CCR) accounted for the balance 13%.

8M21 transactions make up 78-85% of our FY21 forecast

  • Transactions in the first eight months of 2021 totalled 9,407 units, up 48% y-o-y and made up 78-85% of our full-year expectation of 11,000-12,000 units.
  • Meanwhile, according to Singapore Real Estate Exchange (SRX) data, the estimated resale transactions were 4.9%/40.5% higher m-o-m/y-o-y, with 1,860 units changing hands. Demand was underpinned by the still-low interest rate environment, in our view.

Private home prices improved modestly m-o-m in August

  • According to SRX, private resale home prices improved 0.5% m-o-m in Aug, led by higher prices in CCR and OCR, and 6.4% higher from the end-2020 level. With demand outlook still brisk, we maintain our expectation of 5-7% growth in home prices in 2021F. We anticipate prices to stay supported by continued buying interest.
  • Overall, we expect prices to pace the 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 a strong balance sheet 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.
  • Potential 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 2021-09-15
SGX Stock Analyst Report ADD MAINTAIN ADD 8.970 SAME 8.970