Property Development & Inventory - CGS-CIMB Research 2021-10-15: A Quieter September

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

Property Development & Inventory - A Quieter September

  • September 2021 monthly home sales declined 37.2% y-o-y and 31.4% m-o-m.
  • Year-to-date sales volume remains robust, amid moderated price appreciation.
  • Reiterate sector Overweight on valuations. Sector top picks: CIT and UOL.

Lower September monthly home sales

  • September 2021 monthly home sales came in at 1,296 units, thanks to the launch of Parc Greenwich Executive Condominium (ECs). Excluding ECs, private home sales amounted to 834 units, 37.2% lower y-o-y and 31.4% below Aug 21 level, on the back of a low number of new units launched.
  • The sales rate in September continued to outpace new launch volumes, with only 210 new units offered. The best-selling projects in the month were Normanton Park and Parc Clematic, while in the Core Central Region (CCR), Leedon Green and Fourth Avenue Residences also saw decent sales.
  • Outside Central Region (OCR) projects made up 42.7% of monthly volume transactions; city fringe projects (Rest of Central Region, RCR) made up 37.2% of sales; while projects in the CCR accounted for another 20.1% of volume sales.

9M21 primary and resale transaction volume was higher y-o-y

  • Transactions in the first 9 months of 2021 totalled 10,241 units (+33.2% y-o-y) and made up 85-93% of our full-year expectations of 11,000-12,000 units.
  • Meanwhile, according to Singapore Real Estate Exchange (SRX) data, the estimated resale transactions was 3.8% lower m-o-m, but still 35.9% higher than a year ago, with 1,736 units changing hands.

Private home prices up q-o-q but at a moderated pace

  • According to URA flash estimate, private home prices rose 0.9% q-o-q in 3Q21, underpinned by stronger landed homes and condo prices in the RCR locations. This translated into a 5.1% price appreciation for 9M21.
  • In the secondary market, September 2021 resale home prices were higher 1% m-o-m and 8.9% y-o-y, with better showing across all three regions.
  • With demand still remaining brisk, we maintain our home price expectation for 2021F at +5% to +7%. We anticipate prices to stay supported by continued buying interest and to pace economic recovery.

Reiterate sector Overweight

  • Developers’ valuations still look inexpensive to us, trading at a 45.5% 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).
  • Sector re-rating catalysts: good sell-through rates for new launches.
  • Downside risks: faster-than-expected interest rate hikes and property cooling measures that could dampen demand for housing.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-10-15
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