Singapore property market update Feb 2019

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The following are snippets of reports compiled from major brokers on the performance of the Singapore property market for Feb 2019

Credit Suisse

According to Credit Suisse, private primary sales (ex-EC) in February totalled 455 units, with no new launches taking place. Mar-2019 saw 6 new launches across the first two weeks. 2M19 primary sales of 891 units were down -2.2% YoY, as overall take-up rates remain low.

Sales in Feb 2019 were led by a project launched in 2018 namely Serangoon/Hougang (Affinity at Serangoon, Riverfront Residences). This project had stable ASPs, ahead of Florence Residences’ launch (2 March weekend). Credit Suisse also notes implied returned units ranging from 14% to 37% on Jan-2019 launches.

Mar-2019 launches to date have witnessed low volumes, with limited ability to price ahead of the market. Florence Residences sold 60/1,410 units over its launch weekend, while competing new launches along the East Coast region saw single digit volumes.

Credit Suisse reiterates flat 2019E property prices amidst high supply and cautious buyer attitude. UOL is preferred, given a wide margin of safety in their residential. projects, attractive valuations (0.58 P/B, 49% discount to RNAV) and the near-term catalyst of UIC’s potential delisting.

JP Morgan reports Feb-2019 developer sales remaining resilient at 455 units (+4% MoM/+18% YoY), despite the absence of new launches over the Lunar New Year. Existing projects benefitted from interest over the Cross-Island Line, higher agent commissions and selectively lower median pricing. A surge in March home sales is anticipated, led by multiple launches across different segments, and from a spillover in interest to existing projects.

Developers are up 11.8% YTD, outperforming the FSSTI (+4.2%). Our top pick is CIT due to its substantial Singapore landbank and on improved recurring income.

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Sales momentum rotated back into mass market projects such as Affinity at Serangoon (88 units sold, S$1,494 psf), which was the top-seller, and Riverfront Residences (49 units, S$1,322 psf), both of which are by Oxley-led consortiums. Mid-end projects such as UOL’s The Tre Ver (48 units, S$1,574 psf) and Logan Property’s Stirling Residences (31 units, S$1,777 psf) were the next best sellers. Buying interest was concentrated in the mass (51%) and mid (39%) markets, with high-end sales at 10%.

Several projects saw lower median prices MoM, including at The Tapestry (S$1,270 psf, -4.4% MoM). The Garden Residences (S$1,509 psf, -3.7% MoM) and Parc Botannia (S$1,311 psf, -5.3% MoM), which could be attributable to changes in unit mix or from selective discounts.

Sales momentum will accelerate in March across multiple launches including Logan Property’s The Florence Residences (1,410 units) in Kovan, Oxley’s 1953 (58 units), City Developments’ Boulevard 88 (154 units) and Sustained Land’s One Meyer (66 units). Sim Lian’s Treasure at Tampines (2,203 units), the largest residential development in Singapore, has also begun previews, with the launch slated for later in March.

BAML

Private home presales data in Feb 2019 continue to reaffirm BAML’s flattish view on the physical market. Feb presales volume rose yoy with the YTD run-rate tracking that of YTD 2018. Overall pricing remained firm. The sell-through rate is down sharply from last year but has not fallen off a cliff, in line with our industry view. BAML estimates that while the level of lapsed Option-to-Purchase (OTP) has picked up compared periods of pre-property curbs, the trend appears to have eased considerably vs. 2H18. BAML keeps their residential price assumption unchanged at +2.5% for 2019 on flat volume. At this point, there is little risk of price/volume swings in either direction. Buy ratings on developers are maintained with unchanged estimates on attractive valuations, with the sector at >40% discount to RNAVs (-1s.d below mean), CAPL and CIT are the top 2 developer picks.

Total Feb sales (excluding EC) were 455 units, up 18% yoy and up 4% mom. Total sales YTD inched have down -1.3% vs yoy, but overall are tracking 2018 volumes on a seasonally adjusted basis. Demand for units in Feb was boosted by the government’s announcement of the new Cross Island MRT Line, benefitting projects such as Affinity and Riverfront Residences. The 2 projects saw the most number of units sold in Feb, moving 88 units and 49 units, respectively.

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The sell-through rate (presales vs. new units launched in the month), while still healthy at 0.8x, declined sharply from the 2.45x in Feb 2018. Clearly, saleable resource is building up at a time when home demand is more selective. The offset is that unsold inventory (currently at c.36k units) should peak this year as land-banking activities drop off. We believe most developers have time on their side to stagger launches in phases.

Affinity and Garden Residences, both projects in similar locations, saw median prices decline -5.7% and -9.4%, respectively, from when they first launched in June18, before the property curbs (Affinity: 67% of launched units sold, Garden: 61%). Prices were flat for projects launched after the curbs, such as Parc Esta (c.S$1.7kpsf) and Whistler Grand (c.S$1.35kpsf), with100%, and 88% of launched units sold, respectively.

Outside Central Region (OCR) and Rest of Central Region (RCR) made up 80% of the sales YTD, similar to last year. That said, demand in CCR appears stronger, with 176 units sold or 2.2x yoy. Prices stayed resilient with Fourth Ave Residences (CCR) having sold 77 units (46% of units launched) at an average price of c.$$2.4kpsf by end-Feb after launch in mid-Jan. We visited the soft launch of Boulevard88 (CityDev) on 8 Mar-19 and estimate that around 10 units were sold on the day (out of 154) at >S$3.3kpsf.

BAML’s proprietary analysis shows potentially around 70 lapsed OTPs (option to purchase) in 2M19, slightly higher than our estimate of c.50 lapsed OTPs in 2M18. This current run-rate of 35 lapsed OTPs per month is considerably below an estimate of c.120 lapsed OTPs per month on average post cooling measures in Jul-Dec 2018. The downdraft is that lapsed OTPs have risen, a likely indication of buyers needing more time to secure financing given the lower LTV limits and higher stamp duty rates.

Morgan Stanley

February home sales volumes +21% YoY and +5% MoM. Home sales volumes were +21% YoY but remained subdued at 455 units due to seasonally slow period during Chinese New Year in February. There were no new launches in the month but Oxley’s 1052-unit Afiinity at Serangoon released another 250 units. It was the top seller in the month selling 88 units at a median price of S$1.5k psf, the announcement of Cross-Island MRT line station driving the sales in the project.

From the other existing projects, UOL’s 729-units The Tre Ver sold 48 units at S$1.57k psf, Oxley’s 1,472-unit Riverfront Residences sold 49 units at S$1.3k psf and Logan+Nanshan’s 1,259 unit Stirling Residences sold 31 units at S$1.78k psf.

Outlook: Morgan Stanley expect volumes to pick as a number of projects are lined up to launch in March. Logan Property’s 1410-unit The Florence Residences sold 60 units at S$1.4kpsf on its March 2-3 launch weekend. Sim Lian’s 2203 unit Treasure at Tampines opened for preview today and is expected to start sales by late March, priced at S$1.28kpsf. This will be the biggest condo in Singapore by unit count. There were three other smaller projects launched last week namely CDL’s 154-unit Boulevard 88 (pricing starts from S$3.3kpsf), Sustained Land’s 66-unit One Meyer (sold 9 units) and Oxley’s 58-unit 1953 (19 sold at S$1.9kpsf).

According to the Ministry for National Development, HDB is eyeing relaxation in CPF loan rules on the purchase of older HDB resale flats which is scheduled for implementation in May. We believe this could boost HDB resale values and support upgrader demand for private condos, supporting our case for 5% growth in private home prices this year. Resale condo prices are already showing early signs of recovery in February (Exhibit 1).

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From CIMB

Feb 2019 primary home sales came in at 455 units (457 units including executive condominiums), up 4.4% on a month on month basis and 18.5% higher from a year ago. Against 596 units released into the market, this represents a 76% take-up rate. The bulk of the sales came from projects such as Affinity at Serangoon, The Tre Ver and Riverfront Residences. 

 This brought Jan-Feb sales to 891 units, marginally down from the same period in 2018. Suburban sales made up half of these transactions while city fringe projects accounted for another 39% of sales. Although transaction run rates have so far been tracking below our annual expectation of 9,000-10,000 units for 2019, we maintain our forecasts as we expect more launches during the rest of the year.

According to SRX Property Price Index, resale prices for non-landed properties in Feb 19 ticked up 0.5% mom but were still 0.9% lower from the peak in July 18. We expect residential prices to remain competitive in the face of a large number of potential new launches. Hence, we retain our expectation for private home prices to fluctuate between 0% and +3% in 2019.

Developers’ share prices are at an average 48% discount to RNAV, midway between discounts of 1 s.d. to 2 s.d. to long-term mean. Current valuations are inexpensive, in our view. We expect property stocks to trade range-bound while awaiting fresh sector catalysts, such as an improvement in sell-through rates or sustainable take-up rates. We like diversified companies such as CIT, UOL and CAPL, given their diversified income sources and high recurring income base. Downside risks include economic slowdown which could dampen buying appetite for big-ticket items such as housing.

Citi

Feb-19 primary sales saw marginal improvement of 4% MoM to 455 units despite the traditionally quieter Chinese New Year period, which was mainly driven by re-launches of previously-launched projects. Interestingly, Jan-19’s revised numbers were higher by 3 units despite URA making adjustments to reflect lapsed options to purchase (OTP). With developers continuing to rush their launches this year without adjusting downwards their price expectations, we think sales could potentially hit only ~7,500 units (run-rate of ~600 units/month; average of volumes over the post-TDSR period from 2014-16), which signifies a 15% YoY decline and less favorable for resi-focused developers. Although there have been murmurs of some policy relaxation, we think it remains early given that prices have not really fallen much since Jul-18, given developers’ low urgency to cut prices at this stage and wide bid-ask spread in the secondary market. Our top pick within Developers remains CapitaLand, given its more diversified asset profile and attractive valuations.

Feb-19 primary sales up 4/5% MoM (+18/-4% YoY) to 455/457 units excluding/including executive condominiums (ECs). No new projects were launched during the traditionally quiet Chinese New Year period (week beginning 4-Feb-19), with the entire 596 launched units (+20% MoM) coming from 8 previously-launched developments, which incidentally also were the top selling projects. These include Affinity at Serangoon (250 units launched; 88 units sold; S$1,494 psf), Riverfront Residences (70 units launched; 49 units sold; S$1,322 psf) and The Tre Ver (50 units launched; 48 units sold; S$1,574 psf). 51% of volumes were mass market. 2M19 primary sales of 891 units (-35% YoY) represented just 10% of 2018 figures.

Secondary market worse, with volumes down 25/67% MoM/YoY to 461 units. 2M19 secondary sales of 1,077 units (-12% YoY) accounted for 10% of 2018 data.

More options, less take-up. Overall initial take-up (i.e. within 1st weekend) of the 9 new launches YTD have been very weak at 8%, compared to 20% for the launches in 2H18 after Jul-18’s cooling measures. We think this reflects buyers’ increasing awareness of the sizeable number of options they have, rising mortgage rates (+60-100bps since May-18) and higher land cost of launches. While these 3 factors are mostly irreversible, we think the only way for volumes to improve is for developers to reduce prices, which we believe is still early at this stage of the cycle. Key launches over the next few months include Treasure at Tampines, Amber Park, Sloane Residences and Riviere

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