Singapore Property − All Signs Pointing To Regulatory Relaxation


The sharp drop in units sold in May suggests ongoing dampening home-buying sentiment, which could prompt the government towards demand-side policy easing after the massive scale back in supply. Watch out for possible early elections in end-15 and demand-side policy easing in 1H16 post a 10-15% correction in property prices. We remain OVERWEIGHT on the property sector as expectations of demand-side policy easing lift developers’ depressed valuations. CapitaLand and Wing Tai are our top picks.

WHAT’S NEW
The Urban Redevelopment Authority’s (URA) monthly developer sales for May indicate of 638 units (-43.2% mom, -57.1% yoy) were sold, excluding executive condominiums (ECs), amid the launch of 499 units (-62.9% mom, -72.6% yoy).

ACTION
The sharp drop in units sold in May suggests ongoing dampening home-buying sentiment, which could prompt the government towards demand-side policy easing after scaling back on supply. We remain OVERWEIGHT on the property sector as expectations of demand-side policy easing lifts the depressed developers’ valuations. Wing Tai and CapitaLand are our top picks.

ESSENTIALS
May’s figures failed to emulate April’s impressive form as developers held back on launches. Flavours of the month were North Park Residences (59 units sold at S$1,397psf) and Botanique at Bartley (94 units sold at S$1,292psf), accounting for about 24% of total sales in May (vs 65% in April with combined 740 units sold alone exceeding May figures). The sharp drop in May sales is due to the absence of new launches as developers held back due to continued weak home-buying sentiment.

Government scaled back on supply to be followed by demand-side policy easing. With rising risk of oversupply from the high upcoming supply of 94,000 units in the pipeline, the government has further cut total GLS supply by 11% hoh to 7,285 units, a level not seen since 2010. The diminishing confirmed list shrank further to 2,130 units, a decline of nearly 74% from its peak in 2H10 (8,135 units). Public housing supply was also cut by nearly 69% to an all-time low of 520 confirmed units. We believe the supply side scaleback is to avert a drastic price correction. The risk of overshooting the desired correction in property prices amid prolonged weak home-buying sentiment may prompt the government to look into demand-side policy easing next.

Possible early elections post SG50 celebrations may light the fuse towards policy easing. It is likely that elections could be called in end-15, timed to coincide with the conclusion of the nation’s 50th anniversary. We believe the newly elected government could look into demand-side policy easing towards the middle of next year after a 10- 15% correction in property prices. Recall that Singapore has among the world’s highest home ownership rates at over 90% and a drastic correction may result in alienating its voter base. We believe the government will likely start with easing of the onerous transaction charges (buyers stamp duty and sellers stamp duty). (Read Report)

Read Related Reports
Singapore Property - New home sales plodding along
Tuesday, 16 June 2015
- DBS Group Research
The Real Estate Pulsebeat: May 2015 homes sales – Low New Launches Bummer
Tuesday, 16 June 2015
- RHB Research

Source : UOB KayHian Research

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