Authorities are expecting developers’ demand for new landbank to soften, as evidenced by a 5-year decline in housing units. The increasing number of unsold inventories may also be the reason why authorities are cutting back on supply, so as to avoid a future oversupply situation. Despite the lacklustre market, we identify two sites likely to attract high interest due to their locations. Maintain NEUTRAL, with CapitaLand our Top Pick as it is less exposed to the listless local market.
■ What has been announced by the authorities?
The Ministry of National Development has announced the details of the 2H15 government land sales (GLS) programme. Overall, four sites – which can yield 2,130 housing units, including 520 executive condominium (EC) units – will be included in the confirmed list.
■ The authorities expect a cool property market to persist
We note that the number of housing units for the GLS programme has been declining over the past five years (see Figure 1). For the 2H15 programme, housing units under the confirmed list have fallen 29.5% vis-à-vis the previous initiative. This is the largest decline in the past five years. We believe this shows that the authorities are expecting the property market to remain sluggish, striking a healthy balance between buyers and sellers.
■ What is trending among the developers?
We tracked developers’ bidding preferences over the past one year and found that they are typically more interested in the following land parcel features:
■ Expect developers to bid aggressively on these selective land sites
Under the confirmed list in the 2H15 GLS Programme (see Figure 4), we expect developers’ interest will be high for Alexandra View and Siglap Road. This is because these sites are next to the Redhill MRT Station and a waterfront living area respectively. However, the other two sites at Clementi Ave 1 and Yio Chu Kang Road may not gather many bids from developers. Therefore, we expect the developers to bid cautiously in the challenging market.
■ What can investors do from here?
In the midst of such a challenging market, we favour property counters with high regional exposure. Our Top Pick – CapitaLand (CAPL SP, BUY, TP: SGD4.20) – has a mere 9% FY15 RNAV exposure to the Singapore residential segment but higher exposure to retail/office/mixed developments. We reiterate that the 3-party Catch-22 situation amongst homebuyers, developers and authorities should still persist. As we expect a listless property market to continue in 2015, we project new homes sales (including ECs) to hit 6,000-9,000 units and ECs to hit below 2,000 units. We forecast for property prices to drop 6-10% pa in 2015 – they have already dropped 3.9% YoY as of 1Q15. (Read Report)
Source : RHB Research