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
■ 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:
i) waterfront living,
proximity to an existing/future Mass Rapid Transit (MRT) station, and
close proximity to a renowned primary school (see Figures 2 and 3).
■ 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
■ 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
Labels: CapitaLand, Property Sector