Maintain OVERWEIGHT. City Developments and Wing Tai are our key picks.
• The flurry of enbloc activity in the current enbloc sales cycle is on course to surpass the
2006/7 cycle in value terms. With limited options under Government Land Sales (GLS),
developers are turning to enbloc sales to replenish their depleting landbanks at surging
prices, and pricing in a 10-30% appreciation in residential property prices.
• Maintain OVERWEIGHT. While collective sales are poised to exceed that from the
2006/7 cycle, oversupply risk is under control. Displacement demand from en-blocers and
return of foreign buyers will be the key drivers for the property upcycle ahead. We remain
OVERWEIGHT with City Developments and Wing Tai being our key picks.
• Collective sales poised to exceed that from the 2006/7 cycle; oversupply risk is
within control. From 2016-18, collective sales transactions topped S$17.8b (~92th
percentile mark of the 2006/7 cycle; in terms of transactional value), even though the
cumulative units displaced are only at the 56th percentile of 2006/7’s cycle. During the
2006/7 enbloc sales cycle, 10,000 units were taken out, and twice the number of units had
been put back in the market. In the current 2016-18 cycle, approximately 5,900 units are
expected to yield a similar supply of around 20,600 in new developments (3.5x of units
displaced). The impeding supply of 20,600 units from enbloc sales is equivalent to two
years of new sales (based on the 10-year average new sales of 11,539 units p.a). In good
years (ie 2012), new sales could even mop-up 20,000 units in a single year, suggesting
that enbloc pipeline is well-within the market’s absorption capacity.
• Sales momentum remains strong; with transactions in 3M18 already reaching the 62th
percentile of 2017’s value. Unlike in the past cycles, there has been better understanding
of the enbloc process (ie which is more defined; case law decisions have been set out).
Homeowners are also decidedly united in moving fast, not wanting to miss this cycle. For
these reasons, the required 80% minimum consent is also achieved in less than three
months on average (compared to 8-12 months in previous cycles), adding momentum to
the current cycle.
• Front-loaded displacement demand; to fuel mid/high-end segment properties and
supress vacancies. During the 2006/7 enbloc cycle, around 10,590 units were taken out,
minting a similar number of millionaires seeking replacement properties. In the current
2016-18 ytd cycle, close to 5,900 units have been taken out. Although a part of the
displacement demand will be siphoned (ie those who cash out, and turn to HDBs or
leasing), we believe that the wealth effect will still see a majority upgrading to mid/-high
end resale properties and feed into the property upcycle. The en-bloc wave will also result
in around 5,900 units being demolished, bringing down vacancies in the near-term.
• Return of foreigner participation to boost mid/high-end property segment. Although
foreign purchases grew 33% yoy in 2017, they accounted for only 22% of the sales
volume volume in private residential market, as compared to 30/32% in the 2007/11
cycle). There is scope for Singapore to absorb potential capital inflow from foreign buyers
(ie typically dominated by the Chinese, Malaysians, Indians and the Indonesians). The
growth in foreign homebuying has been led by the Chinese, with their purchases growing
in both absolute and relative terms. Their 2017 purchases was 4.4x that in 2005.
According to our channel checks, the Chinese were among the most enthusiastic buyers
of the New Futura project among foreign purchasers.
• Levelling of playing field among different tax regimes; builds relative appeal of
Singapore. Although the ABSD had risen to 15% (from 10%) in Jan 13, overseas regimes
have since caught up with harsher cooling measures to limit foreigners’ participation. For
eg Hong Kong has doubled its stamp duties on overseas property buyers to 30% in Nov
16. Taipei also implemented a punitive divestment gains tax of as high as 45% in Jan 16
(with no expiration), dwarfing Singapore’s Sellers Stamp Duty (SSD) of 12% (3-year limit). (Read Report)
Source : UOB Kay Hian Research
Singapore Property - On The Prowl For Land
Shared By Stock Fanatic on Wednesday, March 28, 2018 | 28.3.18
Posted on Wednesday, March 28, 2018 |
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