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Singapore Property - Physical market continues with strength; where are stocks heading?

Shared By Stock Fanatic on Friday, April 13, 2018 | 13.4.18

Tulip Garden sold for S$906.9m
Yanlord Land Group announced that a joint venture between the group and MCL Land has successfully tendered for the en-bloc sale of the freehold Tulip Garden for S$906.9m, the second-largest collective sale so far, bringing YTD collective sales done to S$6.5bn. According to Business Times, the sale price is 20% higher than the reserve price and translates to S$1,790psf per plot ratio, 5-17% higher than nearby transactions. The site could yield 670 units, up from the current 162 units. We estimate a breakeven ASP of S$2,200-2,300psf, implying a potential selling price well above S$2,500psf.

Strong fundamentals continue with physical market
New launches YTD – including New Futura, The Tapestry, Park Place and Verandah Residences – have all seen strong responses with a sell-through rate north of 70% at ASP significantly higher than secondary pricing in the nearby area. Previously launched projects and even unsold inventories are all seeing good interest levels. 1Q URA PPI saw the largest increase, at 3.1%. With continuous en-bloc taking away completed supply, developers are likely to gain more pricing power over the next 18-24 months. We also see upside risk to our current 10% ASP growth forecast.

Where are stocks heading?
Despite the strong performance of the physical residential market, Singapore developers have underperformed over the last month.

We believe that the divergence in performance reflects
1) increased concerns regarding potential government measures in response to rapid ASP growth;

2) increased concerns about uncertainty on the interest rate outlook and

3) lowered risk tolerance as a result of ongoing macro events.

While we think investors could remain uncertain on the developers in the near term, we see a lengthening of the current virtual cycle for the Singapore residential property market. We also believe that policy measures are unlikely in the near term, especially with HDB re-sale pricing yet to bottom. Indeed, with the bulk of the en-bloc money yet to be released and existing supply yet to be demolished, we are probably just at the beginning of this cycle. We reiterate our positive stance on the developers City Developments and UOL Group, our top picks. (Read Report)

Source : Deutsche Bank Markets Research

Posted on Friday, April 13, 2018 | 13.4.18
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