CGS-CIMB Research analyst Lock Mun Yee has kept her “overweight” rating for the Singapore property sector in an Oct 15 research note.
This comes after September recorded monthly home sales of 1,296 units, 37.2% lower y-o-y and 31.4% lower m–o-m. According to Lock, September sales were underpinned by the launch of Parc Greenwich, an executive condominium by Frasers Property located in Sengkang.
Nonetheless, units launched in September totally only 210, with the sales rate continuing to outpace launch volumes.
“The best-selling projects in the month were Normanton Park and Parc Clematic, while in the Core Central Region (CCR), Leedon Green and Fourth Avenue Residences also saw decent sales,” says Lock.
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Outside Central Region (OCR) projects made up 42.7% of monthly volume transactions, while city-fringe projects made up 37.2% of sales. Projects in the Central Core Region accounted for the remaining 20.1%.
Despite the lower sales for September, Lock highlights that year-to-date sales volumes remain robust. Sales transactions in the first nine months of 2021 totalled 10,241 units, 33.2% higher y-o-y and making up 85-93% of Lock’s full-year expectations of 11,000 to 12,000 units.
“Meanwhile, according to Singapore Real Estate Exchange (SRX) data, the estimated resale transactions was 3.8% lower mom, but still 35.9% higher than a year ago, with 1,736 units changing hands,” she adds.
According to flash estimates by the Urban Redevelopment Authority (URA), private home prices rose 0.9% q-o-q in 3Q2021, underpinned by stronger landed homes and condo prices in the Rest of Central Region locations. This translates into a 5.1% price appreciation for the first nine months of 2021.
Resale home prices were also higher, expanding 1% m-o-m and 8.9% y-o-y. Lock believes prices will stay supported by continued buying interest. She has maintained her forecast of home prices growing between 5-7% for 2021.
Lock views that developers’ valuations “still look inexpensive”, trading at a 45.5% discount to RNAV. This represents close to one standard deviation below the long-term mean discount.
“With the residential market still enjoying brisk transaction activity, we prefer developers with visible residential pipelines and strong balance sheets that would enable them to tap into any opportunities during this slower cycle,” she says.
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Her preferred picks are City Developments (CDL) and UOL Group. CGS-CIMB has "add" ratings for both counters, with target prices of $8.97 and $8 respectively.
She views good sell-through rates for new launches as sector rerating catalysts, while downside risks include faster-than-expected interest rate hikes and property cooling measures.
Shares in CDL and UOLD closed at $7.43 and $7.29 respectively on Oct 18.
Photo: Bloomberg