SINGAPORE (June 15): Maybank Kim Eng is maintaining its “positive” outlook on developer stocks with catalysts from an impending rebound in home prices.
In May, URA reported developers sold 1,024 private homes and 370 Executive Condos after aggressive launches in the past two months to capture market exuberance from the first sign of policy easing.
This brings total private home sales to over 5,700 units ytd and is on track for Maybank’s forecast of 10,000 units this year, which will be 25% higher compared to 7,972 units in 2016.
“We believe robust sales should drive a further decline in unsold stock in the market... the ensuing improvement in inventory-to-sales ratio should allow developers to lift home prices,” says analyst Derrick Heng in a Thursday report.
Mid-to-mass market projects continue to drive sales with 341 and 617 units sold in the RCR and OCR segments.
Sales remain fairly slow in the luxury segment with 66 units sold in the CCR. CDL’s project, Commonwealth Towers, was the third best seller with 53 units sold in the month.
“UOL and CDL with $9.05 and $12.05 offer the best proxy to this inflection point,” says Heng.
Heng also notices further improvement in sales at The Santorini and The Alps, two mass market projects located next to CDL’s recently acquired land parcel in Tampines, which could mean less competition when the project gets launched next year.
UOL's projects Principal Garden and The Clement Canopy were also among the best-selling projects.
With the pickup in private home sales, Heng says developers have turned increasingly positive on the sector's outlook with more aggressive pricing seen at recent land deals.
With improving affordability, ample liquidity and a decline in unsold stock, he sees scope for developers to raise prices in the coming year and see escalating land prices as a harbinger of higher home prices.
This inflection point should be a catalyst for the sector.
