SINGAPORE (Aug 16): RHB is remaining “neutral” on the Singapore property sector on muted growth in property price in the coming months, impacted by the recent cooling measures.
The research house has a “buy” call on its top pick, CapitaLand with a target price of $3.95, as it remains minimally impacted by the recent cooling measures, and benefits from the continued build-up in its recurring income base and diversified exposure.
In July, Singapore home sales hit a 15-month high due to homebuyers rushing to purchase before the implementation of cooling measures on July 6.
See: Singapore home sales soar in July on minute-to-midnight buying
In a Thursday report, analyst Vijay Natarajan says, “We expect sales volumes to dip by more than 50% m-o-m in August, due to seasonal factors (the Hungry Ghost festival) and the lack of new launches.”
Despite cooling measures, buying demand remains healthy as developers are lowering their selling price expectations and offering attractive discounts to move inventory.
This was seen especially in the recent launch of UOL Group’s The Tre Ver, where 140 of 200 units were sold on the first day of launch on attractive pricing, compared to existing launches.
“We also note that developers have limited room to defer the launches or hold on to inventory, as they face hefty additional buyers stamp duty (ABSD) penalties if they fail to sell the entire project within five years,” says Natarajan.
Overall, the analyst expects 2018 primary transaction volume to range from 9,000 to 11,000 units.
Meanwhile, property prices are likely to stay flattish in 2H18 and expected to grow modestly by 0%-2% next year, as there is very little room for developers to lower prices due to the high land banking costs.
In addition, 2H18 will see about five sites (including a white site) made available via a confirmed list in the government land sales (GLS) programme.
“Despite recent measures, we expect to see healthy bidding interest for the sites on their strong location attributes (ie close to MRT stations and routes) and amenities – albeit at moderated prices. The bids for these sites should throw some light on developers’ expectation of property prices ahead,” adds Natrajan.
As at 11.10am, shares in CapitaLand are trading flat at $3.31 or 0.7 times FY18 book with a yield of 3.9%.
