Keeping supply steady but high
• Housing supply to be maintained at >7,000 units in 2H12
• Rising medium term inventory to cap price upside
• Prefer diversified or non-residential plays such as Capitaland, UOL, CMA, GLP
As expected, keeping supply high but steady. The government has announced it will offer 15 confirmed list and 24 reserve list sites for sale in 2H12. These sites can yield a total 14,200 residential units (including 3,100 ECs), 388,000sm GFA of commercial space and 3,700 hotel rooms. Of this, 14 land parcels are new. The Confirmed List comprises 4,000 private residential units, 3,100 ECs and 80,000sm GFA of commercial space, in line with what was on tap in 1H12. Most of the sites are in the Outside Central Region or Rest of Central Region, indicating that the proportion of mass and mid market housing will continue to be high. About 57% of the new land parcels will supply housing in locations such as Sengkang, Punggol, Pasir Ris, Jurong West, Woodlands and Tampines. New plots at Commonwealth Ave and a mixed residential/commercial parcel in Yishun are also likely to draw good developers’ attention. To continue building momentum at the Jurong Gateway area, a new commercial site was added with a potential 67,200sm of GFA.
Medium term housing inventory rising. We expect the government to continue to use supply side mechanism as a way to dampen rapid price hikes and expect the authorities to retain a watchful stance in terms of policy while waiting for physical stock to come onstream, particularly when primary market transactions YTD remain robust. Adjusting for the latest figures, there is a large supply of 86,000 units (including 7000 ECs) in the pipeline, of which 44% is still unsold, or about another 2.3 years’ of inventory, based on last year’s demand. Inclusive of the 25,000 HDB apartments to be offered by the government this year, completed stock is expected to rise in the medium term. This should cap housing prices. In the commercial segment, with the Jurong Gateway and a new parcel at Cecil St, there will be 762,000sm of office GFA in the pipeline.
Bottom-up stock picking. From the developers’ perspective, we think they are likely to be relatively more cautious in their land selection and bidding activities to replenish their much-depleted landholdings. With the ongoing global uncertainties, property stocks have retreated from their year high and are trading at a 37% discount to RNAV or at –1SD to mean level. While we think much of the valuations have factored in the cautious outlook, investors’ risk appetite in the near term will remain low due to external volatility. Our strategy in the developer space would be to prefer those with a diversified property segment exposure such Capitaland and UOL as well as those with lower residential activities and are market players in their niche such as CMA and GLP.
Source/Extract/Excerpts/来源/转贴/摘录:DBS Vickers Research
Publish date: 14/06/12