Clock ticking as property developers face double threatBy Jude Chan
SINGAPORE (Sept 16): The clock is ticking for Singapore’s property developers, who are facing the double threat of ABSD deadlines and looming supply.
It was exacerbated by a slow August, which coincides this year with the seventh month in the lunar calendar year, or Hungry Ghost month – considered inauspicious by Chinese homebuyers who typically avoid property purchases.
Developers in August sold a total of 805 homes, a drop of 18% y-o-y compared to August 2015 and 58% lower than in July. This comprised 473 private homes and 332 executive condominiums (EC).
“With cooling measures remaining in place, we doubt home sales volumes can improve materially. This could continue to weigh on sentiment for the sector,” says Maybank Kim Eng analyst Derrick Heng in a Thursday report.
Maybank has maintained its “neutral” rating on the Singapore property sector.
“In the coming months, we believe the spotlight will be on the actions of developers that have significant unsold units for projects facing their respective ABSD deadlines,” Heng says.
Developers have to sell all the units in a residential project
within a five-year period to qualify for an exemption on paying
Additional Buyer’s Stamp Duty (ABSD) on land cost at the time of purchase. And it’s crunch time for some developers.
IOI Properties’ The Trilinq has just five months to go before its ABSD deadline in January 2017 – and 48% of the project still remains unsold.
Other developers running against the clock to beat their ABSD deadlines in 2017 include United Industrial Corporation, City Developments Limited, and Wing Tai Holdings.
Only half of the units at UIC’s Mon Jervois have been sold so far, while its Pollen & Bleu project is still 88% unsold. Meanwhile, CDL’s The Venue Residences has 45% not yet sold, and Wing Tai joint venture project The Crest is 70% unsold.
“While we have yet to see significant price cuts, there could be more pressure to do so as project deadlines near. This could lead to downwards pressure on prices,” Heng says.
CIMB, too, believes that private home prices will continue to decline.
However, the research house believes this will be due to a high incoming supply of private residential units. Some
10,262 units will be completed in 2H16, and another 14,578 units in 2017.Coupled with “rising vacancy and dwindling rental market, we expect private home prices to continue declining and keep our projection for a mid-single digit dip in 2016,” says CIMB lead analyst Lock Mun Yee.
“Looming supply continues to cloud outlook,” Lock adds. “45% of these completions are in the suburban locations and this will continue to drag on price outlook in these areas.”
Yet, CIMB is keeping its “overweight” rating on the sector.
“Developer stocks are trading at a 42% discount to the sector RNAV,” says Lock. “We think that much of the negative newsflow is in the price.”
CapitaLand is the top pick in the Singapore property sector for both Maybank and CIMB.
Maybank is keeping it at “buy” with a target price of $3.93, while CIMB recommends “add” with a target price of $4.17.
In addition, CIMB also highlights City Developments and UOL Group, keeping both at “add” with target prices of $10.38 and $7.96, respectively.
CapitaLand closed at $3.12, CityDev closed at $8.86, and UOL closed at $5.51.
Source: The Edge
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