Residential property on the road to recovery
By UOB Kay Hian
The residential segment is on the road to recovery with 2-4% monthly gains noted in the mass market and mid-tier price levels and the return of liquidity in the high-end sales segment. Sales volume in the primary market leapt nearly six fold to 2,596 units in 1Q09, mostly due to sales in the mass market and mid-tier segments, representing nearly 60% of full-year developer sales last year. Developer sales for 2Q09 are on track for a strong showing with 1,207 units sold in April and about 1,200 private home units sold in May. Developers have also started raising prices for several mass market, mid-tier and upper-end projects by lowering the discounts from the 2007 peak levels. They are also firming up plans for more mass market and mid-tier market launches/re-launches in the coming months.
Sales momentum carrying through to high/luxury-end
There has also been a steady increase in the number of transactions worth above S$1,500 per sq ft (psf) since the beginning of this year. The Orchard Residences, Hamilton Scotts and Boulevard Vue have seen units sold at above $2,500 psf and a few units at The Orchard Residences have even exceeded $3,000 psf. Preliminary data points and our checks with the developers suggest a continuation of the trend. The rise in transactions at the high psf levels will alleviate land write-downs and default concerns. As a result, we expect low level of write-downs in the upcoming results season.
PriceRange of Apartments Sold (Jan-Apr) |
Month |
$750 psf and below |
$750 to $1000 psf |
$1000 to
$1500 psf |
$1500 to $2000 psf |
More than $2000 psf |
Jan |
30 |
57 |
19 |
2 |
0 |
Feb |
803 |
189 |
334 |
5 |
1 |
Mar |
705 |
343 |
164 |
5 |
3 |
Apr |
537 |
328 |
252 |
88 |
2 |
Source: Business Times, Colliers, URA
Remaining Overweight
The base formation for the residential and office property prices has seen average declines of 30% to 40% from the peak prices in end-2007. The recent data points are indicative of a 2-4% increase in the mass market and mid-tier segment price levels from the base levels.
Consequently, we have raised our Revalued Net Asset Values (RNAV) and target prices by 18% and 51% respectively to factor in the following:
- 30% average decline (vs 40% previously) from the peak in the average selling prices (ASP) of residential and commercial properties.
- Lowering of land write-down and Deferred Payment Scheme (DPS) default assumptions
- Marking to market for associates and subsidiaries
- Reducing the discounts of target price to RNAV.
Incorporating the revisions, we continue to see good value in property stocks, even after the recent sharp rally in share prices. We have upgraded high-end property stocks with City Developments, Allgreen, Wheelock and Ho Bee as the top picks.
| Company |
Recommendations |
Target Price |
| Allgreen |
Buy |
1.40 |
| Capital Land |
Buy |
4.65 |
| City Devt |
Buy |
12.05 |
| GucoLand |
Hold |
2.00 |
| Ho Bee |
Buy |
1.15 |
| Keppel Land |
Buy |
3.10 |
| S Global |
Hold |
1.25 |
| Wheelock |
Buy |
2.25 |
| Wing Tai |
Buy |
1.95 |
Disclaimer
We have based this document on information obtained from sources we believe to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Expressions of opinion contained herein are those of UOB Kay Hian Research Pte Ltd only and are subject to change without notice. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of the addressee only and is not to be taken as substitution for the exercise of judgement by the addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities.
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