Developers turning more cautious when replenishing landbanks, says DBS

angela.teo@bizedge.com

SINGAPORE (Feb 19): DBS says developers are turning more choosy in adding to their Singapore landbank.

They are also becoming more cautious in their pricing strategy after more land sites were awarded at reserve price levels rather than at a premium.

Property sales were off to a good start in January as total transactions — primary and secondary markets — doubled compared to a year ago, says lead analyst Derek Tan in a Monday report.

A total of 522 private residential units were sold in Jan, a 37% rise y-o-y. During the month, developers also moved 100 executive condominium units. The secondary market also sprang to life with 966 units sold, representing an 85% increase from a year ago.

These numbers translate into $3.1 billion in transaction value in Jan, consisting $1.1 billion in primary sales and $2.0 billion in secondary sales, a more-than-100% increase y-o-y.

Notwithstanding the Lunar New Year at the end of Jan, Tan maintains that buyer sentiment has improved significantly, buoyed by the stronger-than-expected economic growth outlook in Singapore.

Four collective sales projects were sold through private treaty in the past week, bringing year-to-date en bloc sales to eight sites, worth a total $3.5 billion.

 

Brookvale Park entrance

The latest collective sale site to find a buyer was Brookvale Park, which was bought by a joint venture between Hoi Hup Realty and Sunway Developments at $530 million, or $932 psf per plot ratio (Credit: JLL)

 

While the total value for Jan 18 is almost half that was achieved in 2017, there appears to be a bit of "fatigue", says Tan, especially when most of the recently concluded deals were sold through a private treaty after an unsuccessful public tender.

"This slowing momentum is positive, in our view, as it means lower upward pressure on final selling prices when these projects are launched," says Tan.

Based on estimates, the built-up in new supply from en bloc and government land sales (GLS) of close to 28,000 units, with another potential 8,000 units from the 1H18 GLS programme, still represents a still-healthy absorption rate (supply/estimated annual primary sale) of between 2.4 to 2.7 years.

Tan likes developers like UOL and City Developments who have the ability to catch the positive wave of buyer sentiment and deliver strong project sell-through rates.

In the mid-cap space, Roxy-Pacific, with six projects with 440 units to be launched in 2018, could see its stock price re-rate if it can achieve strong sell-through rates.

Meanwhile, property broker, APAC Realty, offers investors an opportunity to participate in the projected robust growth in transactional volume in 2018.

 

This story, written by PC Lee for The Edge Singapore, first appeared on Feb 19.

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