Singapore Property

DBS Group Research on 18 Sept 2012

MONTHLY dip in home sales was expected. August primary home sales (including ECs) dipped 26 per cent month-on-month to 1,539 units. Excluding ECs, the decline was slightly higher - 27 per cent month-on-month to 1,421 units. The drop was expected because of the Hungry Ghost Month which also saw slower pace of launches. This brings 8M 2012 sales to 15,604 units (excluding ECs). The bulk of sales were concentrated in the Outside Central Region with 62 per cent of transactions while the Core Central Region generated another 14 per cent of sales. Projects that received good responses include Parc Olympia, City Dev's Bartley Residences, UIC's V on Shenton (ASP S$2,019 psf) and Flo Residences.

Policy concerns likely to weigh on sentiment. Looking ahead, with transaction volumes remaining robust amid a low interest rate environment and with the onset of QE3, we expect the government to remain watchful of the market. The recent move by the Hong Kong authorities to lower loan-to-value ratios for second homes has also raised concerns whether Singapore could follow suit. Hence, we believe this overhang could dampen market sentiment for property stocks despite investors taking a more risk-on stance.

Prefer diversifieds and non-residential plays. While mid-cap property developers are trading at significant discounts to book NAVs and downside is limited, we think the potential overhang would continue to weigh on the sector. We continue to like stocks with diversified business models or have strong market niches such as CapitaLand and CapitaMalls Asia (CMA). Maintain Buy on CapitaLand (TP $3.42) and CMA (TP $2.08).