Singapore - Housing 01 (May 08 - Oct 08)

[winston]

ANALYSIS-Recovery hopes fading for Singapore developers

By Daryl Loo SINGAPORE, May 21 (Reuters) - Hopes that a slowdown in Singapore's property market is temporary are fading as an uncertain economic outlook and a looming housing glut threaten to plunge the sector into a prolonged downturn.

Homebuilders such as CapitaLand , Keppel Land and GuocoLand have delayed launching new projects in the moribund market, taking a hit to first-quarter earnings as they hoped for a rebound later this year.

Prospects could be dented further in coming months if smaller developers face financing troubles and have to unload properties at massive discounts. Some have gorged themselves on expensive land acquisitions over the past two years.

With home prices expected to fall 30 to 40 percent over the next three years, Singapore's developers could be badly hit and analysts may slash their earnings estimates further.

"This is the start of a multi-year price correction. Private residential property prices could easily fall by up to 30 percent by 2010," said Barclays Capital economist Leong Wai Ho.

Credit Suisse in a report this month saw rents and property prices falling even more steeply by as much as 40 percent, and downgraded its investment recommendation for the sector to "underweight".

Warning signs have been flashing as first quarter 2008 sales volumes slumped to the lowest in five years and price growth slowed for two straight quarters, with concerns about a global economic slowdown and the U.S. subprime mortgage crisis scaring off potential homebuyers.

Leong said an impending oversupply will worsen the problem, with 66,000 new homes expected to be completed over the next four years, against forecast demand for 50,000 in the same period.

The three-month Singapore Interbank Offered Rate -- a benchmark for mortgage loans -- has fallen to near record lows below 1.3 percent, but that may not be enough to revive buyers' flagging confidence, economists say.

"Negative real interest rates will be at best a cushion, rather than a boost to housing demand in the near term, although they could lift property demand if and when sentiment turns," said Citi analyst Kit Wei Zheng.

STEEP DISCOUNTS "The worst is yet to come and price cuts are imminent, as the holding power of property players is weakening and speculative demand is diminishing," said ABN AMRO analyst Fera Wirawan.

BNP Paribas has flagged high financial risks for small developers including Bukit Sembawang , Low Keng Huat , and Lian Beng , which have almost all their debts due within a year.

Even major builders such as Allgreen , KepLand and GuocoLand could face difficulties after steep drops in profit in the last quarter as they launch fewer projects, analysts say.

Slower sales and rising costs could raise developers' gearing or debt-to-equity ratio to dangerous levels above 70 percent, up from the industry average of about 62 percent.

"We identify three developers, namely Allgreen, GuocoLand and Keppel Land, that could face some pressures on cash flow," JPMorgan analyst Christopher Gee said in a report, noting that gearing levels could be pushed up to between 80 and 130 percent.

The risk of price falls has been heightened by property speculators buying in recent years with little upfront cash, relying on a deferred payment scheme. The government scrapped the scheme last October in a bid to cool down the sector.

[winston]

Singapore property prices have peaked - govt

SINGAPORE, May 23 (Reuters) - Singapore's booming property market has peaked and will continue to moderate over the next two years, the country's trade ministry said on Friday.

Singapore's central bank said that while the financial services industry could face some slowdown there was no evidence of a large job cuts.

"There could be some slowdown, but not major slowdown.

Anecdotal evidence shows that while financial institutions are reviewing headcounts and business lines, they are also looking at several areas of growth," Monetary Authority of Singapore Deputy Managing Director Ong Chon Tee told a news conference

[LenaHuat]

The draft Plan is out!

Read it here :-
http://www.ura.gov.sg/dmp08

Some of U will be pretty happy with it.

[winston]

From DMG:-

Property: The Storm before the Calm (Developers – NEUTRAL, REIT - OVERWEIGHT)
Terence Wong (62323896, [email protected])
Brandon Lee (62323891, [email protected])

A stark contrast. This time last year, it was clear blue skies for the property sector, firing on
practically all cylinders. But the sub-prime crisis in the US hit the stock and property markets hard.
Sentiments and interest in property started to dive in Oct 07, with many launches being pushed back due to an expected lacklustre demand.

It dealt a crushing blow to property buyers’ appetite and sentiments, as witnessed by the 730 new private residential units sold in 1Q08 - a 47.7% drop from 4Q07. Compared to the average quarterly transacted units of 3,537 in 2007, this number represented an even more significant plunge of 74.9%. En-bloc market practically capitulated.

Some lingering concerns. There are some concerns which will affect property prices (both physical
and capital markets) in the next 12 months. One important pressure point is the stock market. It has seen wild swings and has largely been on a downtrend since 4Q07. Given the tight correlation
between equity and property, it is unsurprising that property market was also hard hit. As a result of the dampened sentiments, property developers are adopting a wait-and-see attitude and holding back the launches.

Oversupply to pressure prices? There are 67,736 uncompleted units in the pipeline (excluding the
Government Land Sales Programme), of which 63% has yet to be sold and 83.4% are expected to be come onstream between 2Q08 and 2011, it is not inconceivable that worries of a supply glut in the property sector have been mooted.

We believe demand will be more than the past 10-year average, given an influx of foreigners in the coming few years. We estimate the vacancy rate to be 5.4% - 7.9% from 2008 – 2013, not too far away from the average annual vacancy rate of 7.7%. This gives us a good enough reason to conclude that the concerns of an over-supply have been overplayed, and that the supply-demand dynamics in the next 5 years should remain in a healthy equilibrium.

Run for cover with REIT in the near term. Given the near term uncertainties, we believe stock prices for properties will remain pressured. In the next 3-6 months, we favour REITs, which have good earnings visibility and high dividend yields. Their defensive nature should shield investors from the volatility in the stock market. We like CapitaMall Trust, Suntec REIT and Cambridge Industrial Trust.

Developers present good value further out. There is a confluence of positive drivers, including
population growth and the successful remaking of Singapore, which will likely drive property prices in the long-haul. When the property sector makes a comeback, the front-runners will once again be the large cap developers. We favour CapitaLand and Keppel Land.

[kennynah]

Thanks L ...

I tried the link....ahh... this one will directly bring to the masterplan wesbite http://www.ura.gov.sg/DMP2008/home.htm

[LenaHuat]

Ooops.......me didn't give a perfect link

I'm very happy with the higher revised GPR numbers for my properties

[kennynah]

and i am seeing some Parks and Waterbodies Plan around mine....nice...can go catch spiders on weekends

[helios]

Thanks Lena - u r fantastic!!

i've to go to e URA gallery to download some 'info' ... usual practice*

[winston]

from UOB-Kay Hian

Draft Master Plan 2008 focuses on decentralisation

The Urban Redevelopment Authority of Singapore (URA) has released its Draft Master Plan 2008 for public review and feedback. The detailed statutory land use plan guides the physical development of Singapore over the medium term in the next 10 to 15 years.

It focuses on decentralisation through the creation of three commercial and mixed-use hubs at Jurong Lake District, Kallang Riverside and Paya Lebar Central. The plan allows for a
29% increase in the existing housing stock with a potential addition of 327,200 new homes. There are no major plot ratio revisions in the plan.

Jurong Lake District to be transformed into unique lakeside destination for business and leisure. The plan for Jurong feature 5.4m sf sqm of office space, 2.7m sf of retail, food & beverage (F&B) and entertainment space, about 2,800 hotel rooms and around 1,000 new housing units. The Lakeside precinct is envisaged to be developed into a major leisure destination for Singaporeans and tourists.

The plan features a new waterfront playground with novel attractions and a new lakeside village next to Jurong Lake. It offers an alternative shopping and dining experience, as well as F&B, retail and entertainment space and boutique hotels by the lake.

Paya Lebar Central: Attractive location for businesses due to close proximity to City Centre. The plan features 3.2m sf of office space and 2.2m sf of hotel and retail space over 12ha of land. It will be a very attractive location for businesses due to its close proximity to the city centre and
relatively low operating costs. The planned Paya Lebar MRT interchange station in 2010 for the Circle and East-West lines will enhance its positioning further as a regional centre. No new housing has been planned for this area.

Kallang Riverside: New waterfront lifestyle precinct. Located at City Fringe and home to the upcoming Storts Hub, Kallang Riverside is expected to benefit the most from the Master Plan 2008. There are plans for 4,000 new waterfront homes in Kallang Riverside. There will also be 3.2m sf of
office space and 3.2m sf of hotel, retail and entertainment space. Units of the upcoming Riverine by the Park, along Kallang Road near the river, were recently sold at $1,600 psf. In the vicinity, the units at Citylights at Jellicoe Road were sold at $1,000-1,300 psf.

We believe the decentralisation initiatives and waterfront living initiatives will boost property prices in the Kallang, Jurong East, Paya Lebar areas and provide support for residential properties in the mass/mid-tier market segment over the medium to long term.

Among the developers under our coverage, Allgreen (BUY/RNAV: S$2.05/Target: S$1.65) draws nearly 40% of its value from the mass/mid-tier segment. Ho Bee’s (BUY/RNAV: S$2.15/Target: S$1.50) South Dakota project will also get a boost from the rerating of the Kallang area.

[winston]

From DBS:-

Big Plans, Big Picture

Master Plan 2008 Unveiled: In our earlier preview piece on the Draft Master Plan 2008, which was unveiled last Friday, we mentioned that the analysis of newsflow over the past year or so pointed towards a Master Plan that would see changes in land use and increases in plot ratios only in selected new growth areas, rather than a widespread upgrade in densities.


As we had expected, the Draft Master Plan 2008 was largely grounded in a few growth areas – Jurong Lake, Paya Lebar, Kallang Riverside and Marina Bay – and there was an absence of increase in plot ratios for existing developments. This basically means that developers and andowners hoping for a windfall by way of an increase in the legally permissible plot ratios for the redevelopment of their land (and hence, an immediate jump in land valuation) would have to wait at leaset another 5 years, for the next Master Plan review in 2013.

The Big Picture: We view Master Plan 2008 as more of a strategic blueprint laying down the growth sectors and strategic areas in the medium-term economic development of Singapore over the next 10 to 15 years, to show that the physical support in terms of land and infrastructure is in place for Singapore’s move into the next stage of economic growth.

Four broad strategies were undertaken in the review – better use of land, decentralization with new growth areas, priority on public transport and enhancing of quality of life and sense of identity.

Medium-Term Beneficiaries: The Master Plan 2008, nonetheless, will filter down to improved growth fundamentals for various economic sectors. Among the developers, we like City Dev (TP S$12.90), CapitaLand (TPS$7.20) and F&N (TP, S$5.80). In the S-REIT space, we like CMT (TP S$3.93), FCT (TP S$1.66) and CDL HT (TPS$2.90). Healthcare (Raffles Medical, TP S$1.74; Parkway Life REIT, TP S$1.50), transport (ComfortDelgro, TPS$2.22; SMRT, TP S$2.00) and construction (HLA, TPS$4.30; Pan-United, TP S$1.16) would also benefit.

Bringing It All Together

Even though the Master Plan is exhibited in the form of 5 regional plans, each region is a piece of a larger picture that aims to provide the impetus and growth for Singapore’s economy in the medium-term.

The expected increase in population will bring the need for additional homes, and with the economic fundamentals for Singapore still very much intact in spite of the challenging global economy at the current moment, property developers would still be able to leverage on the Singapore growth story
in years to come.

We continue to favour the big-caps at the current moment, with City Dev being a key proxy to the residential market (BUY, TP S$12.90) and Fraser & Neave (BUY, TP S$5.80) having significant exposure to the massmarket segment, with about 95% of its 5.5m sf landbank geared towards this segment.

CapitaLand (BUY, TP S$7.20) is also attractive given its multi-revenue model, which would benefit from increased commercial activity due to a rising population and increased tourist arrivals.

The development of four additional rail lines (aside from Downtown Line 1 and Circle Line which are already under construction) in the form of Downtown Lines 2 and 3, Eastern Region Line and Thomson Line, will bring economies of scale to the rail operators in the medium-term. We like SMRT (BUY,TP S$2.00) and ComfortDelgro (BUY, TP S$2.22).

And all these developments will be a shot in the arm for the construction sector, which will continue to benefit from the physical re-shaping of Singapore. Top picks in this sector are Hong Leong Asia (BUY, TP S$4.30) and Pan-United Corp(BUY, TP S$1.16).