Singapore - Housing 01 (May 08 - Oct 08)

[winston]

From DBS:-

Singapore property developers unveiled CY1H08 results that were largely in-line or below expectations, mainly on the back of slowing sales and moderating increases in revaluation gains.

However, macroeconomic factors have deteriorated in recent months. Thus, we look at the 2001-2003 equity and property downcycle as the most comparable to current climes. In addition, we have changed our office and hotel valuation assumptions to reflect bottom cycle conditions. Even under these assumptions, stocks appear inexpensive, trading at 34% discount to trough RNAVs.

Our strategy would be to advocate stock selection, preferring the large caps such as City Dev, which has resilient core earnings as well as a cheap landbank across all the market segments; and bombed out mid- and small-cap stocks such as Allgreen and Ho Bee, the latter of which has locked in a good portion of its earnings for FY09.

[millionairemind]

From DBS:-

Our strategy would be to advocate stock selection, preferring the large caps such as City Dev, which has resilient core earnings as well as a cheap landbank across all the market segments; and bombed out mid- and small-cap stocks such as Allgreen and Ho Bee, the latter of which has locked in a good portion of its earnings for FY09.

Stocks and factors to watch: --Singapore property - Goldman Sachs advised investors to avoid the real estate sector for 6-9 months in a report on Friday naming weakening economics, imminent supply increases and uncertain equity markets.

Goldman Sachs maintained its "sell" on City Developments and named CapitaCommercial Trust and Suntec REIT as its favourite stocks.

One says buy, another says sell????

[LenaHuat]

GS says 'sell' cuz it overpaid for the DBS building

[-dol-]

According to GS:
"Based on relevant income groups, we estimate that apartment prices in the prime and
mass segments are about 10x and 8x of net annual household income, respectively."
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

The UK is grappling with their "House of horrors" now. There, house prices are about 5.5x of mean earnings. Their long-term average is 3.7x.

Are Singaporeans being prudent???

[LenaHuat]

I recall this 'unity' principle, which I think is useful input for decision-making as it sharpens the the earnings argument.
http://www.asiaone.com/News/The+Straits+Times/Story/A1Story20080503-63108.html

But this analysis ignores the effect of foreign investors (both non-resident instititional and individual).

[-dol-]

As usual, I can rely on Lena to provide an interesting perspective. Thanks!

Foreign fund flows is a big factor for this little red dot.

[Blackjack]

Fresh from business times -

Despite weaker property sentiment, the government has opted to leave development charge (DC) rates largely unchanged, except for an average 6.3 per cent cut for non-landed residential use.

There may not be sufficient evidence of declines in property values yet, market watchers said, but the rates could be cut at the next revision if stronger evidence emerges to show values are falling.

DC rates, which may be payable for enhancing the use of some sites, are revised twice yearly, on March 1 and Sept 1, by the Ministry of National Development in consultation with the Chief Valuer.

DC rates are stated across 118 geographical sectors. MND announced changes to boundaries affecting eight geographical sectors in three vicinities - the Race Course Road area (following the realignment of Race Course Road after the completion of Farrer Park MRT Station), Jurong Lakeside area (where there are plans under draft Master Plan 2008) and Pulau Brani (which has been moved out of the geographical sector that includes Sentosa).

Jones Lang LaSalle's analysis shows that a site redesignated from one sector to another in the Jurong Lakeside area could see increases in DC rates of 35 per cent for landed residential use, 39 per cent for hotel use and 38 per cent for industrial use based on Sept 1, 2008 rates.

As for the minimal changes in DC rates for most use groups, CB Richard Ellis executive director Li Hiaw Ho said this was in line with the slow pace of public and private land transactions seen this year.

Knight Frank managing director Tan Tiong Cheng said: 'For the commercial (office, retail) sector, we do not have direct evidence to show land values have dropped. For residential, the collective sales market has quietened but there has been evidence at recent state land tenders to show a decline in land values.'

That could account for the chops in DC rates for non-landed residential use.

Jones Lang LaSalle head of research (Southeast Asia) Chua Yang Liang too pointed to several cases of 99-year condo sites being sold at state land tenders recently at prices below their March 1, 2008 DC rate-implied land values.

DC rates for non-landed residential use were trimmed in 116 of the 118 locations. The cuts ranged from 3.8 per cent (in the Pasir Ris/Loyang and Punggol areas) to 10.8 per cent in the Balestier area. Recent transacted prices for non-landed projects like The Marque, Vutton and Pavilion 11 might have been the reason for the DC cut. The rate for Sentosa was trimmed 10.5 per cent, perhaps based on prices achieved recently at condos like Marina Collection and Turquoise at Sentosa Cove.

Two adjacent geographical sectors covering Ang Mo Kio/Bishan and Braddell/Potong Pasir, saw respective cuts of 10 per cent and 9.4 per cent. The cuts could be due to a 99-year condo site at Lorong 2/3 Toa Payoh near Braddell MRT Station being sold in April at 23 per cent below the price paid for a condo site next to Ang Mo Kio Hub in September last year.

DC rates for landed residential, commercial and hotel uses were completely untouched across the 118 geographical sectors. For industrial use, the rate was increased 11.1 per cent in the Paya Lebar/Eunos area but unchanged in the other 117 locations.

CBRE's Mr Li said the latest DC rate revisions were 'pretty much an academic exercise as there aren't many en bloc sales or redevelopments of sites going on which would involve DC payments'.

'Nobody is getting excited; there's little practical effect.'

[memphisb]

Hi, I have a qn that google doesn't really good answers.
What I would like to ask is as local singapore citizens, are we allow to purchase hdb flats and also purchase private properties as form of investment for rental income such as condos.

Would appreciate it if someone is able to advise.

[kennynah]

no restriction on this. but you would have to stay in the HDB flat; ie.you wont be allowed to stay in that private housing and rent out your hdb flat. well, you could stay in the condo, and leave your hdb flat empty, but i wonder why would anyone do this?

[blid2def]

MB - I think you should be able to find details on that in HDB's web site... but anyway, I believe K's answer is the gospel truth.