URA announced last evening a revision in guidelines to lower the maximum allowable units in new private flats and condominium developments outside the Central Area.

Under the new rules, the maximum allowable number of dwelling units (DU) per development will be the building GFA divided by 85 sqm instead of 70 sqm which was in place since 2012.

Nine areas (previously four) including Marine Parade, Joo Chiat-Mountbatten, Telok Kurau-Jalan Eunos and Stevens-Chancery will face more stringent restrictions of having a minimum average requirement of 100 sqm. This will come into effect from 17 Jan 2019.

We believe this will add further stress to the property market as developers have been trying to build smaller units to increase affordability to buyers from an absolute dollar perspective, and to increase their ASPs and thence profit margins as smaller units tend to fetch higher ASPs.

The en-bloc market, which has dried up post the last set of cooling measures announced in Jul this year, will likely see a more significant impact.

Separately, URA also announced that the bonus GFA cap for private outdoor spaces in residential developments (such as balconies, private enclosed spaces and private roof terraces) will be reduced from 10% to 7% (effective 17 Jan 2019).

However, developers can still achieve up to 10% bonus by qualifying for other incentive schemes, such as the Green Mark Bonus GFA Scheme.

We believe these measures will likely result in developers’ submitting less aggressive bids for future land tenders.

While valuations for the sector are cheap, in our view, we do expect some knee-jerk selling pressure on SG developers’ share price today, and currently have a NEUTRAL rating on the SG residential sector.

Source: OCBC Research - 18 Oct 2018