• August proved to be a month in which private home-buying sentiment remained robust on a y-o-y basis. As a result, we do not believe that the government will look at demand-side policy easing in the near to medium term, especially given that elections need to take place in the next six months. We have lowered our rating on the property sector to MARKET WEIGHT as Singapore property developers appear to be trading at fair P/B valuations at present.

What’s New

• The Urban Redevelopment Authority’s (URA) monthly developer sales for Aug 19 indicate that a total of 1,122 units (-4.8% m-o-m, +82.1% y-o-y) were sold (excluding executive condominiums (ECs)) amid the launch of 979 units in the same month (+7.5% m-o-m, +83.3% y-o-y).

Action

• The strength in August’s data, with 1,122 units sold and only a mild 4.8% m-o-m decline (despite August being the ‘Hungry Ghost’ month), indicates that buyers remain sanguine about Singapore’s GDP slowdown and US-China trade tensions. We do not believe that the Hong Kong protests affected these numbers, though it remains to be seen if there is any uplift from the current month onwards. We also highlight that the government has announced changes to grants and incentives for HDB resale flats, thus potentially resulting in stronger demand from HDB owners wanting to upgrade to private homes.

Essentials

Resilient buying sentiment, despite a dearth of launches in the seventh lunar month.

• Developers typically avoid launching new projects in the seventh lunar month, which ended on 29 Aug 19. As a result, we only saw one new launch, Parc Clematis (totalling 1,468 units) on the last weekend of Aug 19, which also led its way as the top selling project (316 units sold) in Aug 19. Previous launches, such as The Florence Residences (122 units sold), Treasure at Tampines (93 units sold), Parc Botannia (60 units sold), Parc Esta (47 units sold) continued to sell down their inventories.
• The impact of the seventh lunar month may have also been blunted by changing buyer demographics. Although Aug 19 sales were up an impressive 83.3% y-o-y, we note that that came off a low base in Aug 18 (ie which was still reeling off effects post-cooling measures announced in Jul 18)

Precursor to a (mixed) Sep 19.

• As a pre-cursor, we are seeing weaker numbers from the recent three new launches held during the 14-15 September weekend, which included Meyer Mansion (10.5% sold/21 of 200 units), The Antares (6.8% sold/18 of 266 units), and Uptown @ Farrer (12.9% sold/15 of 116 units). The take-ups are considered subdued, compared with the 20% benchmark post-Jul18 cooling measures.
• Arguably, the three projects are also testing new benchmark PSFs in their vicinity, such as Meyer Mansion (S$2,747psf ASP), The Antares (S$1,760psf ASP), and Uptown @ Farrer (c.S$1,800-1900 psf ASP). A close comparison for Meyer Mansion is Amber Parks (ie ASP S$2,425 on launch weekend) which is priced 12% cheaper, but similarly enjoys freehold status, D15 locale, and is close to the future Tanjong Katong MRT.
• However, we note that the pace of sales is also supply-led. The wide-plethora of options (ie unsold inventories from 80 new launches between Jan 18-Aug 19) will help to support overall new sales volume (at the expense of lower take-ups at individual projects).

Pace of launches to pick up again, against a more competitive background.

• Post-seventh lunar month, we believe that developers will race to ramp up new launches, given the limited buyer-pool (and to beat the ABSD deadline). At end-2Q19, there were some 39,413 unsold inventory, which is equivalent to 4-5 years of sales (assuming 8,000- 10,000 units sold p.a.).
• Some of the upcoming launches to look out for include Midtown Bay (219 units) and Pullman Residences (340 units). Based on our channel checks, some of the more aggressive developers are stepping up their game with commissions of 3-4% (vs market norms of 2%), as well as faster commission payout (eg 1% advance commission within 24 hours of closing a deal).

Source: UOB Kay Hian Research - 17 Sep 2019