Developers that acquired expensive land to feel brunt of new property curbs

Christopher Chitty4 Sep 2018

Singapore traffic night crop

Experts revealed that real estate developers that bought pricey land in Singapore’s prime districts during the most recent en bloc cycle prior to the implementation of the new property curbs are the most at risk from the fresh cooling measures, reported the Business Times.

The city-state’s prime areas are traditionally Districts 9, 10 and 11, which covers Orchard, Tanglin, Holland and River Valley.

More: Development charge for condo up by 33%

“The tightening of loan-to-value (LTV) and increase in Additional Buyer’s Stamp Duty (ABSD) have raised the barrier of entry for property buyers and developers now face the risk of slowing sales,” said Smartkarma insight provider Royston Foo.

Moreover, the stock prices of Singapore-listed property developers have fallen, with the FTSE ST Real Estate Holding and Development Index falling to its lowest this year at 779.25 a day after the new cooling measures were announced. Although it has rebounded to 811.46 as of 31 Aug, the index is still lower than its year-to-date peak of 931.71.

“We acknowledge that valuations (of developers) are undemanding, as it is trading at a blended forward price-to-book ratio of 0.57x, which is 1.5 standard deviations below its 10-year mean of 0.78x”, said Andy Wong Teck Ching, an analyst with OCBC Investment Research.

Despite the lower stock prices, market watchers aren’t advising investors to buy such stocks, unless the subject company has diversified away from the city-state or had not acquired land at expensive prices in the latest en bloc cycle.

“We believe CapitaLand and Ho Bee” fall under this category of developers that could pique the interest of investors, said RHB Research property analyst Vijay Natarajan.

For Smartkarma analyst Foo, he cites Sing Holdings as one of his top choices.

More: Savills still upbeat over condo prices.

“Sing Holdings’ recent new launch Parc Botannia was a success.” In fact, the 735-unit condominium at Fernvale Street in District 28 is currently 60 percent taken-up.

“It also did not acquire any land bank during the collective sale cycle, and cooling land prices could provide opportunity for the company to replenish its land bank at reasonable prices.”

Furthermore, due to the new cooling measures, the en bloc market has slowed down and private condos in Singapore are expected to see modest price growth, added RHB’s Natarajan.


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