Breaking new records
- Strong new launch sales momentum YTD with take up rates at c. 83% during launch weekend compared to 43%-64% in the past two years underscores our cautious optimism for developers
- Upcoming launches in Sept-22 to test S$2,000 psf pricing for the outside central region (“OCR”)
- Developers have pre-sold most inventories, any potential slowdown in sales unlikely to see a material hit to NAV/RNAVs, highlighting cheap valuations
- Picks: CDL and Guocoland
Strong sales momentum in new launches in 2022 on dwindling supply. The Singapore residential market is gearing up for two launches in Sept-22 (Sky Eden @ Bedok and Lentor Modern) which we are watching closely. While overall primary sales momentum in 8M22 has dropped by 45% y-o-y to c.5,700 units, average pricing has remained firm despite ongoing weakening macro datapoints and higher mortgage rates. With dwindling new supply inventories, we have seen new property launches achieving high take-up rates at c.83% on average during the launch weekend, far ahead of the 43%-64% seen in the past 2 years. The strong sales momentum will likely result in a further squeeze in supply and drive average pricing higher in 2H22, albeit at a more modest pace.
New pricing benchmarks likely to be achieved for projects in the Outside Central Region. Sky Eden @ Bedok and Lentor Modern are two projects in the outside central region (“OCR”) that will be looking to test the market with indicative pricing of c.S$2,000 psf onwards, which would set a new benchmark. The 152-unit Sky Eden @ Bedok seems likely to see strong buyer reception given its location within an established town centre in Bedok and being the first launch in the location in 10 years. Guocoland will continue to transform neighbourhoods with the launch of 605-unit Lentor Modern, bringing its trademark luxury positioning to the OCR region. The project’s amenities with improved connectivity to the Central Business District (“CBD”) with the gradual opening of Thomson-East Coast Line (“TEL”), the project is attractive. We estimate that Guocoland will see a c.1.0-1.2% accretion to RNAV for every S$100 psf above our projected c.S$2k psf for the project.
Downside risks priced in; CDL and Guocoland are preferred picks. Developers are trading at an average P/NAV of 0.55x, which is close to – 2 SD of its historical trading range. While concerns of a residential slowdown given macro uncertainties are valid, strong pre-sales would shield NAVs/RNAVs from downgrades in our view. In fact, strong commercial and hospitality portfolios are key drivers to earnings and NAV upgrades in 2H22. Our picks are City Developments (CDL) and Guocoland.
