Slower new home sales in Aug
- There was a mom decline in Aug home sales due to lack of new launches.
- Two new project launches in Sep should boost upcoming new sales.
- We stay sector Overweight due to inexpensive valuations. Our sector top picks: CIT, CLI and UOL.
Slow sales in Aug
? According to the Urban Redevelopment Authority (URA), Aug 22 monthly home sales in Singapore came in at 448 units. Excluding executive condos (ECs), private home sales amounted to 437 units (-47.6% mom, -64% yoy). The mom decline in sales was due to absence of significant new launches. Projects with most transactions in Aug were Hyll on Holland, Riviere, Perfect Ten, Leedon Green and The Hyde.
? Volume transactions in the Core Central Region (CCR) were most active, accounting for 50% of sales in Aug. Meanwhile, projects in the Rest of Central Region (RCR) took up another 29% of sales. Take-up in suburban areas accounted for the balance 21%. We expect a pick-up in Sep with 2 planned new launches
? With the latest data, new home sales (excluding ECs) for the first 8 months of 2022 totalled 5,655 units (-40% yoy). We expect volume sales to pick up in Sep with the launch of Sky Eden @ Bedok and Lentor Modern projects. Accordingly, we leave our primary home sales volume projection unchanged at 10,000 units for 2022F. Meanwhile, according to Singapore Real Estate Exchange (SRX) data, private home resale volumes declined 14.5% mom in Aug 22 (-38.6% yoy), while HDB resale volume declined 1.7% mom and -15.5% yoy in the same month.
Homes prices continued to rise in Aug
? Based on SRX data, private resale home prices inched up by 1.2% mom in Aug 22, bringing YTD improvements to 6.6%. Meanwhile, HDB resale prices in Aug rose 0.4% mom and up 6.6% year-to-Aug. According to the URA residential price index, private home prices rose 4.2% in 1H22 (vs. end-2021 level), and we anticipate continued price improvement into 2H22F. We maintain our 2022F private home price projection to +5-8% in 2022F.
Reiterate sector Overweight
? Developers’ valuations still look inexpensive to us, as they are trading at a 42% discount to RNAV, close to 1 s.d. below the long-term mean discount. We prefer developers with visible residential pipelines and strong balance sheets that would enable them to tap into any opportunity during this slower cycle. Our preferred picks are CIT, CLI and UOL.
? Potential sector re-rating catalysts: good sell-through rates for new launches. Downside risks: faster-than-expected interest rate hikes, slower economic outlook, and property-cooling measures that could dampen demand for housing.