Singapore Residential – Sales to catalyse interest in developers
- Robust pipeline of residential launches could turn attention back to developers
- Eyes on Lumina Grand, EC project near upcoming Tengah district, and a strong take-up rate could galvanise CDL’s share price
- ECs to continue enjoying brisk sales with its pricing attractiveness to upgraders/new homeowners
- Pick CDL for its robust pipeline of EC and suburban launches
Robust pipeline of launches could shift attention to developers. The coming two weekends will see the launch of over c.1,000 new residential units across three projects, mainly in the Outside Central Region (OCR), with more to come in Feb 24, bringing attention back to the property developers. This is following the quiet months of Nov 23-Dec 23, when new project launches tapered off. While the Singapore property developers (FSTREH Index) saw a strong rebound of +c.8% in the past two months, since the lows back in late Oct 23, it underperformed S-REITs, which ran up by +15%. Using City Developments Limited (CDL) as a proxy to the residential market, we noted that there was a positive correlation between share prices and a strong showing at new residential launches in 7 out of 11 occurrences since 2018, and we expect to see a similar trend in the coming months.
Executive condominiums (ECs) are a pot of gold for home buyers. With suburban condominiums hitting a new pricing benchmark of S$2k psf in recent months, we have seen buyers (that qualify) focus their attention on ECs, which are priced more attractively, at up to a c.25% discount to private property prices, mainly due to income limits and tighter affordability ratios placed on buyers. As such, past EC projects launched in 2022-2023 have seen robust sell-through rates, with c.88% to 100% sold within two-three months of launch, giving developers certainty in their returns. With CDL set to launch the 512-unit Lumina Grand, an upcoming EC project in Bukit Batok (near the new Tengah estate), we expect to see a strong buyer response, potentially boosting CDL’s share price.
EC sites to remain keenly contested. Despite the high-supply pipeline and developers taking a cautious stance towards land-banking, we believe that developers will take a more opportunistic stance on EC sites (with three more in the pipeline offering c.1,500 units. We anticipate these EC sites will be hotly contested in the upcoming tenders, with the likes of CDL, FPL, and UOL keenly looking to add it to their inventories upon launch, which would be accretive to RNAVs.
This implies that this is apart from the 3 properties that will launch c.1,000 units over the next weekends. Is that correct?