The robust primary sales reported in March poses a double-edged sword for listed developers, say DBS Group Research analysts Derek Tan and Rachel Tan.

The pair’s note comes after the property market saw a record quarter in the 1Q2021 with sales of around 3,400 units.

New private home sales in March surged to 1,373 including executive condominiums (ECs), which was more than double that of February’s figures.

See: CGS-CIMB stays 'overweight' on Singapore property sector after March home sales jump and Singapore new private home sales doubled in March, fuelling concerns on cooling measures


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Developers launched 959 new units in March alone and sold 663 units, achieving a sell-through rate of 70%.

The strong transaction volumes, including a record quarter in transaction volumes for resale HDB homes, say the analysts, are positive for property agencies such as APAC Realty.

“[Agencies] are likely to report accelerating sales momentum, riding on the strong trends seen within the private and public markets,” they write.

DBS has rated APAC Realty at “buy” with a target price of 61 cents.

The developers within the bank’s coverage – City Developments Limited (CDL), UOL and Bukit Sembawang – have seen their unsold inventory levels fall.

The analysts have indicated that their preferred picks are CDL and Bukit Sembawang (for mid-caps).

The brokerage has rated CDL at "buy" with a target price of $10.50 and "buy" for Bukit Sembawang with a target price of $5.44.

“With overall market inventory running low with close to [around] 23,000 units unsold (including ECs) and completions of ongoing developments over 2021-2023, developers will likely be closely looking at land-banking,” write the DBS analysts.

“We see opportunities from either the 1H2021 government land sales (GLS) program where recent sites in Lentor and Tampines may yield up to 1,200 units, or potentially the collective sales market (en-bloc sales) which has recently come back to life with a selected number of smaller developments sold en- bloc,” they add.

To the analysts, the uptrend in property prices in 2021 is led by “cost push” and “demand pull” factors, which Includes pent-up demand from buyers and a hike In construction costs due to higher material and labour costs.

The analysts also believe that policy tweaks may be possible as the property price index (PPI) and HDB Indexes rose 5% and 6% over the past six months.

“With 1Q2021 flash estimate of a rise in the property price index by 2.9% (or [around] 5.0% in the past 6 months), at the current rate, we believe there is a possibility that the PPI may run ahead of our assumed 3%-5% increase for 2021 and outpace the projected Gross Domestic Product (GDP) growth of 6.3% for 2021,” they write.

“With HDB prices also rising by 6% over the same period, we believe the risk of possible policy tweaks to slow the pace of increases in the PPI and HDB resale indexes may be high. A look at tightening measures in the past 15 years indicate that authorities acted when these indexes (PPI and HDB) rose by more than 6% and 7% respectively.”

Should that happen, developers’ share prices may dip, which is likely to be a knee jerk reaction from investors, say the analysts, who add that they “remain buyers on any dips”.

“This is given that most developers under our coverage (i) have substantially sold inventory that were sitting on their books, and (ii) are projected to deliver strong earnings recovery in 2021 led by the recovering commercial and hospitality segments.”

To the research team at OCBC Investment Research, it believes the “current property market upcycle has been driven largely by genuine homebuyers, especially aspiring HDB upgraders who are purchasing a private home for staying”.

Based on current price levels, the OCBC team has indicated that it prefers UOL Group, “given that it has been lowering its inventory risks and has also been seeking to unlock value for shareholders via redevelopment projects”.

“UOL’s net gearing ratio of 0.29 times as at Dec 31, 2020, is also at a very healthy level,” it adds.

OCBC has rated UOL “buy” with a target price or fair value of $8.91.

As at 11.57am, shares in APAC Realty, CDL, Bukit Sembawang and UOL are trading at 50.5 cents, $7.92, $4.67 and $7.89.