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New launches, healthy take-up rates to sustain residential developers in near-term: RHB

Michelle Zhu
Michelle Zhu • 2 min read
New launches, healthy take-up rates to sustain residential developers in near-term: RHB
SINGAPORE (Sept 11): RHB Research is maintaining “neutral” on the real estate sector with a flattish price outlook for 2H18, and expectations that primary transactions will decline 10% y-o-y in 2018 with no near-term catalysts for players with larger
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SINGAPORE (Sept 11): RHB Research is maintaining “neutral” on the real estate sector with a flattish price outlook for 2H18, and expectations that primary transactions will decline 10% y-o-y in 2018 with no near-term catalysts for players with larger exposure to the local residential sector.

The research house’s top “buy” pick is CapitaLand with a target price of $4, as it expects the stock to see minimal impact from the recent property cooling measures implemented by the Singapore government.

In a Tuesday report, analyst Vijay Natarajan says he thinks CapitaLand will also benefit from the continued build-up in recurring income base, and its diversified exposure.

APAC Realty, also rated “buy” with a target price of 77 cents, should benefit from sustained momentum in new launches combined with higher developer commissions, in his view.

Recalling a recent show flat visit at the 1206-unit JadeScape, Qingjian Realty’s redevelopment of the former Shunfu Ville Housing and Development Corp (HUDC) estate, the analyst highlights that the “fully packed” show flat with an estimated 500-700 people during his visit reaffirms his view that demand remains strong, if pricing and amenities are attractive.

“We noticed that the developer has lowered the indicative sales prices by 10%, in response to recent measures implemented by the government. The show flat was crowded with potential buyers, who we believe were drawn by the reasonable pricing and attractive location,” notes the analyst.

Natarajan’s also thinks JadeScape’s indicative average selling price (ASP) of about $1,550 psf is reasonable as it is 10% lower than the initial guidance of $1,700 psf, with early buyers to expect additional launch discounts of ~3%.

In his view, this makes for a competitive selling price compared to nearby new projects, such as Thomson Three, Sky Vue, Thomson Impressions and Sky Habitat units which are being transacted at $1,400-1,650 psf.

Further, citing EdgeProp’s estimation that JadeScape drew a crowd of nearly 9,000 on its preview weekend, the analysts expects a healthy take-up at the launch of the property. He believes more than 200 units will be sold on the opening day.

“Mayfair Gardens (387 units), a redevelopment by Oxley [unrated] is expected to be launched over the next few weeks. The take-up rates at these two launches should help to sustain the primary sales volume growth momentum in September,” Natarajan concludes.

As at 11.32am, shares in CapitaLand, APAC Realty and Oxley are trading at $3.28, 52 cents and 34 cents respectively.

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