SINGAPORE (Sept 25): Maybank Kim Eng expects a busy month ahead for the local property market.
The brokerage cum research house is predicting strong bids for the tender for a prime commercial site on Beach Road which will close this Thursday as prime commercial land remains in short supply.
That would be an expression of developers’ confidence in the sector’s outlook, providing a positive push for office property stocks.
Developers of the Beach Road project has committed to a minimum price of $1.138 billion or $1,197 psf ppr. Consultants are calling for a top bid of $1,262-$1,400 psf.
“With a potential rebound in Singapore’s office market, we see rents reaching $11 psf by the time the project is completed in 2022,” says analyst Derrick Heng in his Friday report.
In addition, another nine en bloc deals will close by Oct 16.
Other than the 7,500 units from deals concluded year to date, en bloc deals in the market today could offer another 6,000 units to developers’ inventories.
Another 20 plus deals at various stages of the process could add a further 17,500 units.
While developers are spoilt for choice in the en bloc market, we believe listed players will be more cautious in bidding for larger sites due to potential penalties under Qualifying Certificate (QC) rules.
While these alone are not enough to trigger privatisation, Heng says some developers could mull a delisting if this “unfair” advantage is not addressed by regulators.
In that case, Ho Bee is arguably the strongest candidate for this.
“We remain positive on the sector, expecting catalysts from a rebound in property prices,” says Heng.
UOL and City Developments are its preferred large-cap developers while Guocoland offers attractive relative value for investors with lower liquidity thresholds.
Meanwhile, CapitaLand Commercial Trust is its top office REIT for upside from its Golden Shoe redevelopment.
As at 1.23pm, shares in Ho Bee, UOL, CityDev and Guocoland are trading at $2.35, $8.06, $11.19 and $2.29 respectively.
Units in CapitaLand Commercial Trust are trading at $1.69.