SINGAPORE (Apr 18): According to Deutsche Bank, the Singapore property market continues to show strength.

The research house has picked City Developments (CDL) and UOL Group as its top buys.

On Apr 12, Yanlord announced that the group and Hong Kong Land Holdings’ MCL Land have jointly won the tender for the en bloc sale of Tulip Garden with a bid of $906.9 million.

See: Yanlord-Hongkong Land JV wins Tulip Garden en bloc sale with $907 mil bid

The winning bid is approximately 20% above Tulip Garden’s reserve price of $753 million when it was put up for sale by tender in late February, translating to $1,790 psf per plot ratio, 5-17% higher than nearby transactions.

This is so far the second-largest collective sale, bringing YTD collective sales done to about $6.5 billion.

The site could yield 670 units, up from the current 162 units.

In a recent report by Deutsche Bank, analyst Joy Wang says, “We estimate a breakeven ASP of $2,200-2,300 psf, implying a potential selling price well above $2,500 psf.”

On the other hand, new property launches to date – including New Futura, The Tapestry, Park Place and Verandah Residences – have all seen strong responses with a sell-through rate of more than 70% at ASP, which is significantly higher than secondary pricing in the nearby area.

Previously launched projects and even unsold inventories are all seeing good interest levels.

“With continuous en-bloc taking away completed supply, developers are likely to gain more pricing power over the next 18-24 months. We also see upside risk to our current 10% ASP growth forecast,” says Wang.

Despite the strong performance the Singapore property market is experiencing, where are the stocks heading?

The analyst believes that the divergence in performance reflects increased concerns regarding potential government measures in response to rapid ASP growth; increased concerns about uncertainty on the interest rate outlook; and lowered risk tolerance as a result of ongoing macro events.

Although investors may remain uncertain on the developers in the near term, Wang sees a lengthening of the current virtual cycle for Singapore’s residential property market.

Meanwhile, policy measures are unlikely in the near term, especially with HDB re-sale pricing yet to bottom.

“Indeed, with the bulk of the en bloc money yet to be released and existing supply yet to be demolished, we are probably just at the beginning of this cycle,” adds Wang.

As at 3.00pm, shares in CDL and UOL are trading at $12.78 and $8.78, or 1.1 times and 0.7 times FY18 book, respectively.