Property stocks soar amid rise in collective sales

Property stocks soar amid rise in collective sales

Oct 7, 2017

Real estate index up 20.6% from start of year as market recovers

Jacqueline Woo


Real estate stocks charged ahead yesterday on more signs of an upswing in the property market.

Blue chip UOL Group stood out as one of the day's biggest winners, with its shares surging 4.3 per cent or 35 cents to $8.55 - lifting returns by a whopping 42.7 per cent since the start of the year.

City Developments (CDL) added 1.7 per cent or 19 cents to $11.60, while Wheelock Properties shot up 3.9 per cent or 7.5 cents to $1.98.

Market sentiment has been on the mend since the start of the year, with the benchmark FTSE ST Real Estate Index up by 20.6 per cent.

It enjoyed a further boost with the success of two large sales en bloc this week. On Wednesday, Amber Park, a 200-unit development in Amber Gardens, was sold to CDL through its Cityzens Development unit and a joint-venture partner from parent Hong Leong Group for $906.7 million, marking the biggest freehold collective sale deal seen here.

A day later, the Normanton Park estate near Kent Ridge Park was sold for a hefty $830.1 million to Chinese firm Kingsford Huray Development.

Collective sales of residential sites have hit $5.2 billion across 25 deals this year, four times the value seen in the same period last year - a figure that could rise further in light of a slew of prospective deals for the next three months, said JP Morgan in a report yesterday.

This already puts 2017 as the third-biggest year of sales en bloc after 2007, which holds the record at $12.2 billion, followed by 2006 at $8.2 billion.

JP Morgan analyst Brandon Lee said in the report that the 25 transactions this year - well up on the 10 in all of last year - provides clear evidence of another collective sale cycle in the making, which traditionally lasts at least three years.

He believes the collective sale frenzy is "sustainable" given that the number of unsold near-term residential units in the pipeline, excluding executive condominiums, has fallen for three straight quarters to an all-time low, reaching 10,303 units as at the second quarter of this year.

The bank's own estimation puts this figure even lower at 7,749 units as at August. At the same time, developers are not replenishing their land banks enough to offset the number of units they are selling, a situation worsened due to insufficient government land.

All these factors indicate that the collective sale fever will continue, Mr Lee said, adding: "We expect this to result in immediate displacement demand, improved vacancy (rate) and higher selling prices."

A collective sale cycle getting started could be hindered by more hikes in development charges, along with a sizeable launch pipeline in 2019 to 2020, said Mr Lee.

But he added: "Coupled with the nascent upcycle, mediocre overseas performance and shareholders' continued hunt for residential proxies, we expect listed developers to become more pro-active in (sales) en bloc over the next six to 18 months."

Similarly, Bank of Singapore chief investment officer Johan Jooste said in a note earlier this week that the property market is "at a turning point". He said the bank has been keeping an "overweight" call on the local property sector since the second quarter, due to the cut in housing supply and rising collective sale activities, adding that it believes "the bottom is actually behind us".

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Buoyant en bloc market lifts CDL, UOL

CDL racks up second-highest trading value of the day, UOL joins the ranks of the top 5 gainers

Oct 07, 2017

Stephanie Luo


CITY Developments Limited (CDL) and UOL Group enjoyed a bump in share price and trading activity on Friday, driven by a buoyant en bloc market that some observers think is sustainable.

On Friday, CDL hit a high of S$11.68 before closing at S$11.60, up 1.67 per cent from Thursday, with about 5.6 million shares worth S$65.3 million changing hands. CDL's average three-month volume is 1.7 million shares.

The stock finished second in terms of value, after Singtel that recorded S$128.5 million. Others among the top five include OCBC Bank and DBS Bank.

UOL rose as much as 4.3 per cent to close at S$8.55 on Friday, with about four million shares worth S$33.5 million changing hands. The stock, which has an average three-month volume of 1.15 million shares, hit a high of S$8.56.

UOL was one of the top five absolute gainers, alongside Jardine Cycle & Carriage and Jardine Strategic Holdings Limited.

On Wednesday, CDL announced that its wholly-owned subsidiary, Cityzens Development Pte Ltd, and joint-venture partner Hong Realty (Private) Limited had successfully tendered for the collective sale of the Amber Park condominium site for S$906.7 million (or S$1,515 per square foot per plot ratio), making it Singapore's largest freehold collective sale by dollar value to-date. The buyers beat seven others to clinch the plot. Cityzens Development and Hong Realty will respectively hold a 80:20 stake in the project.

Last month, UOL announced that its associated company is set to purchase en bloc the freehold property of Nanak Mansions at S$201.08 million after putting in the highest bid in a tender. That works out to S$1,429 psf ppr inclusive of development charge. According to JLL senior consultant Karamjit Singh, the tender attracted six bids.

With en bloc fever now hot in Singapore, the recent string of deals have lifted market sentiment, with the property industry poised for a rebound.

Analysts from JP Morgan Securities Singapore said in a report on Thursday: "Collective sales have quadrupled year on year to S$5.2 billion year-to-date, suggesting the start of a three-year en bloc cycle which we think is sustainable on record-low unsold near-term pipeline, perpetually low replenishment-to-sales ratio and listed developers' record-low landbanks."

The report added that CDL was the "best proxy to the multi-year residential upcycle", where prices should rise 12-16 per cent over 2017 to 2019.

"CDL has the largest landbank of 3,169 units among developers, which we expect to further expand given its renewed focus on Singapore, healthy balance sheet and Amber Park's success resulting in positive outcome for prospective en blocs."