3 Oct 16, 8.15am/11.15am Morning Call/Webinar Sector Report Singapore Developers
Disclaimer The information contained in this presentation has been obtained from public sources which Phillip Securities Pte Ltd ( PSPL ) has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the Research ) contained in this presentation are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in this presentation is subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. This presentation is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should seek advice from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. 2
Singapore Property Yet to see the bottom Peter Ng & Tan Dehong Phillip Securities Research Pte Ltd 3 October 2016
Executive Condominiums (EC)
Public Housing in Singapore Record low supply of new HDBs over a 5 year period from 2006-2010 70,000 Average yearly supply Average yearly demand 60,000 50,000 Source: HDB, Phillip Securities Research (Singapore) 40,000 30,000 20,000 10,000 10,755 12,690 22,072 26,196 37,860 23,942 19,799 31,584 11,027 5,987 18,055 28,125-5
Public Housing in Singapore Forecasted supply until 2018 expected to be sufficient to meet demand Look at Total Marriages for rough gauge of demand Newly weds likely biggest demand generator for new HDB 29,000 28,000 27,000 26,000 25,000 24,000 23,000 22,000 21,000 20,000 Total Marriages Source: SingStat, Phillip Securities Research (Singapore) 28,322 6
Executive Condominiums (ECs) Reintroduced in 2010 after being phased out in 2008 Number of Launched and Sold ECs 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Launched Sold 4,936 Source: CEIC, Phillip SecuritiesResearch (Singapore) 3,337 3,750 2,535 2,505 1,794 1,489 2011 2012 2013 2014 2015 1H2016 >2017F 7
% Sold Executive Condominiums (ECs) Occupancy Rate at 86.2% at 2Q16 2,943 units unsold inventory, a high since 2010 100% 90% 80% 70% ABSD Charges kick in: 2Q2018 66% 98% 98% ABSD Timeline 68% 98% Source: HDB, URA, Phillip Securities Research (Singapore) 73% 66% 1Q2019 60% 50% 47% 40% 39% 30% 20% 10% 0% Bellewoods Bellewaters The Amore The Terrace Lake Life Westwood Residences The Brownstone The Vales Sol Acres 8
Executive Condominiums (ECs) Remaining 3 plots of land for ECs unlaunched c.1,500 units Including launched but unsold inventory: Slightly >4,000 units, around 1.5x average annual demand since 2010 Date Tender Awarded Land Parcel Street Name Max Gross Floor Area (Sq m) Potential No. of Units 29/6/2016 Sengkang E20 Anchorvale Lane 63,044 573 29/12/2015 Hougang E6 Yio Chu Kang Road 51,584 469 19/5/2015 Choa Chu Kang E12 Choa Chu Kang Avenue 5 49,158 447 Source: HDB, Phillip Securities Research (Singapore) Total 1489 9
% Sold Executive Condominiums (ECs) Increased household salary ceiling from 3Q2015: S$14,000 (From S$12,000) 1H16 saw 1,841 units sold 72% of full year 2015 figure Slowdown in supply from 2017 to allow developers ample time to clear inventory 100% 90% 80% More recent EC launches: September 2015 to current Sales Status of more recent EC launches 81% 89% 70% 60% Source: HDB, URA, Phillip Securities Research (Singapore) 50% 40% 38% 30% 29% 26% 20% 10% 17% 14% 0% Signature at Yishun The Criterion Parc Life Wandervale The Visionaire Treasure Crest Northwave 10
Singapore Private Property
Map Location of market segments Source: Ming Property Singapore Core Central Region (CCR) Rest of Central Region (RCR) Outside Central Region (OCR)
Calendar of property cooling measures Date Name of Cooling Measure Details 20-Feb-10 30-Aug-10 14-Jan-11 8-Dec-11 6-Oct-12 12-Jan-13 Seller's Stamp Duty (ASSD) 1 Sell a property within 1 st year: pay amount same as buyer stamp duty (BSD) Loan-to-value (LTV) adjustment 1 Reduced from 90% to 80% SSD 2 1 st year: pay amount equals to BSD, 2 nd year: 2/3 BSD, 3 rd year: 1/3 BSD LTV adjustment 2 1 st loan: 80%, 2 nd loan: 70% SSD 3 1 st year: 16% of purchase price, 2 nd year: 12%, 3 rd year: 8%, 4 th year: 4% LTV adjustment 3 1 st loan: 80%, 2 nd loan: 60% Introduction of Additional Buyer's Stamp Duty (ABSD) LTV adjustment 4 ABSD adjustment 1 LTV adjustment 5 1 st property - SC: 0%, PR: 0%, F: 10% 2 nd property - SC: 0%, PR: 3%, F: 10% 3 rd property - SC: 3%, PR: 3%, F: 10% 1 st loan: 80% and 60% if loan tenure > 30 years or borrower's age exceeds 65 when loan ends, 2 nd loan: 60% and 40% with same tenure and borrower's age conditions 1 st property SC: 0%, PR: 5%, F: 15% 2 nd property SC: 7%, PR: 10%, F: 15% 3 rd property SC: 10%, PR: 5%, F: 15% 1 st loan: 80% and 60% with same tenure and borrower's age conditions 2 nd loan: 50% and 40% with same tenure and borrower's age conditions 3 rd loan: 40% and 20% with same tenure and borrower's age conditions Mortgage Servicing Ratio (MSR) adjustment 1 Up to 35% (reduced from 40%) of gross monthly income (GMI) is allowed for repayment of loans on HDB Flats 29-Jun-13 Introduction of total debt servicing ratio (TDSR) to private Up to 60% of GMI is allowed for repayment of loans on a private property properties 28-Aug-13 MSR adjustment 2 MSR reduced to 30% from 35% MSR extended to EC MSR now applies to loans of EC purchases 9-Dec-13 Resale levy on EC Second-timer purchase of EC directly from developers are required to pay resale levy Source: Monetary Authority of Singapore, Housing Development Board, Phillip Securities Research (Singapore)
QC vs ABSD Qualifying Certficate (QC) Obtain Temporary Occupation Permit (TOP) within 5 years from land purchase date Complete sales of all units within 2 years from TOP If unable to sell all, developer can pay a pro-rated QC extension charge 1 st year: 8%, 2 nd year: 16%, 3 rd and subsequent year: 24% of land cost Additional Buyer s Stamp Duty (ABSD) Complete both sale and construction within 5 years from land purchase date 15% on land cost + 5% interest per annum upon incurring Developer will still pay the full ABSD amount even if there is 1 unit left unsold 14
The recent quarters RCR and OCR sales from 3Q15 to 2Q16 made up 82% of total sales volume 46% of total transactions were from properties of lower sales value (<S$1m) Sales mix is likely to continue amid constraint from the 60% TDSR property cooling measure Sale of units based on market segments Breakdown of new sales in the past four quarters (3Q15 and 2Q16) 7000 6000 400% 350% 300% 1.5-2 mil 12% > 2 mil 5% 5000 250% 200% 4000 3000 2000 57.4% 150% 16.5% 100% 8.2% 6.6% 50% 0% 1.25-1.5 mil 17% < 1 mil 46% 1000-50% -100% 0 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 CCR RCR OCR YoY Change (RHS) Source: REALIS, Phillip Securities Research (Singapore) -150% 1-1.25 mil 20% Source: REALIS, Phillip Securities Research (Singapore) 15
Launches in the different market segments Developers have launched more than 75 percent of new units in the RCR and OCR market segments in the past 6 quarters since 1Q15 Trend should continue for next few years from low land sales in CCR Recent CCR land sale in Jul-16 and the previous one was in Sep-13 Developers remain cautious due to oversupply in CCR 60% TDSR will continue to weigh on CCR segment due to higher prices Breakdown of new launches by market segment 100% Developer sales of units and remaining unsold units in CCR 2500 90% 80% 2000 70% 60% 1500 50% 40% 1000 30% 20% 500 10% 0% 1Q13 1Q14 1Q15 1Q16 0 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 Core Central Region Rest of Central Region Outside Central Region Source: REALIS, Phillip Securities Research (Singapore) Number of unsold units Source: REALIS, Phillip Securities Research (Singapore) Number of units sold by developers 16
Creative marketing schemes Developers have been exploring creative marketing schemes to boost sales Ardmore Three: ABSD absorption package, OUE Twin Peaks: deferred payment scheme Not likely to sustain sales as shown in sales volume Number of transactions lodged at Ardmore Three and OUE Twin Peaks 20 18 80 70 16 60 14 12 10 8 6 4 50 40 30 20 10 2 0 0 2012 2013 2015 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Source: REALIS, Phillip Securities Research (Singapore) Source: REALIS, Phillip Securities Research (Singapore) 17
Large supply of unsold inventory likely to deter upside in ASP Total unsold units standing at 13,000 units and is at a multi-year high The presence of stubborn inventory and likely to put a cap on Average Selling Price (ASP) gains We expect developer s margin to compress further Unsold units are gradually being absorbed SG Government has no incentive to unwind cooling measures Number of unsold units including those that have yet to be launched 20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 3Q06 3Q07 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 Unsold but launched units Unsold and unlaunched units Source: REALIS, Phillip Securities Research (Singapore) 18
Property purchases driven by investment Intent Singaporeans took up the majority of new property units (as much as 92%) High ownership rate in SG suggests homebuyers are snapping up homes for investments i.e. rental or price appreciation Sales breakdown of residential property units (exclude ec) by residential status 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% SC PR Foreigner Company Source: REALIS, Phillip Securities Research (Singapore) 19
RCR properties appear to be most attractive among all RCR properties have been offering the highest median gross yield Two factors: higher rental matched with lower price appreciation Median rental grew 70%, 10 ppts higher than other segments Median prices appreciated 50%, compared to 60% for CCR and 90% for OCR Gross yield of residential property units (include EC) 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 CCR RCR OCR Source: REALIS, Phillip Securities Research (Singapore) 20
Rental market under pressured Rental declined the most since the 08 GFC Decline was led by higher vacancy rates in private resi properties and a larger pool of new units entering the market Expecting rental demand to be unable to keep up as the SG Government continues to clamp down on foreign labour pool Private property (including EC) rental index and vacancy rate 125 10 Pipeline supply of private residential property completions including EC 20000 115 9 18000 17461 105 8 16000 15312 14000 95 7 12000 11775 85 6 10000 8761 75 5 8000 65 4 6000 4000 5093 55 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 Private residential property rental index (LHS) Private residential property vacany rate (RHS) Source: CEIC, Phillip Securities Research (Singapore) 3 2000 402 0 2H16 2017 2018 2019 2020 >2020 Source: Urban Redevelopment Authority (Singapore), Phillip Securities Research (Singapore) 21
SG private property performance lagging behind foreign markets Top 3 nationalities: Malaysians, Indonesians and Chinese SG property stayed flat amid the slew of cooling measures that were introduced We expect demand for private residential properties to extend declines at least until cooling measures are lifted Residential property price index of top three foreign homebuyers 400 Annual sales volume of private residential properties of foreigners and PRs 3000 300 2500 2000 200 1500 100 1000 500 0 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 Singapore Indonesia China Malaysia Source: CEIC, Bloomberg, Phillip Securities Research (Singapore) 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H16 PR Foreigner Source: REALIS, Phillip Securities Research (Singapore) 22
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H16 Scarcity of land sales under GLS signals weakness Periods of higher land sales typically led to decline in property prices In 1H16, Government Land Sales (GLS) is close to a 12-year low since 2004 Low volume in land sales reflect weak sentiments as developers remain cautious on land acquisitions and slow absorption rate of unsold units Relationship between land sales and URA property price index 40 35 30 25 20 15 10 5 0 180 160 140 120 100 80 60 40 20 0 Number of land sales (LHS) URA Property Price Index (RHS) Source: REALIS, Phillip Securities Research (Singapore) 23
Developers share price driven by sales volume Historical strong correlation between developer share price performance and sales volume; sales volume close to 10-year low Major catalyst to boost sales volume is unwinding existing property cooling measures Home prices outpaced wage growth (70% vs 60%) in past 10 years between 2006 and 2015 Premature for SG Government to unwind cooling measures Relationship between number of units sold and FTSE Real Estate Index 25000 1000 8000 Launched but unsold units across market segments 100% 20000 900 7000 800 80% 6000 700 60% 15000 10000 5000 600 5000 500 4000 400 3000 300 2000 40% 20% 0% 100 1000-20% 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H16 Number of units (LHS) FTSE Real Estate Index (RHS) 0 0 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 Core Central Region Rest of Central Region Outside Central Region YoY Change (RHS) -40% Source: REALIS, Phillip Securities Research (Singapore) Source: REALIS, Phillip Securities Research (Singapore) 24
Developments potentially to face QC extension charges Project Developer Region Land Cost QC Deadline Total Units Sold Units Unsold Units % unsold iliv @ Grange Heeton Holdings CCR 73 Oct-15 30 0 30 100% 5.8 Tomlinson Heights Hotel Properties CCR 52 Mar-16 70 44 26 37% 1.5 TwentyOne Angullia Park China Sonangol CCR 228 Apr-16 54 11 43 80% 14.5 Le Nouvel Ardmore Wing Tai CCR 201 Apr-16 43 3 40 93% 15.0 Starlight Suites King Wan & TA Corporation CCR 120 May-16 105 76 29 28% 2.7 Waterscape At Cavenagh Hiap Hoe CCR 119 Sep-16 200 151 49 25% 2.3 The Peak @ Cairnhill I Tee International and TG Development CCR 17 Sep-16 52 32 20 38% 0.5 The Interlace CapitaLand & Hotel Properties RCR 548 Sep-16 1,040 919 121 12% 5.1 d'leedon CapitaLand & Hotel Properties CCR 1339 Oct-16 1,715 1540 175 10% 10.9 Nouvel 18 CDL CCR 478 Nov-16 156 0 156 100% 38.2 Ardmore Three Wheelock Properties CCR 180 Dec-16 84 49 35 42% 6.0 OUE Twin Peaks OUE Ltd CCR 625 Feb-17 462 254 208 45% 22.5 Leedon Residence Guocoland CCR 835 Jun-17 381 253 128 34% 22.4 Source: URA, Phillip Securities Research (Singapore) QC Fee (S$m) 25
Developments potentially to face ABSD clawback Project Developer Region Land Awarded Land cost (S$m) ABSD Deadline Total units Sold Unsold % unsold Estimated ABSD (S$m) Michaels' Residences SCB Terraform OCR Dec-11 71 Dec-16 40 12 28 70% 8.84 Robin Residences Sing Holdings CCR Dec-11 52 Dec-16 134 92 42 31% 6.47 The Trilinq IOI OCR Jan-12 408 Jan-17 755 322 433 57% 50.80 # 1 Suites The One Development RCR Jan-12 26 Jan-17 112 88 24 21% 3.24 Ascent @ 456 Quest Homes RCR Jan-12 24 Jan-17 28 16 12 43% 2.99 Mon Jervois SingLand CCR Feb-12 119 Feb-17 109 52 57 52% 14.82 Robin Suites Goldhill Cap & Robin 25 CCR Feb-12 54 Feb-17 92 69 23 25% 6.72 Kingsford.Hillview Peak Kingsford Development OCR Mar-12 243 Mar-17 512 425 87 17% 30.25 Floraview Oxley, Unique and Goldprime OCR Mar-12 96 Mar-17 90 54 36 40% 11.95 The Quinn Top Global OCR Mar-12 85 Mar-17 139 102 37 27% 10.58 The Bently Residences@Kovan Goodland Group OCR Apr-12 27 Apr-17 48 38 10 21% 3.36 Vue 8 Residence Capital Development OCR Jun-12 211 Jun-17 463 341 122 26% 26.27 Pollen & Bleu SingLand CCR Jun-12 113 Jun-17 106 13 93 88% 14.07 Neem Tree Aylesbury RCR Jun-12 46 Jun-17 84 19 65 77% 5.73 Liv on Wilkie Roxy-Pacific and Harry Lin CCR Aug-12 33 Aug-17 81 69 12 15% 4.11 The Crest Wing Tai, Metro & UE RCR Sep-12 516 Sep-17 469 124 345 74% 64.24 The Venue Residences CDL & Hong Leong RCR Sep-12 245 Sep-17 266 130 136 51% 30.50 The Creek @ Bukit Chiu Teng Group RCR Sep-12 192 Sep-17 260 138 122 47% 23.90 The Siena Far East CCR Sep-12 46 Sep-17 54 42 12 22% 5.73 One Surin ACT Holdings OCR Sep-12 38 Sep-17 27 7 20 74% 4.73 Rezi 3Two TEE, KSH and Heeton RCR Sep-12 23 Sep-17 65 49 16 25% 2.86 The Glades Keppel Land & China Vanke OCR Oct-12 435 Oct-17 726 493 233 32% 54.16 The Rise @ Oxley - Residences Oxley Holdings CCR Nov-12 130 Nov-17 120 77 43 36% 16.19 Alex Residences SingLand RCR Dec-12 333 Dec-17 429 262 167 39% 41.46 Source: URA, Phillip Securities Research (Singapore) 26
FTSE Real Estate Holdings and Development Index 1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 0.4 2008 2009 2010 2011 2012 2013 2014 2015 2016 Price to Book Ratio (FSTREH Index) - 1 SD - 2 SD Mean + 1 SD + 2 SD Source: Bloomberg, Phillip Securities Research (Singapore) 27
Peer Comparison Table Name Mkt Cap (S$'mn) Last Px (S$) ROE (%) ROA (%) Dividend Yield (%) Price-to-book Ratio (X) Gearing (%) CAPITALAND LTD 13,432.5 3.17 4.2 1.5 2.8 0.78 33.9 CITY DEVELOPMENTS LTD 8,165.5 8.98 6.2 2.8 1.8 0.83 31.9 FRASERS CENTREPOINT LTD 4,321.0 1.49 7.6 3.5 5.8 0.70 41.2 UOL GROUP LTD 4,529.6 5.62 4.4 3.0 2.7 0.56 23.5 WHEELOCK PROPERTIES (S) LTD 1,770.9 1.48 1.9 1.1 4.1 0.58 12.9 WING TAI HOLDINGS LTD 1,306.4 1.69 0.2 0.1 1.8 0.40 27.7 GUOCOLAND LTD 2,366.6 2.00 4.0 1.4 2.5 0.63 48.4 TEE INTERNATIONAL LTD 110.6 0.22 8.6 1.5 3.2 1.11 46.4 OUE LTD 1,578.2 1.75 3.7 1.7 4.0 0.36 38.9 HOTEL PROPERTIES LTD 1,825.5 3.51 4.9 2.5 2.3 1.04 34.7 HIAP HOE LTD 326.3 0.69 1.0-0.5 1.4 0.51 35.0 HEETON HOLDINGS LTD 139.8 0.43 3.8 0.7 1.4 0.45 45.8 Average: 4.2 1.6 2.8 0.7 35.0 Source: Bloomberg, Phillip Securities Research (Singapore) 28
Disclaimer The information contained in this presentation has been obtained from public sources which Phillip Securities Pte Ltd ( PSPL ) has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the Research ) contained in this presentation are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in this presentation is subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. This presentation is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should seek advice from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. 29
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