Singapore Developers - StocksBNB · 10/3/2016 · MSR extended to EC MSR now applies to loans of EC purchases Resale levy on EC Second-timer purchase of EC directly from developers

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Sector Report

Singapore Developers

3 Oct 16, 8.15am/11.15am Morning Call/Webinar



2

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.



Singapore Property

Yet to see the bottom

Peter Ng & Tan Dehong

Phillip Securities Research Pte Ltd

3 October 2016



Executive Condominiums (EC)



5

Record low supply of new HDBs over a 5 year period from 2006-2010

Public Housing in Singapore

10,755 12,690

22,072 26,196

37,860

23,942 19,799

31,584

11,027

5,987

18,055

28,125

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Average yearly supply Average yearly demand

Source: HDB, Phillip Securities Research (Singapore)



6

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

Public Housing in Singapore

28,322

20,000

21,000

22,000

23,000

24,000

25,000

26,000

27,000

28,000

29,000

Total Marriages

Source: SingStat, Phillip Securities Research (Singapore)



7

Reintroduced in 2010 after being phased out in 2008

Executive Condominiums (ECs)

2,535

4,936

3,337

2,505

3,750

1,7941,489

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2011 2012 2013 2014 2015 1H2016 >2017F

Number of Launched and Sold ECs

Launched Sold

Source: CEIC, Phillip SecuritiesResearch (Singapore)



8

Occupancy Rate at 86.2% at 2Q16 – 2,943 units unsold inventory, a high

since 2010


66%

98% 98%

68%

98%

47%

73%

66%

39%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bellewoods Bellewaters The Amore The Terrace Lake Life WestwoodResidences

TheBrownstone

The Vales Sol Acres

% S

old

ABSD Timeline

ABSD

Chargeskick in:

2Q2018 1Q2019

Source: HDB, URA, Phillip Securities Research (Singapore)



9

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

Total 1489Source: HDB, Phillip Securities Research (Singapore)



10

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


29%26%

17%

81%

38%

89%

14%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Signature atYishun

The Criterion Parc Life Wandervale The Visionaire Treasure Crest Northwave

% S

old

Sales Status of more recent EC launches

Source: HDB, URA, Phillip Securities Research (Singapore)

More recent EC launches:

September 2015 to current



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

Seller's Stamp Duty (ASSD) 1 Sell a property within 1st

year: pay amount same as buyer stamp duty (BSD)

Loan-to-value (LTV) adjustment 1 Reduced from 90% to 80%

SSD 2 1st year: pay amount equals to BSD, 2nd year: 2/3 BSD, 3rd year: 1/3 BSD

LTV adjustment 2 1st

loan: 80%, 2nd

loan: 70%

SSD 3 1st

year: 16% of purchase price, 2nd

year: 12%, 3rd

year: 8%, 4th

year: 4%

LTV adjustment 3 1st loan: 80%, 2nd loan: 60%

1st property - SC: 0%, PR: 0%, F: 10%

2nd property - SC: 0%, PR: 3%, F: 10%

3rd property - SC: 3%, PR: 3%, F: 10%

1st

loan: 80% and 60% if loan tenure > 30 years or borrower's age exceeds 65

when loan ends,2nd loan: 60% and 40% with same tenure and borrower's age conditions

1st

property SC: 0%, PR: 5%, F: 15%

2nd property SC: 7%, PR: 10%, F: 15%

3rd

property SC: 10%, PR: 5%, F: 15%

1st

loan: 80% and 60% with same tenure and borrower's age conditions

2nd loan: 50% and 40% with same tenure and borrower's age conditions

3rd

loan: 40% and 20% with same tenure and borrower's age conditions

Mortgage Servicing Ratio (MSR) adjustment 1Up to 35% (reduced from 40%) of gross monthly income (GMI) is allowed for

repayment of loans on HDB Flats

29-Jun-13Introduction of total debt servicing ratio (TDSR) to private

properties

Up to 60% of GMI is allowed for repayment of loans on a private property

28-Aug-13 MSR adjustment 2 MSR reduced to 30% from 35%

MSR extended to EC MSR now applies to loans of EC purchases

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)

20-Feb-10

30-Aug-10

14-Jan-11

8-Dec-11

6-Oct-12

12-Jan-13

9-Dec-13

ABSD adjustment 1

Introduction of Additional Buyer's Stamp Duty (ABSD)

LTV adjustment 4

LTV adjustment 5



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

• 1st year: 8%, 2nd year: 16%, 3rd 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

15

Source: REALIS, Phillip Securities Research (Singapore)

57.4%16.5%

8.2%

6.6%

-150%

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

350%

400%

0

1000

2000

3000

4000

5000

6000

7000

1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16

CCR RCR OCR YoY Change (RHS)


< 1 mil46%

1 - 1.25 mil20%

1.25 - 1.5 mil17%

1.5 - 2 mil12%

> 2 mil5%

Sale of units based on market segments Breakdown of new sales in the past four quarters (3Q15 and 2Q16)



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

16


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1Q13 1Q14 1Q15 1Q16

Core Central Region Rest of Central Region Outside Central Region


0

500

1000

1500

2000

2500

1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16

Number of unsold units Number of units sold by developers

Breakdown of new launches by market segment Developer sales of units and remaining unsold units in CCR



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

17


0

2

4

6

8

10

12

14

16

18

20

2012 2013 2015 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16


0

10

20

30

40

50

60

70

80

Number of transactions lodged at Ardmore Three and OUE Twin Peaks



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

18


0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

3Q06 3Q07 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15

Unsold but launched units Unsold and unlaunched units

Number of unsold units including those that have yet to be launched



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

19


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

SC PR Foreigner Company

Sales breakdown of residential property units (exclude ec) by residential status



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

20


2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16

CCR RCR OCR

Gross yield of residential property units (include EC)



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

21

Source: CEIC, Phillip Securities Research (Singapore)

3

4

5

6

7

8

9

10

55

65

75

85

95

105

115

125

1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16

Private residential property rental index (LHS) Private residential property vacany rate (RHS)

Source: Urban Redevelopment Authority (Singapore), Phillip Securities Research (Singapore)

11775

17461

15312

8761

5093

402

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

2H16 2017 2018 2019 2020 >2020

Private property (including EC) rental index and vacancy rate Pipeline supply of private residential property completions including EC



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

22

Source: CEIC, Bloomberg, Phillip Securities Research (Singapore)

0

100

200

300

400

1Q11 1Q12 1Q13 1Q14 1Q15 1Q16

Singapore Indonesia China Malaysia


0

500

1000

1500

2000

2500

3000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H16

PR Foreigner

Residential property price index of top three foreign homebuyers Annual sales volume of private residential properties of foreigners and PRs



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

23


0

20

40

60

80

100

120

140

160

180

0

5

10

15

20

25

30

35

40

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

Number of land sales (LHS) URA Property Price Index (RHS)

Relationship between land sales and URA property price index



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

24


0

100

200

300

400

500

600

700

800

900

1000

0

5000

10000

15000

20000

25000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H16

Number of units (LHS) FTSE Real Estate Index (RHS)


-40%

-20%

0%

20%

40%

60%

80%

100%

0

1000

2000

3000

4000

5000

6000

7000

8000

1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16

Core Central Region Rest of Central Region Outside Central Region YoY Change (RHS)

Relationship between number of units sold and FTSE Real Estate Index Launched but unsold units across market segments



Developments potentially to face QC extension charges

25

Project Developer Region Land Cost QC Deadline Total Units Sold Units Unsold Units % unsold

First year

QC Fee

(S$m)

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)



Developments potentially to face ABSD clawback

26

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, Phill ip Securities Research (Singapore)



FTSE Real Estate Holdings and Development Index

27

Source: Bloomberg, Phillip Securities Research (Singapore)

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

2008 2009 2010 2011 2012 2013 2014 2015 2016

Price to Book Ratio(FSTREH Index)

- 1 SD - 2 SD Mean + 1 SD + 2 SD



28

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

4.2 1.6 2.8 0.7 35.0

Source: Bloomberg, Phillip Securities Research (Singapore)

Average:



29

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.



30

Analysts Pei Sai Teng, Macro

Jeremy Ng, Technical Analysis

Jeremy Teong, Banking & Finance

Soh Lin Sin, Consumer | Healthcare

Richard Leow, Transport | REITs (Industrial)

Dehong Tan, REITs (Commercial, Retail, Healthcare) | Property

Peter Ng, Property | Infrastructure

Ho Kang Wei, US Equity

Chen Guangzhi, Oil and Gas | Energy

By Phillip Securities Research Mohamed Amiruddin, Operations Exec

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Documents

Singapore Developers - StocksBNB · 10/3/2016 · MSR extended to EC MSR now applies to loans of EC purchases Resale levy on EC Second-timer purchase of EC directly from developers