Sin­ga­pore home sales face a US$811mil lit­mus test

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PETALING JAYA: WCT Hold­ings Bhd shares rose on the an­nounce­ment of its 20%-stake JV in CORE Pre­cious De­vel­op­ment Sdn Bhd that will jointly de­velop a res­i­den­tial project in Tun Razak Ex­change (TRX) with China Com­mu­ni­ca­tions and Con­struc­tion Group (CCCG).

This first res­i­den­tial project at the TRX will carry an es­ti­mated gross de­vel­op­ment value (GDV) of RM1.1bil.

It would trans­late into a value of around RM1.5mil to RM1.7mil for the av­er­age sell­ing price.

In a press re­lease, WCT said the project con­sists of two ser­viced res­i­dence tow­ers and one ser­viced apart­ment tower and was ex­pected to be com­pleted by end of 2022.

Sales pre­view of the said project will SIN­GA­PORE: Barely a week into 2019 and Sin­ga­pore’s res­i­den­tial home sales mar­ket is fac­ing a S$1.1bil (US$811mil) lit­mus test. Hori­zon Tow­ers, an older-style build­ing near the pop­u­lar Or­chard Road shop­ping dis­trict, has gone on the mar­ket for re­de­vel­op­ment a third time after two failed at­tempts.

The sell­ers’ col­lec­tive has re­tained its re­serve price but other groups of home­own­ers also seek­ing so-called en-bloc deals are cut­ting their ask­ing bids in the hope de­vel­op­ers will bite.

For in­di­vid­u­als who have held apart­ments for sev­eral years and rid­den the prop­erty boom, the prof­its can be hand­some. En-bloc, or col­lec­tive, sales are where a group of apart­ments are sold to a com­mon de­vel­oper and the pro­ceeds di­vided among unit own­ers. (In gen­eral, if a de­vel­op­ment is more than 10 years old, at least 80% of own­ers must agree to a sale.)

But gov­ern­ment cool­ing mea­sures in­tro­duced in July that in­creased the stamp du­ties home builders need to pay when ac­quir­ing land have made mar­ket watch­ers scep­ti­cal about how many trans­ac­tions will be a suc­cess.

“Bil­lion-dol­lar en-bloc deals will be very hard to get through,” said Ni­cholas Mak, an ex­ec­u­tive di­rec­tor at real es­tate as­set man­ager ZACD Group.

“De­vel­op­ers are no longer land hun­gry and are more con­cerned about sell­ing ex­ist­ing projects.” be­gin in July 2019, while of­fi­cial launch is slated in Novem­ber 2019, ac­cord­ing to UOBKayHian.

The re­search house main­tained a “neu­tral” out­look on the an­nounce­ment, ow­ing to the over­hang in high rise projects.

“We do not ex­pect the project to be spared from the lull amid the over­hang high-rise res­i­den­tial is­sues in Kuala Lumpur (on the as­sump­tion this res­i­den­tial project of­fers the same value propo­si­tion like other prop­erty projects in Kuala Lumpur).

“The de­tails of the project are yet to be an­nounced to the pub­lic (i.e pric­ing) and we be­lieve bet­ter value propo­si­tions of­fered would be an added ad­van­tage for the project cou­pled with CCCG ef­forts to mar­ket its first res­i­den­tial flag­ship project in the over­seas mar­ket, in ad­di­tion to its strate­gic lo­ca­tion in TRX.”

MIDF Re­search, how­ever, said

it did not

Sin­ga­pore im­posed higher stamp du­ties and tougher loan-to-value rules in early July after res­i­den­tial prices in the city-state rose 7% in the first half of 2018. Ex­tra con­straints since then have in­cluded curbs on the num­ber of “shoe-box-sized” apart­ments, lim­it­ing trans­ac­tions at the cheaper end of the mar­ket.

That’s a par­tic­u­lar blow for en-bloc deals be­cause de­vel­op­ers often ac­quire older build­ings with larger units and then redo the floor sizes to ac­com­mo­date more dwellings.

The new guide­lines on size, out­lined in Oc­to­ber, ef­fec­tively cut the max­i­mum num­ber of apart­ments al­lowed in any one de­vel­op­ment by 18%.

The changes only af­fect projects out­side the city-state’s cen­tral area, and come into ef­fect later this month.

“With ex­pec­ta­tions of a slow­down in sales in 2019, de­vel­op­ers might re-think their land bank­ing strat­egy, or even stop look­ing al­to­gether,” said Derek Tan, an an­a­lyst at DBS Group Hold­ings Ltd.

“As the gov­ern­ment moves in with more re­stric­tive mea­sures to curb both de­mand and sup­ply, we ex­pect de­vel­op­ers to fo­cus on clear­ing in­ven­to­ries rather than adding more.”

The South-East Asian lender ex­pects new home sales to drop 20% this year to be­tween 7,500 and 8,500 units, and prices to slip as much as 3%.

Hori­zon Tow­ers was re­launched for

sale ex­pect ma­te­rial earn­ings im­pact from the land ac­qui­si­tion in the near term as earn­ings may start to kick in only from fi­nan­cial year (FY20) on­wards.”

The re­search house main­tains its earn­ing fore­cast for the fi­nan­cial year 2019 (FY19).

An­a­lysts at MIDF also stated that in ref­er­ence to its chan­nel check, the pur­chase price was lower in com­par­i­son with pre­vi­ous deals, with price tag av­er­aged at RM4,595 per sq ft in the pre­vi­ous cal­en­dar year.

WCT’s stock price spiked to 78.5 sen fol­low­ing the an­nounce­ment, with 69.96 mil­lion shares traded.

MIDF called for “buy” with an un­changed tar­get price of RM1.05, while UOBKayHian called for “hold” with a TP of RM0.79.

PublicIn­vest­ment Bank called for a “hold” on the stock with a tar­get price of 90 sen and JF Apex Re­search listed WCT as among the stocks to watch for. after an un­suc­cess­ful at­tempt last year.

The 99-year lease­hold es­tate, which was com­pleted in 1984, com­prises about 210 units and was most re­cently ren­o­vated in 2014.

The first at­tempt for an en-bloc sale was made a decade ago at S$500mil, but the trans­ac­tion fell through after a court ruled the sales process was im­prop­erly han­dled.

Park View Man­sions is an­other re­launch, but at a re­serve price that’s 22% lower. Gil­stead Man­sion, a con­do­minium near Sin­ga­pore’s Lit­tle In­dia dis­trict, re­duced its price guide by S$3mil to S$65mil and still couldn’t find a taker.

“Although some sites have slashed their re­serve prices, de­vel­op­ers have turned cau­tious and many won’t be in a hurry to bid for land un­less an at­trac­tive deal comes to mar­ket,” Chris­tine Li, head of re­search for Sin­ga­pore at Cush­man & Wake­field Inc, said.

De­vel­op­ers spent around S$30bil be­tween late 2016 and June last year ac­quir­ing land through gov­ern­ment ten­ders or re­de­vel­op­ment deals, one of the most-ac­tive pe­ri­ods since 2013, DBS said.

They’ll need to shell out sig­nif­i­cantly more after the hike in stamp du­ties, in­creas­ing busi­ness risk.

“The en-bloc out­look re­mains chal­leng­ing,” Li said. “There’s a mis­match in ex­pec­ta­tions be­tween de­vel­op­ers and sell­ers -- ask­ing prices are still rel­a­tively high and de­vel­op­ers are wary about pay­ing top dol­lar.” — Bloomberg SIN­GA­PORE: Fitch Rat­ings ex­pects Malaysia’s taka­ful seg­ment to ben­e­fit from the gov­ern­ment’s push for af­ford­able in­sur­ance and higher in­sur­ance pen­e­tra­tion, par­tic­u­larly as Mus­lims dom­i­nate the coun­try’s pop­u­la­tion.

Greater adop­tion of tech­nol­ogy – par­tic­u­larly in distri­bu­tion – will be im­por­tant for op­er­a­tors to cap­ture the un­tapped pop­u­la­tion seg­ments and younger con­sumers with greater cost-ef­fec­tive­ness

Fam­ily and gen­eral taka­ful busi­ness ex­panded by 12.9% and 7.1%, re­spec­tively, in first half 2018 (1H18), faster than the 5.4% and 0.9% in life and gen­eral in­sur­ance.

The sec­tor con­tin­ues to gain share in the do­mes­tic in­sur­ance mar­ket – fam­ily taka­ful ac­counted for 32% of the over­all life mar­ket, based on new busi­ness pre­mi­ums in 1H18 (2017: 30%).

The re­cently con­cluded spilt of com­pos­ite li­cences into sep­a­rate ones for fam­ily and gen­eral taka­ful op­er­a­tions is pos­i­tive for the over­all in­dus­try, as the higher cap­i­tal re­quire­ments en­cour­age more of a busi­ness fo­cus, as man­age­ment seeks to op­ti­mise re­turns on the in­creased cap­i­tal de­ployed.

The im­mi­nent in­tro­duc­tion of IFRS17 and the op­er­a­tional changes it en­tails rep­re­sent an­other chal­lenge for taka­ful op­er­a­tors and the broader in­sur­ance in­dus­try.

The changes may put pres­sure on profitabil­ity in the short term, but will pro­mote prod­uct in­no­va­tion, healthy com­pe­ti­tion and growth in the long term.

By TENNIELLE CHUA Ajay: We urge more banks to em­brace the plat­form, to reap economies of scale.

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