More attractive land prices for Singapore tenders ahead, says Citi, giving its top developer pick

[SINGAPORE] More attractive land prices could be on the horizon for eight upcoming government tenders from May to September this year, in support of developers’ land replenishment exercises, said Citi equity research analyst Brandon Lee in his Thursday (May 15) report.

Recent data from the Urban Redevelopment Authority showed that there were 663 private homes sold in April by Singapore developers, reflecting a 9 per cent month-on-month decline but 120 per cent year-on-year increase.

About 759 units including executive condominiums were sold in April, compared to 1,344 units launched, versus 1,510 units sold and 1,315 units launched in March. In April 2024, 363 units were sold and 278 units were launched.

This came on the back of fewer popular new launches in the mass market, in addition to weaker sentiment from trade-related issues, wrote Lee.

“A majority – or 59 per cent – of new launches are within the less popular high-end segment, and only four are in the mid-end of major mass market in Upper Thomson Road, Canberra Crescent, De Souza Avenue and Margaret Drive for the rest of the year,” the analyst observed.

Therefore, he believes that average monthly primary sales ahead will likely hover at the 500 to 700 unit level, as compared to the 1,000 to 1,600 unit level from January to February this year, supported mainly by soft mortgage rates.

The three newly launched projects in April only witnessed an overall initial take-up of 34 per cent during the first week of their launches, before improving to 38 per cent by the end of the month, compared to 81 per cent for the three new projects released in March.

The top sellers were 937-unit One Marina Gardens, with 384 units sold for a median price of S$2,948 per square foot (psf) with a 41 per cent take-up rate, followed by 358-unit Bloomsbury Residences, with 107 units sold for S$2,454 psf at a 30 per cent take-up rate. They collectively contributed 65 per cent of total volumes, noted Lee.

By segment, the mid-end market accounted for 73 per cent of sales, followed by mass-market at 25 per cent, and high-end market at 2 per cent.

UOL strength reflected as a “direct proxy” to property in Singapore

UOL Group is Citi’s top developer pick, with a target price of S$9.20 set at a 40 per cent discount to its restated net asset value (RNAV) of S$15.34.

“Both UOL and City Developments Limited (CDL) are the most direct proxies to Singapore property, in view of their respective 86 per cent and 52 per cent exposure,” he said.

Citi’s target price for CDL is also pegged at a 40 per cent discount to its RNAV.

“We expect UOL to benefit from a decent take-up for two of its residential launches in the second half of 2024, and expectations of more redevelopments of its aged commercial properties,” wrote Lee.

Some key downside risks to UOL’s performance include capital rate expansion as interest rates rise; a prolonged period of existing cooling measures; and potential economic slowdown, which would lead to weaker-than-expected office and retail net absorption.