New Additional Buyer’s Stamp Duty (ABSD). As we noted previously, the continued strength in private housing prices did test the resolve of the government in dishing out more policy measures. Apart from announcing more details of the 1H2012 GLS programme, we believe the government surprised the market by implementing more demand side measures on top of the gradual supply side policies in moderating private residential prices. From 8 Dec 2011, the government is imposing an Additional Buyer’s Stamp Duty (ABSD) on certain categories of residential purchases which will apply to the exercise of all options to purchase (See Figure 1) on top of the existing Buyer’s Stamp Duty. We continue to expect a prolonged period of gradual weakness in physical prices with supply side policies in play moving forward accentuated by the latest set of cooling measures, during which a lack investors’ interest is likely to persist for this sector. Maintain NEUTRAL on developers, sell CDL.
Broad based residential buying shows no let up; more demand side measures. Despite a slowdown in growth momentum, overall residential prices still rose +1.3%QoQ edging past the previous peak in 2Q08 by 15.9% with the mass market segment as the main driver as well as residential vacancy at all time lows. 3Q11 saw price increase of +2.1%QoQ and 3,082 units sold in the OCR in 3Q11, and 7,692 units in 9M11 surpassing the total of 7,296 units in 12M10. While foreign purchases of 1,222 units declined -15.5% QoQ in 3Q11, foreign buying from mainland Chinese buyers remain sustained. While supply side policies are likely gradual, we believe the recent continued strength in the private residential market led to the ABSD in a bid to further stem speculative buying and moderate prices. We expect this new policy to impact sentiment as well as prices and transaction volume, particularly the high-end segment.
1H12 GLS programme: more of the same. Following release of sites yielding c.14,195 units for the 2H11 GLS programme, the 1H12 GLS programme will again see c.14,100 units including 3,500 ECs to provide further housing supply in response to the strong residential take up within our expectations.
Higher discounts on developers, Sell CDL. We believe policy overhang will persist for developers, and with the latest set of cooling measures we raise our discount on RNAV pegged to 30% for the large-cap developers (see Figure 7) as well as higher discounts to the mid-cap developers. As such, we are downgrading Singapore residential barometer CDL to SELL, highlighting its significant highend residential exposure and view its relative outperformance unsustainable, as well as downgrading to Wing Tai to NEUTRAL with its focus on high-end residential exposure but potential downside priced in. Within the sector, our preferred pick is CapitaLand in which we continue to see value in its multi-geographical, multi-segment exposure and a well established asset recycling platform. Stock is trading 41% steep discount to RNAV and 0.79 P/B (against 5-yr median P/B of 1.34). Recent share buyback by the company vindicates value embedded in share price, which also may see re-rating from active capital deployment into attractive acquisitions moving forward. Keppel Land’s longer term asset allocation is still evolving which creates uncertainty for the stock, however we believe at current levels the negatives are likely priced in.
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