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14-04-12, 23:06
http://www.businesstimes.com.sg/archive/saturday/premium/wealth/others/shares-asian-developers-may-be-dampened-h2-ubs
Published April 07, 2012
REAL ESTATE
Shares of Asian developers may be dampened in H2: UBS
S'pore ranked last among 8 Asian nations in terms of providing investment opportunities
By Mindy Tan
(Singapore)
INCREASING government intervention and potentially higher mortgage rates could dampen the share price performance of Asian developers in the second half of this year, said UBS in a report issued earlier this week.
Singapore, in particular, was ranked last in a list of eight Asian countries, based on which provided the best investment opportunities.
Based on a ranking model created by Swiss bank UBS to assess macro conditions, market fundamentals (affordability, demand/ supply, and market structure), credit availability, profitability (margins and landbank), and valuations (where a higher score bodes well), Singapore scored particularly low in 'affordability' (2.3), and 'demand/supply and development cycle' (2.3).
According to UBS, property prices in Singapore have outpaced household income 2.1 per cent per annum over the past 10 years, with affordability deteriorating since 2005.
'Along with concerns over safeguarding the banking sector should the cycle turn, this has sparked government policy measures,' noted UBS, citing the restricted loan-to-value limits on mortgages, the additional buyer's stamp duty charge, and the additional supply of land and HDB units.
'Though markets including Hong Kong and Singapore are moving towards concerning levels on one or two matrices, none of the Asian markets look to be in 'bubble-like' ranges,' it added.
Another area of concern lies in potential oversupply.
Singapore's delivery of 12,300 residential units per annum (6,400 private) over the past five years has been substantially below the demand of around 35,000 units, which resulted in a strong appreciation of housing prices. To remedy this, government initiatives have focused on increasing the sale of land available for residential development, including boosting the construction of HDB flats.
As a result, supply is expected to reach 40,000 units in 2014 and 45,000 in 2015, said UBS.
'We assume an 8 to 10 per cent decline in physical prices in 2012. Given the doubling of new supply in 2014 and further growth in 2015, there are risks of the market moving into oversupply,' it added.
'Developers will be maintaining strong launch momentum in the months ahead. Should monthly sales remain high and prices firm, we believe there is risk of another round of government policy measures, perhaps targeting local buyers,' said UBS in its report.
A separate report issued by Citigroup Global Markets agreed, citing low price quantum with shrinking unit size, a low mortgage rate of one per cent, coupled with strong median household income growth of 11 per cent which has made properties affordable to a bigger pool of potential investors.
'Based on our estimates, the potential pool of buyers has risen by at least 70 per cent since 3Q09 despite the 30 per cent rise in the price of OCR properties,' said the report.
OCR properties are those Outside Central Region.
'We are of the view that strong interest in suburban private properties is unlikely to recede. We are concerned about rising investment demand and heightened policy risks. With policy overhang, developers are likely to remain range-bound,' the report added.
Based on UBS's ranking system, China, the Philippines and Indonesia were the top three countries in terms of markets with the best investment prospects.
Published April 07, 2012
REAL ESTATE
Shares of Asian developers may be dampened in H2: UBS
S'pore ranked last among 8 Asian nations in terms of providing investment opportunities
By Mindy Tan
(Singapore)
INCREASING government intervention and potentially higher mortgage rates could dampen the share price performance of Asian developers in the second half of this year, said UBS in a report issued earlier this week.
Singapore, in particular, was ranked last in a list of eight Asian countries, based on which provided the best investment opportunities.
Based on a ranking model created by Swiss bank UBS to assess macro conditions, market fundamentals (affordability, demand/ supply, and market structure), credit availability, profitability (margins and landbank), and valuations (where a higher score bodes well), Singapore scored particularly low in 'affordability' (2.3), and 'demand/supply and development cycle' (2.3).
According to UBS, property prices in Singapore have outpaced household income 2.1 per cent per annum over the past 10 years, with affordability deteriorating since 2005.
'Along with concerns over safeguarding the banking sector should the cycle turn, this has sparked government policy measures,' noted UBS, citing the restricted loan-to-value limits on mortgages, the additional buyer's stamp duty charge, and the additional supply of land and HDB units.
'Though markets including Hong Kong and Singapore are moving towards concerning levels on one or two matrices, none of the Asian markets look to be in 'bubble-like' ranges,' it added.
Another area of concern lies in potential oversupply.
Singapore's delivery of 12,300 residential units per annum (6,400 private) over the past five years has been substantially below the demand of around 35,000 units, which resulted in a strong appreciation of housing prices. To remedy this, government initiatives have focused on increasing the sale of land available for residential development, including boosting the construction of HDB flats.
As a result, supply is expected to reach 40,000 units in 2014 and 45,000 in 2015, said UBS.
'We assume an 8 to 10 per cent decline in physical prices in 2012. Given the doubling of new supply in 2014 and further growth in 2015, there are risks of the market moving into oversupply,' it added.
'Developers will be maintaining strong launch momentum in the months ahead. Should monthly sales remain high and prices firm, we believe there is risk of another round of government policy measures, perhaps targeting local buyers,' said UBS in its report.
A separate report issued by Citigroup Global Markets agreed, citing low price quantum with shrinking unit size, a low mortgage rate of one per cent, coupled with strong median household income growth of 11 per cent which has made properties affordable to a bigger pool of potential investors.
'Based on our estimates, the potential pool of buyers has risen by at least 70 per cent since 3Q09 despite the 30 per cent rise in the price of OCR properties,' said the report.
OCR properties are those Outside Central Region.
'We are of the view that strong interest in suburban private properties is unlikely to recede. We are concerned about rising investment demand and heightened policy risks. With policy overhang, developers are likely to remain range-bound,' the report added.
Based on UBS's ranking system, China, the Philippines and Indonesia were the top three countries in terms of markets with the best investment prospects.