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Thread: Private housing crunch on the cards: JP Morgan

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    Default Private housing crunch on the cards: JP Morgan

    Published July 12, 2007

    Private housing crunch on the cards: JP Morgan

    Much of expected supply to kick in only about 1-2 years from now

    By UMA SHANKARI


    SINGAPORE could face a private housing supply crunch in the short term even though as many as 57,900 units are under construction or planned, says JP Morgan in a report.

    Supply should 'normalise' in the next 12-18 months, says the investment bank, pointing out that 4,400 units were added to housing stock in just the first quarter of 2007.

    But much of the supply will only kick in about one or two years from now. 'Most of the inventory will be brought on-line over the next year or two for completion post-2010, with 16,800 private residential properties due in 2009.'

    At end-2006, about 14,200 available units were unoccupied and a further 4,100 were due to be completed by this year-end.

    'These in total will yield 18,400 ready-to-occupy units to meet the demand from those who need a completed unit to occupy in 2007,' says JP Morgan.

    Its analysts, Christopher Gee and Joy Wang, point out that their estimates for the private housing pipeline do not include the supply from the government land sales programme, which could yield another 3,500 units. Nor do their figures take into consideration an estimated 16,000 units that could come up on the sites of projects sold en bloc.

    JP Morgan says the government, which has over the past month made a number of cautionary statements about the excessive property price movements, can be expected to continue to back up those statements with supply-side initiatives.

    But no official action to dampen demand - such as real property gains taxes - should be expected, it adds.

    The analysts also point out that luxury home prices in Singapore are fast approaching those in Hong Kong. 'Singapore's luxury market prices are no longer such an apparent relative bargain as they were two or three years ago, especially in contrast to Hong Kong and some major cities around the world.'

    Official estimates show that prices of uncompleted projects in the core central region climbed 46.3 per cent from the first quarter of 2004 to the first quarter of 2007.

    JP Morgan has an 'underweight' rating on Singapore property stocks, saying prices already reflect 'an optimistic outlook on further housing price increases'. It is keeping its 'overweight' calls on CapitaLand and GuocoLand, but has downgraded City Developments to 'underweight'. Allgreen Properties and Wheelock Properties are also rated 'underweight'.



  2. #2
    TODAY Guest

    Default Re: Private housing crunch on the cards: JP Morgan

    Friday, July 13, 2007
    Keeping cool in a hot market
    Analysts don't expect official measures to cool property sector

    Joseph Yadao
    [email protected]

    THE Government may have raised the ante for the property sector with a string of warnings, but analysts don't expect official measures to follow any time soon to cool investor fervour.

    A sense the Government remains sanguine about the market, and the impending supply of homes over the next year or so, are reasons the property sector has yet to feel the heat, they said.

    Describing recent Government comments as "unprecedented" action to instill a note of caution into the booming market, JPMorgan said in a report this week that "whilst we believe the Government will continue to back up its cautionary statements with supply-side initiatives, we do not expect any official action to curtail demand."

    "The Government can step in whenever they want to. They still see the market as okay, and they believe that it can take care of itself," said Mr Eugene Lim, assistant vice-president of ERA Singapore.

    Since the middle of last month, comments to be cautious in view of a possible market correction, and supply to come have hit the headlines.

    On Saturday, Minister Mentor Lee Kuan Yew weighed in, with a warning to keep property prices below Hong Kong's or lose competitiveness.

    Singapore property prices have been climbing in the past two years, with recent purchases especially those in the high-end raising eyebrows. The Marq in the Orchard area sold at an average $4,137psf for the 21 apartments sold of its phase at end-June.

    Would the Government step in, just as it did in the mid-1990s when it introduced various measures, including the introduction of a capital gains tax, to curb demand?

    Some elements that drove the market then wealth created by en bloc sales, a rising stock market are also present in today's property sector.

    But JPMorgan noted that "in the short term, there appears to be a supply crunch of available-to-occupy units further up the pipeline are 57,908 units under construction or planning, of which 4,403 units were added in the 1Q07."

    Expecting the supply-side to normalise in 12-18 months, the United States-based bank said "most of this inventory would only be brought on-line over the next year or two for completion post-2010, with 16,797 private residential properties due in 2009."

    The figures also do not include supply from the Government land sale programme and en-bloc sales.

    "Given that at least 7,500 units are not included in the development pipeline in our estimation, we think the jump in the change of the number of units in the development pipeline is yet to come," the bank said.

    While mass-market housing prices are still below mid-1990s prices, the luxury and upper-mid property prices are above their mid-1990s levels, JPMorgan estimates show, suggesting Singapore's luxury market "are no longer such an apparent relative bargain as they were two or three years ago, especially in contrast to Hong Kong and some major cities around the world."

    Mr Colin Tan, director of research and consultancy at Chesterton International, thinks that if the mass market enters its own bull run, pricing buyers out of the market, the Government could make a move.

    There is some evidence of that happening: Prices of some suburban properties are soaring on collective sale rumours.

    Transaction caveats on URA's website show a 1,636- sq-ft apartment at mid-priced Fernwood Towers in Marine Parade sold for $1.35 million last month, versus $770,000 for a similar apartment in September.

    "They can base some preventive measures that are dependent on the quarterly price index. For properties in the suburban areas, the Government can release additional supply if that price index increases by, let's say 5 per cent, in a single quarter," said Mr Tan.

    If potential buyers are convinced a steady stream of homes are coming to the market, "this would keep prices steady", said Mr Tan.

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