Published April 26, 2008

Market turmoil expected to hit developers this year

SINGAPORE'S top two developers are expected to report strong core earnings from apartment sales thanks to a three-year property boom, but slower sales since late last year will hit full-year results in 2008.

Private home prices in the city-state jumped 31 per cent in 2007 for the largest increase in eight years, but growth slowed for a second consecutive quarter in January-March as volumes slumped to the lowest since the Sars epidemic in 2003.

Government moves to cool the market, by ending a scheme that allowed delayed payments, coupled with the impact of a global economic slowdown, are expected to hit top developers CapitaLand and City Developments.

This week, Singapore's third-biggest developer Keppel Land by market value, reported a 3.5 per cent fall in quarterly net profit as new property launches were hurt by the US sub-prime mortgage crisis.

'Volumes have dwindled down to a trickle as the halt of the deferred payment scheme coincided with the sub-prime issue,' said Kim Eng property analyst Wilson Liew, who has cut annual forecasts for Singapore developers by 15-18 percent to reflect lower sales.

For the first quarter, CapitaLand, South-east Asia's largest developer by market value, is expected to report a 59 per cent drop in net profit in the absence of divestment and revaluation gains, analysts said.

Divestment gains, coupled with the sale of an office building and the sale of units in its Ascott Residence Trust, had lifted results five-fold in the first quarter of 2007.

'CapitaLand will probably continue to book some revaluation gains this year, but most of the increments would already have been booked in 2007,' Mr Liew said.

CapitaLand's aggressive moves to grow in overseas markets such as China and India are expected to help it weather a slowdown in Singapore's property sector. Overseas operations contributed 40 per cent to CapitaLand's profits in 2007.

City Developments, Singapore's second-biggest developer, is expected to report a 63 per cent jump in first-quarter net profit, boosted by strong sales of its luxury apartments in the last two years.

'CityDev is best poised to ride out the current downturn in the property sector and will be a key mover upon the first signs of a market recovery,' said DBS Vickers analyst Lock Mun Yee, adding that the developer had a large landbank and deep pockets to delay launches until conditions improved. -- Reuters