Thursday, July 30, 2009

Singapore Property News for 30 July 2009


CIMB: Ho Bee upgrade to $1.40


* Target price raised to S$1.40 (from S$1.16).
* Raise our FY10-11 core EPS estimates by 3-4% on slightly higher ASP assumptions for its onshore projects.
* For the same reasons, end-CY10 RNAV has been lifted by 2% to S$1.40.
* Assume S$1,800 psf for its Sentosa inventory, 30% below peak prices.
* Trading at a 21% discount to our RNAV.
* Balance sheet health set to improve significantly (even assuming write-downs)
* Land bank to participate in this physical-property rally
* Raise our target price from S$1.16 to S$1.40, based on parity to RNAV (previously 15% discount).
* Maintain Outperform.

DMG: Too soon to sell

Speculative signs present, but not excessive. National Development Minister Mah Bow Tan stated that the government is seeing speculative signs in the property market. Nonetheless, they are not excessive and it is a little too early to conclude that a property bubble is building up. In any case, the situation is being monitored closely to ensure that a property bubble does not build up. He further assured that there is plenty of supply in the pipeline and the suspended government land sales (GLS) program could be brought back if necessary. Citing the uncertain economic outlook, he urged home buyers to do their homework to ensure their properties are affordable, even if interest rates begin rising.

Investment tips:

Could a property bubble occurs? There seems to be genuine demand given the seven consecutive months of strong sales. However, are home prices realistic or affordable?

Although people will claim Singapore have limited land and growing population led to price increases, I feels it is because of speculative and investment greed. People are owning properties in wish to earn rent and sell when prices rise. Probably in the future, more of our children and student graduates can only afford to rent houses due to increasing costs of living and have no savings for the deposit. Also, with the future of jobs becoming mostly term-based and unsecured, people will be unwilling to commit buying a property.

Who will benefit the most?

References:

  1. Ho Bee by CIMB
  2. Property sector by DMG

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