Analysts' Views Mixed Over H2 GLS List

Source : The Business Times, June 23, 2008

Generally, they welcome more sites on the reserve list

THE Government Land Sales (GLS) programme for the second half of this year has triggered mixed responses from property analysts.

While some read the moderate supply as a plus for property prices, others feel it reaffirms the weak market sentiment.

The GLS list for the second half of 2008 sees 13 new sites - comprising six residential sites, three commercial sites, three hotel sites and one white site. That's lower than the 17 new sites released in the first half.

Of the total 40 sites being offered in the second half, there are only eight confirmed sites, down from 11 in the first, and 32 are on the reserve list, up from 26.

'We see the 2H08 GLS list as reflective of the current market sentiment, following softer bids and the non-award of three tenders in the last six months,' says Citi analyst Wendy Koh.

Westcomb Research, however, views the reduced supply positively, saying that it 'will ease the current urge of developers to release their existing land bank under the current weak demand and reduce downward price pressure'.

Property stocks were a mixed bag on Friday, with CapitaLand up 36 cents at $6.08, Keppel Land up seven cents at $5.20, and GuocoLand down 25 cents at $2.18.

Generally, analysts welcome the market-driven approach to have more sites on the reserve list, in which sites are put up for sale only after developers have indicated interest by committing to a minimum bid.

'It affords the market some breathing space and developers and the market should read the decrease in the confirmed list quantum positively,' says DBS Vickers analyst Adrian Chua in a report.

Deutsche Bank notes that choice of sites was strategic in driving the development of new areas under the Master Plan 2008. The inclusion of four mass-market residential sites in the reserve list, it says, could be insurance against a sharp upswing in sentiment.

Moreover, the lack of supply of CBD office sites should provide relief to the prime office segment and landlords, Deutsche Bank analysts say in a report. 'Muted new supply for both residential and office versus previous years should provide some relief and improve sentiment at the margin.'

Deutsche Bank analysts have pegged a 'buy' call to City Developments and Keppel Land, but add that they continue to prefer Reits over the developers.

DBS Vickers kept its 'overweight' rating on the property sector on belief that the second-half GLS programme 'does inspire confidence in the planning of land supply in Singapore, ensuring sustainable and steady growth in the property sector in the medium-term'.

Its top pick among developers is City Developments for its proxy to the residential market. It has a 'buy' call on F&N for its predominantly mass-market land bank and Allgreen for its mid-tier/mass-market exposure.

Other analysts were less sanguine. Credit Suisse analyst Tricia Song says that she continues to see negative headwinds for the Singapore property sector in the near term, given potentially rising interest rates, construction costs, supply completions and falling rents. She is keeping her 'underweight' call on the property sector, with 'underweight' ratings for City Developments and Wing Tai, but 'neutral' calls for CapitaLand, Allgreen and Keppel Land.

For Nomura, the sound supply outlook for residential units - which the Urban Redevelopment Authority estimates to be 59,545 completed units between end-2007 and end-2011 - is 'unnerving'. It hence retained its bearish stance on the residential sector where it foresees further downside pressures in asset prices from marginal speculative sellers. It has a 'neutral' rating on City Developments and Keppel Land and a 'reduce' rating on CapitaLand.