Property stocks soar amid rise in collective sales

Real estate stocks charged ahead yesterday on more signs of an upswing in the property market.

Blue chip UOL Group stood out as one of the day’s biggest winners, with its shares surging 4.3 per cent or 35 cents to $8.55 – lifting returns by a whopping 42.7 per cent since the start of the year.

City Developments (CDL) added 1.7 per cent or 19 cents to $11.60, while Wheelock Properties shot up 3.9 per cent or 7.5 cents to $1.98.

Market sentiment has been on the mend since the start of the year, with the benchmark FTSE ST Real Estate Index up by 20.6 per cent.

It enjoyed a further boost with the success of two large sales en bloc this week. On Wednesday, Amber Park, a 200-unit development in Amber Gardens, was sold to CDL through its Cityzens Development unit and a joint-venture partner from parent Hong Leong Group for $906.7 million, marking the biggest freehold collective sale deal seen here.

A day later, the Normanton Park estate near Kent Ridge Park was sold for a hefty $830.1 million to Chinese firm Kingsford Huray Development.

Collective sales of residential sites have hit $5.2 billion across 25 deals this year, four times the value seen in the same period last year – a figure that could rise further in light of a slew of prospective deals for the next three months, said JP Morgan in a report yesterday.

This already puts 2017 as the third-biggest year of sales en bloc after 2007, which holds the record at $12.2 billion, followed by 2006 at $8.2 billion.

JP Morgan analyst Brandon Lee said in the report that the 25 transactions this year – well up on the 10 in all of last year – provides clear evidence of another collective sale cycle in the making, which traditionally lasts at least three years.

He believes the collective sale frenzy is “sustainable” given that the number of unsold near-term residential units in the pipeline, excluding executive condominiums, has fallen for three straight quarters to an all-time low, reaching 10,303 units as at the second quarter of this year.

The bank’s own estimation puts this figure even lower at 7,749 units as at August. At the same time, developers are not replenishing their land banks enough to offset the number of units they are selling, a situation worsened due to insufficient government land.

All these factors indicate that the collective sale fever will continue, Mr Lee said, adding: “We expect this to result in immediate displacement demand, improved vacancy (rate) and higher selling prices.”

A collective sale cycle getting started could be hindered by more hikes in development charges, along with a sizeable launch pipeline in 2019 to 2020, said Mr Lee.

But he added: “Coupled with the nascent upcycle, mediocre overseas performance and shareholders’ continued hunt for residential proxies, we expect listed developers to become more pro-active in (sales) en bloc over the next six to 18 months.”

Similarly, Bank of Singapore chief investment officer Johan Jooste said in a note earlier this week that the property market is “at a turning point”. He said the bank has been keeping an “overweight” call on the local property sector since the second quarter, due to the cut in housing supply and rising collective sale activities, adding that it believes “the bottom is actually behind us”.