In 1H2011, the Ministry of National Development (MND) has announced a strong supply of private housing for sale to meet demand. 17 sites were placed on the confirmed list which can yield about some 8,100 residential units. The reserved list had 13 sites which can yield some 6,200 residential units. The supply of land includes private properties, executive condominiums and DBSS properties.
Moving forward, MND is slated to announce the 2H2011 Government Land Sales (GLS) programme. We expect a significant supply of private housing (including sites for Executive Condominiums & DBSS) to address the strong demand.
In addition, a review of the HDB income ceiling is expected to be completed within six months which may impact the demand for private homes, especially in the mass-market segment.
This paper examines the profile of buyers of GLS sites (by tender) since 2010 to 1H2011 in terms of the amount of housing stock that each is holding and the amount of exposure to each housing type.
Amount of GLS housing stock under each developer
To ascertain the housing stock under each developer, a review of all the winning tenderers for GLS sites launched from 2010 to 1H2011 was made. Notably, some of these GLS sites had been launched by the developers for sale.
Henceforth, three factors were considered to arrive at the numbers. Firstly, the number of units in each project as announced by the developer. Secondly, the number of units unsold by the developers based on URA data release[1]. Thirdly, for sites where project details are not announced or finalised, the estimated number of units by the authorities in the land sales package are used.
For sites where joint ventures are undertaken, an even apportionment method is used. For example, if there are 2 parties in a winning tender, it is assumed that the available unsold supply in that project will be evenly split between the two. The same applies for three to four parties in a joint tender. Whilst the apportionment may be different in the actual situation, it is difficult to ascertain the actual interest in the project due to confidentiality issues in some instances.
Chart 1 depicts the top 10 developers based on the estimated housing stock from the GLS sites acquired[2] where the bulk of its stock are ECs (situated at Segar Road (estimated 570 units) and Choa Chu Kang Drive (estimated 490 units)).. Sim Lian Group Limited tops the chart with the highest available housing supply. The Group also has the highest exposure to mass market private homes. City Development is second in term of overall residential supply
Chart 1: Top 10 Developers’ GLS Housing Stock by Property Type
Amount of GLS Land Capital Exposure under each developer
In addition to the estimated housing stock, a rudimentary review is also undertaken for developers based on the potential capital exposure for the land. In this instance, the capital exposure is based on the quantum of the awarded land tender price[3].
A simplistic approach is adopted for this analysis where the land capital exposure is proportionately reduced when the project is launched and sold progressively. The study had not taken into consideration the circumstance where developers break even after achieving a certain sales target which effectively reduces or remove their risk exposure from the capital expended.
The level of debt taken is not considered as the internal leverage policies differ from developers to developers. Henceforth, the total capital exposure is based on the total tender price from the land awarded.
Similar to the earlier section, sites where joint ventures are undertaken, an even apportionment method is used. The amount of capital exposure will be shared among partners where joint ventures are concerned. The amount may differ from actual situation depending on the terms of agreement.
Chart 2 exhibits the top 10 developers with the greatest GLS residential exposure. Not surprising, Sim Lian Group tops the ranking attributed by the high capital exposure from the recent purchase of three condominium sites which collectively accounted for $825 million in land value. City Development fell to the fifth position as their EC sites had a smaller quantum as compared to some other condominium sites. CapitaLand leapfrogged from the ninth position to the third arising from the purchase of the GLS site at Bishan St 14 at $550.1 million.
Chart 2: Top 10 Developers’ GLS Housing Capital Exposure by Property Type
Outlook for mass market residential homes
Regulatory risks to tame the mass market residential market have increased following the post election government statements. If more cooling measures are implemented coupled with any changes to the current HDB income ceiling, demand for private homes, in particular the mass-market segment will be affected.
We expect a significant new supply of private housing for the 2H2011 GLS programme to meet demand. We may expect more new ECs sites to be released arising from the strong take-up for recent EC projects such as Esparina Residences, Prive and The Canopy.
Developers with sizeable mass market homes in their land bank are likely to be more selective. Some may choose to off load their existing land bank before acquiring new sites creating a window of opportunity for others.
In the absence of any new cooling measures, residential sales are expected to remain strong as developers are expected to launch new projects in the coming few months. In April, developers sold 1,788 residential units, the highest monthly volume since November 2010.
Source: Knight Frank Research – 1 Jun 2011
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