Daiwa: Singapore cooling measures haven’t dampened land bids

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Singapore government land sale bids which closed on Tuesday were active and aside from a lower participation rate, showed no evidence that the cooling measures have restrained bidding, Daiwa said in a note on Tuesday.

“There were noticeably fewer bidders for these tenders, the first ones since the property cooling measures were implemented on 6 July 2018, but the highest bids were far from cautious, in our view,” Daiwa said.

The implied break-even prices for the top bids at two private property sites, at Dairy Farm Road and Jalan Jurong Kechil, were near or slightly above the current market prices for comparable projects in the vicinity, Daiwa said.

“We believe these top bids assume a market recovery or the ability to price the new launches at a distinct premium to the market such
that they leave almost no room for error,” Daiwa added.

That suggests many developers still have a constructive outlook on the residential market, particularly for executive condominium sites, the investment bank said. Executive condominiums are a hybrid public-private housing category.

Daiwa kept its Positive rating on the sector, saying the post-cooling measure selloff offers a “compelling buying opportunity,” pointing to “attractive valuations” of 33 percent to 42 percent discounts to net asset values, alongside a potential positive catalyst of a faster and stronger-than-expected physical-market recovery.

It kept Buy ratings on City Developments and CapitaLand.

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