Property Analysis Reports

[Reporter]

Excerpts from the Goldman Sachs report on Singapore Real Estate dated May 12, 2009 (the full report is attached below):

We see incremental positives from a pick-up in residential transaction volume, as inventory backlog is cleared and funding risks ease. Price elasticity has improved, and we now appear closer to the point of price stabilization.

Firmness witnessed in the mass end of the segment is gradually filtering up to the mid-end segments, though investors are still harboring concerns over sustainability of demand. What may not be so apparent is the relative wealth of HDB owners. We estimate the avg. home equity of households in owneroccupied 5-bedroom+ HDB flats (c. 270,000 units) is S$230,000 (equity covers about 30%-35% of the mass end unit).

We expect the pick-up in transaction volumes witnessed over the past three months to continue, driven by HDB upgrader demand in the mass end of the market as affordability has improved. As take-up activity is maintained, we expect supply to be gradually drawn down, leading to a mild price increase of 5% in 2010E.

[Reporter]

Excerpts from the Credit Suisse report on Singapore Property Sector dated June 23, 2009 (see full report attached below):

If we consider total housing supply including public housing,
average supply of 24,000 during 2008-12 is 45% lower than the
10-year historical average. This does not look excessive versus
the annual average 24,000 household formations (marriages).

We believe the 1,141 CCR DPS units this year have lower default risks as current prices are not far from launch prices; key risk would be the 1,270 CCR DPS units in 2010 that had been sold at peak prices.

[Reporter]

Excerpts from the OCBC Report on property sector dated 29 June 2009 (full report is attached below):

Local buyers continue to drive demand. Mass market residential
projects continue to draw strong demand.

A price increase that is actually not a true increase. At Vista Residences, ... it seems that prices have risen sharply in recent months but in fact, the difference in pricing is attributable to the difference in unit sizes and floor plans. Vista Residences offer smaller size units that command higher psf pricing and also smaller balcony space than The Arte. As such, we caution that the strong buying momentum at higher psf pricing for the new launch should not be viewed as a new uptrend for property prices.

We remain unconvinced by the recent 'recovery' in the physical property market as we believe that the buying strength over the recent weeks could have been driven by the spillover effect from the earlier pent-up demand that had drawn cash-rich local investors back into the property market. In our view, potential catalyst for price increase will have to come from the inflow of foreign funds into the property market as well as a pick up in employment opportunities.

[Reporter]

Excerpts from Citi's report on the government's proposed tax changes on property capital gains tax (report is attached below):

Proposed Changes — The Ministry of Finance (MOF) is proposing several changes on the Income Tax Act, of which two affects the property sector.

Change No. 1: Property Gains Tax — If a person sells a second property within four years of the first sale, the profit from the 2nd sale will be subjected to capital gains tax (CGT), effective 1-Jan-10, i.e. 2nd sale occurs after 1-Jan-10 and the first sale was less than 4 years ago. There will be no CGT for the sale of the first property. Currently, an individual does not pay tax on gains unless the tax authority decides that he is a trader, something which is subjective. This proposed change adds certainty on the tax treatment.

What was done before — In May 1996, as part of the anti-speculation measure, individuals were taxed on gains made from selling properties within three years of purchase. There was also a sellers' stamp duty. Capital gains tax was lifted in Oct 2001, post 911.

Impact — If implemented, it is likely to curb any excessive speculation in the market. Speculators may try to get out of the market early before implementation next year. However, this should not have any impact on genuine home buyers but would certainly make investors/speculators think twice. We think there will be downward pressure on the prices and volumes, especially new launches. New sales of smaller sized units (which have been popular so far) are likely to slow.