Citi names top developer picks as mass-market property launches in Singapore see solid take-up

[SINGAPORE] City Developments Ltd (CDL) and UOL Group are the top picks in the real estate sector for Citi Research, as robust weekend sales at two major mass-market launches signal continued strength in the primary residential market.

In a research note on Monday (Apr 27), Citi analyst Brandon Lee maintained a “buy” rating on both developers, citing a strong year-to-date sales momentum. Across the island, eight projects have had an average initial take-up of around 77 per cent during the period.

For CDL, Citi has set a target price of S$11.53, representing a 17 per cent discount to its revalued net asset value (RNAV) of S$13.89 per share. 

The brokerage’s key assumptions for CDL through to the 2028 fiscal year include a 1 to 3 per cent annual rise in Singapore residential prices, office capitalisation rates of 3.5 to 4 per cent, and Singapore Grade A rent growth of 4 per cent in 2026, 2 per cent in 2027, and a 3 per cent decline in 2028.

For CDL’s hospitality segment, Citi assumes cap rates of 4.5 to 5.5 per cent and a consistent 3 per cent annual rise in revenue per available room (RevPAR) in the three years. Meanwhile, retail cap rates are estimated at 4.5 to 5 per cent with rent increases of 0.5 to 2 per cent per year.

Downside risks that could impede CDL from reaching its target price include a weak take-up at its residential launches, the introduction of additional cooling measures, a sharp economic slowdown, over-expansion in overseas markets, and execution issues in turning around the hospitality platform.

UOL Group has a target price of S$12.90, set at a 27 per cent discount to its RNAV of S$17.67 per share. 

Citi identified several factors that could narrow UOL’s RNAV discount. These were: a better-than-expected take-up at the upcoming launch at the former Thomson View condominium site in the fourth quarter of 2026, more details regarding the property group’s redevelopment of Marina Square, and potential asset divestments.

For UOL’s 50.4 per cent stake in Singapore Land Group, Citi estimates RNAV per share based on a similar set of assumptions as for UOL.

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Key downside risks for UOL include cap-rate expansion as interest rates rise, a sharp economic slowdown leading to weaker office and retail absorption, a fall in tourist arrivals having an impact on RevPAR, and a prolonged period of the existing cooling measures.

Strong weekend performance

The positive outlook follows a weekend of high activity, where two 99-year leasehold projects saw significant buyer interest.

Tengah Garden Residences, an 863-unit development by Hong Leong Holdings, GuocoLand, and CSC Land Group, moved 853 units – roughly 99 per cent of its total inventory. The project achieved an average price of S$2,120 per square foot (psf), which Citi estimates translates to an 18 per cent profit-before-tax margin.

Meanwhile, Vela Bay in Bayshore Road, developed by SingHaiyi and Chuan Capital, sold 371 of its 515 units (72 per cent). The average price recorded was S$2,886 psf, reflecting about a 13 per cent profit margin on an estimated break-even of S$2,390 psf.

Singaporeans continue to drive the market; they accounted for 90 per cent of the purchases over the weekend, noted Citi.

“We attribute the solid take-up to the proximity to MRT stations (Hong Kah and Bayshore, respectively), pent-up demand within the precinct, and soft mortgage rates,” it added.  

Citi expects this primary sales momentum to persist, which “bodes well for our top developer picks” – CDL and UOL, it said.