Tailwinds giving property agencies a boost

OVER a year on, fears that the pandemic would roil the property market appear to be unfounded, and property developers aren't the only ones benefiting from buoyant demand.

Real estate agencies are also seen to be turning in a strong report card this earnings season, thanks to a steady stream of deals across the private residential market as well as the HDB resale market.

Singapore's largest property agency PropNex on Wednesday reported a net profit of S$16.52 million for the second quarter ended June 30, 2021, more than doubling from S$7.26 million from the corresponding quarter a year ago, boosted by topline growth.

Revenue surged by about 147 per cent year-on-year to S$260.48 million as transaction volumes rose despite the pandemic, thanks in part to a recovering economy and low interest rates.

PropNex declared an interim dividend of 5.5 Singapore cents, more than triple the 1.5 cents it handed out a year ago.

On the whole, the outlook for the rest of 2021 is shaping up pretty decently too.

Analysts expect the number of homes moved by developers in the primary market to cross the 10,000-unit mark this year, with some projecting the tally could climb as high as 12,000 units. This should outstrip the 9,982 units sold last year.

Already, over 6,450 private homes (excluding executive condominiums) were sold by developers in the first six months of the year, while unsold inventory continues to dwindle.

Data from the Urban Redevelopment Authority (URA) shows that the number of unsold, uncompleted private homes stood at 19,384 as at the end of Q2 2021, down from 21,602 units in the prior quarter.

Private home prices could rise up to 5 per cent this year, according to CGS-CIMB.

However, it's not just the primary market that's going gangbusters.

With construction activities curtailed by safe-distancing measures and border curbs contributing to a labour crunch, completion timelines for both build-to-order (BTO) HDB flats and private developments have been disrupted.

As a result, first-time HDB buyers have resorted to hunting for flats in the HDB resale market, while the brisk demand for HDB resale flats has in turn helped sellers upgrade to private homes.

In the resale market, 5,483 resale and subsale units were transacted in Q2, spiking nearly 20 per cent quarter-on-quarter, according to the URA's latest quarterly report.

OrangeTee & Tie projects that resale volumes for 2021 could work out to 17,000 to 18,000 units, easily pipping the 10,729 units sold last year.

Some buyers may also be turning to the private resale market as they reckon it offers better value for money since resale units tend to be more affordable.

Meanwhile, PropNex estimates that some 26,000 HDB resale flats could be transacted in 2021 - which would surpass the 24,748 flats sold last year - while HDB resale values could rise by 10 to 11 per cent this year.

Taken together, the outlook for real estate brokerages looks fairly sanguine as owner-occupiers and investors shrug off a global pandemic and show an unfaltering appetite for residential property.

"We continue to like property brokers for their asset-light business models and as beneficiaries of the active residential property market," said a CGS-CIMB report by analyst Lock Mun Yee, who has an "add" call on APAC Realty with a target price of S$0.94, owing to its inexpensive FY21 P/E multiple of 9.9x and projected dividend yield of 5.5 cent.

CGS-CIMB expects APAC Realty to post strong quarterly earnings with a Q2 FY21 profit after tax and minority interests (Patmi) of S$6-9 million when it announces its financial results, on the back of robust transaction volumes and a low base last year.

Potential headwinds in the form of imminent cooling measures also appear to have receded for property players, adding to the favourable prospects.

Still, booming sales recently at the launch of the 99-year leasehold, suburban integrated development Pasir Ris 8, where prices ran from S$1,400 per square foot (psf) to S$2,000 psf, have had some developers looking at price adjustments - leaving some analysts to suggest that cooling measures remain a downside risk worth keeping an eye out for.

READ MORE:

• PropNex Q2 net profit more than doubles to S$16.5m
• Pasir Ris 8's multiple price hikes of up to S$2,000 psf may raise expectations for suburban condo pricing
• HDB upgraders are fuelling mass-market condominium sales