CapitaMalls Asia: To buy on possible weakness.

There is a rather obvious negative divergence between price and the MACD. Higher price was achieved with a lower high on the MACD recently. So, we should not be surprised if the share price should decline in the near future as positive momentum in the short term weakens.

However, look at the OBV. There is no sign of smart money retreating as price rose. In fact, it is scaling higher. This suggests that smart money could use any price weakness as an opportunity to buy.

Indeed, if we look at the weekly chart, there is no sign of a negative divergence. The MACD is rising higher into positive territory. The longer term technicals definitely have a bullish bias.

However, with the share price nearing the declining 100w MA which is at $1.71 now, the near term weakness is not unreasonable. The 100w MA is expected to provide some strong resistance.

With the OBV rising, any pull back in price to supports is likely to be a buying opportunity. The pull back should be on the back of declining volume to make the case for buying more compelling.

Of course, the counter could decide to do a correction using time instead. That would be most annoying but that is Mr. Market.

Related post:
CapitaMalls Asia: Going XD on 23 April.

Affordability of housing in Singapore.

Hot on the heels of my last blog post on property prices in Singapore and whether more cooling measures are on the way, I came across an article in TODAY which reported that HDB slammed PropertyGuru for inaccurately reporting that it is more affordable to buy a private property than a resale HDB flat.

I am not really interested in their squabbles since it has no bearing on my life. 

However, I am interested in the last three paragraphs of the article, especially the last two which should put to rest any doubt about the government's intention of driving down the prices of residential property in Singapore.

"One cannot deny the fact that in the last five years, income has not increased at the same rate as property prices," he (PropNex Realty chief executive Mohamed Ismail) said. "However, all property prices are subject to cycles and a correction is likely when the affordability ratio widens."

The HDB felt the rise in HDB resale and private property prices in recent years "is not sustainable". 

"That is why the Government has been intervening with both supply and demand measures, in order to correct the imbalance," said the HDB. "The market has moderated considerably."

With all newly-wed first-timers "largely assured" of access to a new flat, the HDB said it would focus on helping second-timers this year. "As we assist second-timers in getting a new HDB flat, the impact will be felt in the HDB resale market," added the HDB. 

"Meanwhile, URA (Urban Redevelopment Authority) will continue to push out land supply for new private property development, to match the demand. The affordability of housing in Singapore should further improve in the months ahead."

Source: TODAY, 24 March 2012.
PropertyGuru report misleading: HDB.

Related post:
More cooling measures on the way?

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Weekend Comment Mar 23: Flight to REITs as volatility returns
Friday, 23 March 2012

© 2012 - The Edge Singapore

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Singapore tightens rules for developers
Wednesday, 18 April 2012

© 2012 - The Edge Singapore

More cooling measures on the way?

A friend told me that the middle class in Singapore is rich and they have plenty of money for investment. That is probably just a guess. So, I would also hazard a guess to say that many are probably leveraged up to invest in properties and that they are not all cash rich per se.

Notice how it is new launches which are doing well? This is evident in January and Februarys' sales figures. The resale market has gone very quiet. Why? Obviously, one reason is the initial financial outlay is smaller for new launches and payments are made progressively. If all of these buyers are really cash rich, they would be more active in the resale market because, frankly, right now, many times, there is better value in the resale market and these investors would also be able to benefit from rental income right away.

I believe that a big wave of more marginal investors will get hit when the oversupply situation becomes increasingly apparent in residential and commercial properties. Yes, commercial properties too. Rentals have been declining and will probably continue to decline for some time as more new space becomes available.

People leveraging up and buying newly launched properties in anticipation of bigger returns 3 or 4 years down the road when the properties get their TOPs are playing a very risky game. It takes time for stock of real estate to build up and just like arsenic which kills the victim slowly over time, oversupply which builds up over months and years might catch some people unaware.

Of course, there is the argument that unless there is a big external shock, property prices in Singapore will stay resilient. Do we feel that the eurozone's problems are truly over? Do we feel that China's economy is iron clad? Is there no chance of a big external shock taking place? With prices having doubled or more in the last decade and up by 50% or more in the last three years alone, a big external shock could produce a real shocker of a price fall.

We also have people like CDL's Mr. Kwek and CPL's Mr. Liew who say that they have very strong balance sheets and that they do not have to slash prices to move stock. However, these are public listed companies. They have to account to shareholders. Sit on unproductive stock or rent them out upon completion in an environment of weakening rentals even if they are 99 years leasehold properties? I think not.

Also, do not underestimate the political will of the PAP government to reign in the prices of residential properties to make them more affordable. This is also why there is a requirement for developers to sell out any project within a 5 year period from the time they acquired the land or else be slapped with an additional stamp duty. If the developers play punk, expect additional measures from the government.

There has been complaints aplenty regarding the rising cost of doing business in Singapore and a big complaint is that of rental. Everyone was surprised when the government recently said that they would keep an eye on REITs to make sure that they are not driving up rentals in any anti-competitive manner. Cooling measures for industrial and commercial properties on the way, perhaps?

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Non-landed home prices in the secondary property market in Singapore continued to soften in the first quarter of 2012, with those in the prime districts 9, 10 and 11 faring worst.

According to a report by DTZ Research, resale prices of luxury condominiums and freehold condominiums in the prime districts fell by 0.8 per cent and 0.7 per cent respectively.

Resale prices of leasehold condominiums in the suburban areas registered a slight quarter-on-quarter increase of 0.3 per cent, a moderation from the 1.0 per cent growth in Q4 2011.

Transaction of non-landed homes also slowed to about 470 units per month over January and February. This was also lower than the monthly average of about 1,400 units in 2011.

Source: CNA, 21 March 2012.

Related posts:
1. Leverage up and buy investment properties now?
2. Selling a private property just got harder.

Office S-REITs VS. Industrial S-REITs (4).

For some time now, I have been saying it is better to be vested in industrial S-REITs rather than office S-REITs. My research supports this idea.

Now, with the government imposing more cooling measures on residential properties, many investors turned their attention to industrial and commercial properties instead. This has hastened the rising prices of such properties.

Indeed, when a relative of mine called to enquire about Low Keng Huat's Paya Lebar Square, she was told that a modest office unit would set her back by $2,000 psf and the project was almost sold out!

Is it a good idea to pay top dollar to invest in commercial properties in Singapore now?

Over 2H11, we saw office rents peak as Grade A rents declined 0.5% QoQ in 4Q11 while Grade B rents fell by 0.4%. We expect further rental dips in FY12 and believe, from our channel checks, that Grade A rents has already fallen 3-5% QoQ in 1Q12. Going forward, we think office capital values could come under pressure with declining rentals (and) we now forecast office rentals to fall 10-15% in FY12.

Industrial REITs are likely to continue to post healthy YoY growth in distributable income and DPUs for the financial quarter ending 31 Mar, driven by completion of acquisitions, sound occupancy rates and possibly positive rental reversions. Four industrial REITs will also be concluding their financial years. We believe the REITs may likely experience revaluation gains in their portfolios.

Source: OCBC Research.

Related post:
Office S-REITs VS. Industrial S-REITs (3).