'Vital signs' of stabilisation in property market: CDL

SINGAPORE — Property developer City Development Limited (CDL) released on Friday (Aug 11) its second quarter financial results, showing revenue of S$854.1 million, down from S$1.1 billion in the same period last year. Profit after tax and non-controlling interests was S$109.9 million, lower than the S$133.8 million reported in the second quarter last year.

Mr Kwek Leng Beng, CDL Executive Chairman, said: “After several years of subdued market conditions coupled with macro headwinds, the ‘heartbeat’ of Singapore’s residential property market appears to be getting stronger with increased activity and some vital signs of a possible stabilisation.”

“To replenish our land bank, we will continue to bid strategically while remaining disciplined to core fundamentals. We remain hopeful that the Qualifying Certificate (QC) policy can be reviewed in due course, so that developers can look towards both Government Land Sales (GLS) and private sales for land replenishment and avoid a dangerous upward spiral in land cost and property prices that is not in line with the growth of the economy.”

In its report on quarterly earnings, the company explained that the QC policy is imposed on developers with foreign ownership, and this includes Singapore developers listed on the Singapore Exchange.

“Despite being a locally-controlled company, so long as there is just one foreign shareholder, the QC rules will apply. The Group is of the view that the QC policy is an abnormality which penalises Singapore real estate companies in their homeland, making it difficult for them to buy land from the private market for land banking as they are subjected to onerous QC punitive restrictions,” noted the report.

“Thus, local developers must place aggressive bids for GLS sites to compete with foreign developers and contractor-turned developers who have no barriers to entry. If this continues, in view of the pent-up demand from developers for land, this may have unintended consequences of escalating land cost which ultimately leads to higher property prices.”

Despite healthy sales in the group’s residential units, with sales value tripling in the first half of the year to S$1.15 billion, compared to the same period last year, the developer’s earnings were down from the previous year. CDL sold 691 private housing units in Singapore during the Jan-Jun period.

Growth in earnings were driven by contribution from well-received projects including Gramercy Park, Coco Palms and The Venue Residences, coupled with continued strong performance of its projects in China, said the company.

The group will monitor the market closely with plans to launch new projects at the appropriate time. Given the strong sales of Gramercy Park, the company plans to launch another high-end project in the Orchard Road vicinity in the second half of the year – the 124-unit New Futura condominium located at Leonie Hill Road, in the prime District 9 residential enclave.

Mr Kwek said: “CDL is well poised to benefit from an upcycle. In addition to strong residential sales, we will also benefit from monetisation opportunities to unlock value through potential collective en-bloc prospects for some of our mature assets, as well as possible divestment or repurposing of our non-core properties.”

The company’s flagship Republic Plaza will undergo a S$60 million enhancement initiative to rejuvenate the prime office development in the heart of Singapore’s Central Business District, starting in the first quarter next year, to be completed by the first half of 2019.