Singapore property developers are starting to pack up and go abroad

Residential sector is scaring them off.

According to CIMB, developers' core 4Q12 results were mostly in line as lower development earnings have been built into expectations. This was evident for the more Singapore-centric developers.

The strong yoy gains came from 1) revaluation gains on compressed cap rates and rental reversions (REITs, CapLand and UOL) and completion of development projects (UOL, CMA and GLP) and 2) overseas profits on the hand over of the China residential projects (CapLand and KepLand).

Here's more from CIMB:

We expect these two trends to continue dictating earnings for developers in FY13. While the recent implementation of policy curbs in China is likely to curtail development volumes, most of the sales for FY13 delivery have already been locked in.

What stood out in this season outside the results were 1) developers' bearish view on the Singapore residential sector and 2) increased willingness to venture overseas to diversify income.

The latter was evident among the more Singapore-domiciled developers like CityDev, UOL and OUE which indicated that part of their excess capital could increasingly be allocated to overseas investments.

The common target areas mentioned were China and Iskandar/Malaysia though most also said that they will adopt a measured approach.

Another commonality is the preference for non-residential assets, both locally and overseas, a reflection of the developer‟s less sanguine view on the Singapore and China housing markets.

In Singapore, most believe that property prices will correct after the recent cooling measures. The latest cooling measures in Singapore and China have deflated RNAV upside potential for the Singapore developers though we note that exposures to these remain manage able.