Singapore Property | The month of October recorded a 15.4% rise in sales of private homes on a month on month bases as previously launched units received robust demand, according to a report by Singapore Business Review based on Orange Tee data.
The month had 758 previously launched units sold. Sophia Hills, which is a luxury condominium, was the best seller after 62 units moved at $2,029 psf average price.
Consultancies in real estate attributed the rise in transactions to the optimistic market sentiment.
As Singapore’s property market rebounds, the demand remains strong and prices continue to rise slowly despite initial fears that the cooling measures would impact negatively the sale of new pricier units.
According to property analysts and money managers, developers in Singapore may continue with their share rally in 2018 as the property market revives. They are of the opinion that the warning by the central bank on potential oversupply may not occur for years.
After 2017 recorded double-digit gains in property market, Morgan Stanley is predicting a 42% rise in CapitaLand Ltd shares and 24% rise in City Development’s in the next 1 year. UOL Group Ltd and City Developments are among Singapore’s 2017 top performers with developers on their way to recording their best yearly performance in 5 years.
“The risk of oversupply of houses may not be immediate since completing property projects requires lead time. Since the government started to increase land supply only recently, the resulting projects may not be in the market before 2020,” said Tolaram family office director Raj Vaswani. The company manages $500 million having shares in CapitaLand, Frasers Centrepoint, and Guocoland.
According to KGI Securities trading strategist Nicholas Teo, many factors will contribute to sustainability of home prices such as the rental demand weakness, the possibility of global interest rising and increasing vacancy rates.
In addition, there are strict restrictions for the home purchase in Singapore that prevent a sudden rise of home prices.
Morgan Stanley said that the property “upcycle” may continue into 2020 with an estimation that prices of homes may rise by up to 8% in 2018.
“Valuations by developers are attractive and are derived from price-to-book ratios and net asset value discounts,” said Wilson Ng, Morgan Stanley property analyst. Ng is of the opinion that City Developments and CapitaLand have “overweight” ratings.
Below are opinions of 3 money managers about Singapore developer stocks outlook.
- Xin Yan Low, Janus Henderson Group Plc, property security analyst: Earnings by developers will be determined by 2018 launches and valuations continue to be attractive. Developers with large land banks will gain from the increasing land prices. Among her top choices is City Developments.
- Jason Low, DBS Wealth Management investment strategist: The share prices of developers will rise further since the property market is in the early stages of improving.
- Kristy Fong, Aberdeen Standard Investments senior investment manager: The demand for housing has begun to outpace supply as the economic outlook improves and due to “buyers being tired of waiting for property measures to relax.” Aberdeen is for Bukit Sembawang Estates and City Developments.