SINGAPORE (June 14): OCBC Investment Research is maintaining its “overweight” rating on the Singapore property sector, thanks to a rebound of resale prices in the high-end and mid-tier segments, which could further be driven up by a revitalised collective sales market.
According to published flash estimates, resale prices of non-landed private homes rose 0.4% m-o-m in May. The rebound was strongest in the high-end and mid-tier segments, as resale prices in the core central region (CCR) and rest of central region (RCR) rose 1.1% m-o-m, while mass market resale prices (outside central region or OCR) dipped 0.4% m-o-m.
Transaction volumes similarly improved in May with 1,235 non-landed private homes sold – up 17.4% m-o-m over April 2017 and a 57.7% y-o-y over May 2016.
“Through our channel checks, buyer sentiments have clearly improved after the latest tweaks to the property curbs in March 2017 where some measures relating to the Seller's Stamp Duty (SSD) and the Total Debt Servicing Ratio (TDSR) were relaxed,” says lead analyst Eli Lee in a Wednesday report.
“We believe these changes were, on a net basis, supportive of the physical market and continue to forecast for general home prices to reach an inflection point by 2018,” he adds.
While Lee says the physical oversupply situation in the domestic residential market will balance out only in 2018 and after, an increase in collective sale transactions could bring forward the recovery in home prices as developers move quickly to replenish their land banks, which has been lying at multi-year lows.
Just earlier this month, the market saw MCL Land’s en-bloc acquisition of Eunosville for $765.8 million. Including an estimated $194 million differential premium, this translates to a bullish $909 psf ppr. The deal came on the heels of the Oxley-led consortium’s en-bloc acquisition of Rio Casa for $575 million and brought the year-to-date total to $1.5 billion. This surpasses the $1 billion and $380 million annual totals seen in 2016 and 2015, respectively.
OCBC's top picks are CapitaLand, Wing Tai and Wheelock Properties with fair values of $4.07, $2.37 and $2.27.