A-
A
A+
SINGAPORE (Jan 2): The Singapore property market is expected to remain resilient for 2020, according to DBS Group Research.

In a Jan 2 report, lead analyst Derek Tan says on the back of this sentiment, the developers under the research house’s coverage have been actively clearing inventories in 2019. “We see dissipating risks to their exposure to Singapore (SG) residential market which we estimate to drop to less than 15% of RNAV based on unsold inventories,” he adds.

Additionally, 2019 saw local developers going on an acquisition spree, with more than $17 billion of deals inked.

With things looking up for the local property sector, here are a few trends to look out for this year, according to DBS.

1. Singapore property market enters second year of recovery

The local property sector is expected to remain steady in 2020, as it is projected to be in its second year of recovery, on the back of a supply tail-off that started in 2018 and backed by low supply completions.

2. Residential market to stay stable

An uptick in residential prices and higher stability is expected over the next two years. This is believed to be due to the uptick in volumes in 2019 and policy moves to infuse more affordability in the HDB market. Primary sales is projected to remain steady at 10,000 in 2020, with a 1-2% rise in the Property Price Index (PPI).

3. Low absorption rates

Sell-through rates were lower in 2019 although the property sector managed to record better than expected transaction volumes of about 10,000 in primary sales. This is due to a high number of property launches but developers have been cautious by launching only a small proportion of the entire project at a time.

4. Larger developers focused on selling inventories

Some of the larger local developers were seen recording decent sell-through rates, as they have been actively clearing inventories on the books. The top 10 developers (by units) have moved between 13% to 50% of total units as of November 2019. With the 5-year ABSD deadline to come from 2021 onwards, DBS anticipates a faster momentum for selective projects.

5. Upgrader market could show higher demand

The upgrader market could push volumes higher this year, as close to 20,000 units will come off their minimum occupation period (MOP) for HDB from this year onwards. The ability of these upgrader households to purchase a private property (or executive condominiums (EC)) may boost volumes going forward.

6. High unsold inventory

Unsold supply remains high at about 39,000 units, which implies a market absorption rate of close to 4.0 years, assuming 10,000 per annum from primary sales transactions. This could cap any significant PPI increases in the medium term.

7. Local developers to clock in higher ROE

DBS expects local developers to record stronger ROE in FY20-21, on the back of the sector’s recent merger and acquisition (M&A) spree and continued asset recycling.

8. CapitaLand not ascribed the right valuation

The market has not ascribed CapitaLand the right valuation. Currently, the percentage share in local REITs have hit a historical high. CapitaLand’s M&A with Ascendas has brought the group’s listed stakes in its managed REITs to a high of 50% on a per share basis. Comparatively, the historical trading range has been about 40%.

 

Read also: