SINGAPORE (Apr 4): Singapore’s property sector will see a strong growth, especially in its private residential prices and real estate investment trusts (REIT), according to Jeffries.

The Urban Redevelopment Authority (URA) estimates that the private residential property price index increased 4.3 points from 138.7 points in 4Q17 to 143.0 points in 1Q18, representing an increase of 3.1%, compared to the 0.8% increase in the previous quarter.

This recovery is led by prices of prime properties.

Prices of non-landed private residential properties were up by 5% q-o-q in core central region (CCR); 1.1% higher q-o-q in the rest of central region (RCR); and 3.8% higher q-o-q in the outside central region (OCR).

In a Wednesday report, analyst Krishna Guha says, “We maintain our price growth and sales volume forecast for 2018 of mid-single digit and [12,000] units respectively but have an upward bias based on future launches.”

City Developments (CDL) and Wing Tai Holdings have been chosen as the research house’s “buy” picks for the sector.

CDL’s launch of New Futura and The Tapestry has resulted in take-up in excess of 70% for the launched units, which suggests buoyant sentiment.

Furthermore, sales of units in The Tapestry seems to suggest that the hike in marginal buyer’s stamp duty has not dampened sentiment.

See: Top marginal buyer's stamp duty for residential properties raised to 4%

Take-up in upcoming launches may also further reinforce the positive sentiment and upward price trajectory.

“That said, we are cognizant that higher prices may raise probability of cooling measures,” says Guha.

Meanwhile, home purchases by foreigners have increased 44.7% in 2017, accounting for 7.1% of total private home sales. In 1Q18, foreigners constituted 6.5% of total home sales.

At the New Futura and Gramercy Park, over 70% of total sales were by foreigners, including permanent residents. The analyst believes that such purchases may lead to spillover into city fringe projects as well leading expanding prime districts.

On the other hand, three-month interbank rates are up by more than 50 bps on the year to about 1.5% and still lags USD LIBOR by about 80 bps.

Banks also have reportedly raised mortgage rates to about 2%. But better economic conditions and low unemployment rate may offset the impact of higher rates.

“We also note that HDB resale prices continue to decline, dipping 0.8% q-o-q in 1Q18,” adds Guha.

As at 3.50pm, shares in CDL are trading 30 cents or 2.3% lower at $12.69, while shares in Wing Tai are 5 cents or 2.4% down at $2.03.