SINGAPORE (July 3): RHB Research sees a promising outlook for Singapore real estate in the near-term, with property prices expected to rise by as much as 20% by 2019, even as the longer-term sustainability seems uncertain.

“Overall, property prices should rebound by 10-20% over 2018-2019, as the market remains well supported by en bloc liquidity, a stable job market and pent-up demand,” says analyst Vijay Natarajan in a Monday report.

However, the analyst warns that this increase could be unsustainable over the longer-term.

“We remain cautious on the longer term outlook and sustainability of such steep price increases, as key long term factors such as population growth (tighter immigration policies), rental market, and divergence in HDB resale prices,” Natarajan says.

“Additionally, the possibility of faster rate hikes and a volatile macro-environment also pose threats to a smooth recovery in the industry,” he adds.

For now, RHB is keeping its “overweight” rating on the Singapore real estate sector, with APAC Realty and CapitaLand leading the way as its top picks in the sector.

“We expect transaction volumes to remain robust on a slew of upcoming new launches. APAC Realty is the preferred pick in this regard,” says Natarajan.

RHB has a “buy” call on APAC Realty with a target price of $1.35.

As at 4.19pm, shares of APAC Realty are trading 1 cent up at 79.5 cents, implying an estimated price-to-earnings ratio of 9.9 times and a dividend yield of 6.1% for FY18.

“In the big-cap space, our top pick is CapitaLand as we like the recent rationalising of its China portfolio, its efforts to boost ROE through an asset-light approach, and its active capital recycling strategy,” Natarajan adds.

RHB has a “buy” call on CapitaLand with a target price of $4.25.

As at 4.19pm, shares of CapitaLand are trading 3 cents up at $3.17, implying an estimated price-to-earnings ratio of 12.9 times and a dividend yield of 4.1% for FY18.