11 Dec 2017
With an “up-cycle” for Singapore property expected to last until 2020, Morgan Stanley sees home prices rising by as much as eight percent next year, reported Bloomberg.
Signs of a revival in the property market include the first hike in home prices in four years, record land deals, and the first gain in office rents in two-and-a-half years.
And while the Monetary Authority of Singapore has tempered the buoyant sentiment by flagging the risk of rising vacancies on the back of slowing population growth, Singapore developers are still expected to extend their share rally into next year.
Morgan Stanley property analyst Wilson Ng, who has “overweight” ratings on City Developments (CDL) and CapitaLand, noted that developers’ valuations are attractive based on discounts to net asset value as well as price-to-book ratios.
Morgan Stanley expects CDL and CapitaLand’s shares to jump by 24 percent and 42 percent respectively in the next 12 months.
Analysts believe that the risk of a housing oversupply may not be imminent due to the lead time needed to finish projects.
The government has only started to increase land supply recently, noted Raj Vaswani, director of the Tolaram family office in Singapore. As such, the resulting developments are not expected to enter the market before 2020.
His firm, which manages US$500 million (S$676 million), owns shares in Singapore-listed developers CapitaLand, GuocoLand and Frasers Centrepoint.
However, not everyone is bullish on the housing market.
KGI Securities (Singapore) trading strategist Nicholas Teo said many factors could weigh on home prices’ sustainable rally, such as weakness in rental demand, rising vacancy rates, and the prospect of increasing global interest rates.
Aside from this, some stringent home purchase restrictions are still in place in Singapore, which could limit the possibility of runaway house prices.