Singapore's property sector is in recovery mode, despite TDSR

SINGAPORE (Jan 17): Singapore's residential home sales including executive condominiums reached 12,432 units in 2016, an improvement of 21% over 2015 levels. Excluding ECs, home sales reached 8,363 units, which was still 8.3% higher compared with 2015.

CIMB analysts Lock Mun Yee and Yeo Zhi Bin pointed out that it was the highest level of homes sales since the total debt servicing ratio (TDSR) framework was implemented in 2013.

For December alone, total home sales reached 580 units, or 367 units excluding ECs. While it was lower compared with November’s figures, it was comparable with the numbers seen in December 2015.

Nearly two thirds or 63% of the home sales were located in the suburban areas while 31% were from the areas just outside of the prime districts. Prime districts contributed just 6% to total home sales.

So what’s going to happen in 2017?

Lock and Yeo have forecast home sales in 2017 to be between 8,000 and 9,000 units, with residential prices to fall by between 3% and 5%.

“We expect the market’s attention to focus on the declining inventory as the year progresses, and this will underpin home prices,” said the pair in a note on Monday. “In addition, potential stabilisation in the office rental market could also underpin revalued net asset values.”

To that end, the pair is maintaining an “overweight” rating on the property sector, and recommends investors buy UOL, City Developments and CapitaLand.

Shares in UOL, CDL and CapitaLand are trading at S$6.26 (RM19.65), S$8.79 and S$3.14 on Tuesday. — Gwyneth Yeo