SINGAPORE (Nov 1): The slowdown continues for Singapore’s property developers and real estate investment trusts (REITs), according to 3Q16 data by the Urban Redevelopment Authority (URA).

Private residential prices continued to fall by 1.5% q-o-q in 3Q16, and vacancies are expected to stay elevated near ten-year highs on the back of significant supply.

Retail rents retreated 1.8% q-o-q in the central area and Orchard, while a 1.1% q-o-q decline in office rents translated to subdued reversions for office REITs.

Industrial rents fell by 2.0%, led by warehouse rents which were down 4.4% q-o-q. Small cap industrial REITs continued to see negative reversions.

But Credit Suisse says there could be a silver lining amid the gloom.

“Importantly, we believe residential sentiment appears to be improving, with a steady pickup in take-up rates at launched projects, even in projects with less attractive attributes,” says Credit Suisse lead analyst Louis Chua in a Monday report.

“In our view, a recovery in volumes and return of consumer confidence would thus be an important first step towards a sustainable sector recovery,” he adds.

Chua also points out that retail and office rents are declining at a slower pace.

There was also marginal improvement in vacancies at industrial properties, with a 0.3-0.5 percentage point q-o-q improvement in occupancy rates across warehouse, factory and business park space.

City Developments is Credit Suisse’s top pick among the property developers. Chua says CDL will be a “key beneficiary” in an eventual recovery in residential sentiment and volumes.

Credit Suisse is keeping its “outperform” rating on CDL, with a target price of S$11.50 (RM34.59).

In addition, Chua says the top picks among the REITs are Mapletree Commercial Trust, Keppel DC REIT, and CDL Hospitality Trusts.

The three REITs are rated “outperform”, with target prices of S$1.73, S$1.31, and S$1.60, respectively.

As at 12.35pm, City Developments is trading 5 cents higher at S$8.54.

Units of Mapletree Commercial Trust are trading 1.3% lower at S$1.51; units of Keppel DC REIT are trading 0.4% lower at S$1.24; and units of CDL Hospitality Trusts are trading flat at S$1.34. — theedgemarkets.com.sg

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