Singapore home prices likely to grind lower in second half

SINGAPORE (July 5): OCBC Investment Research is keeping its “neutral” rating on Singapore’s residential property sector amid “one of the longest property bears in recent history”.

“Looking ahead to 2H16, barring curb reversals, we expect home prices to grind lower under a potent mix of an uninspiring economic outlook, continued physical over-supply and persistent pressure from still-falling rentals as buyer sentiments remain cautious,” says OCBC lead analyst Eli Lee.

According to flash estimates by Singapore Urban Redevelopment Authority (URA), the private property index fell 0.4% over 2Q16, slowing from a 0.7% drop in 1Q16, but bringing the cumulative price decline to 9.4% since peaking in 3Q13.

“On a relative value basis, we prefer the prime residential property segment, which in fact saw prices move against the grain by increasing 0.2% and 0.3% in 2Q16 and 1Q16, respectively,” Lee says. “The mass market segment, however, presents the least attractive risk reward in our view.”

Lee says OCBC “continue to prefer developers with diversified portfolio exposure and strong balance sheets”.

OCBC maintained its “buy” recommendation on its top developer picks CapitaLand, City Developments, and UOL, with fair value estimates of S$3.68, S$9.89, and S$7.43, respectively.

As at 4.08pm, CapitaLand is trading 2.0% lower at S$2.99, City Dev is 0.12% lower at S$8.11, and UOL is 0.18% higher at S$5.56. — theedgemarkets.com

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