SINGAPORE (Oct 5): Still-buoyant sentiment in the mass market could allow Singapore’s property developers to raise prices, but might trigger further policy tightening on top of the property cooling measures in place, says Maybank Kim Eng.

“Even though construction and financing costs have retreated in recent months, we believe their declines are not sufficient to offset costlier land unless selling prices are raised,” says Maybank analyst Derrick Heng in a Tuesday report.

Heng says land prices have escalated this year following intense competition in recent land bids. He notes that executive condominium plots have sold this year for between 16% and 25% higher than average prices in 2015.

But Heng says developers could raise mass-market prices as buying sentiment remains buoyant, with strong turnouts at various mass market projects, despite general economic weakness, rising unemployment, and rising home vacancies.

However, he points out that the government has no plans of lifting the property cooling measures anytime soon. On the contrary, a rebound in home prices could see further policy tightening.

“As we believe investors cannot rule out further hawkish policies if home prices revive, we see developers balancing price hikes against the risk of policy backlash,” Heng says.

In this uncertainty, Maybank is keeping its “neutral” call on the Singapore property sector.

Maybank’s preferred pick for the sector is CapitaLand, which the research house is keeping at “buy” with a target price of S$3.93.

“We think diversified players with strong recurring income could outperform,” Heng adds.

As at 11.35am, CapitaLand is trading 0.3% lower at S$3.18. —

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