Singapore Property Sector

UOB Kay Hian Research on Jan 3

THE Urban Redevelopment Authority's (URA) latest flash estimates indicate that private home prices stayed flat at up 0.2 per cent q-o-q in Q4 2011, against being up 1.3 per cent in the previous quarter.

This is the ninth consecutive quarter of moderation in private residential prices. Overall in 2011, private property prices increased about 6 per cent (2010: 18 per cent y-o-y). Public housing prices advanced at a slower pace of 1.7 per cent q-o-q compared with 3.8 per cent in Q3 2011. Overall public housing prices climbed 11 per cent in 2011 (2010: 14 per cent).

The public and private residential indices are currently at all-time highs of 206.2 and 190.4 points respectively.
The flash estimates do not fully reflect the recent market slowdown (post additional property measures on Dec 2, 2011), as the data are compiled based on transaction prices during the first 10 weeks of the quarter and use a normalisation procedure.

We believe the final figures due in the last week of January are likely to be lower than the flash estimates, marking a downturn in property prices. Our recent showflat visits affirm the trend of falling volumes (about 20-30 per cent) and moderating prices despite hefty discounts offered by developers.

For 2012, we expect transaction volumes to slow by 20-30 per cent and prices to fall by 10-15 per cent.
We believe physical property prices are at an inflection point of the current cycle, with recent cooling measures further dampening home buying sentiment. However, selective property stocks have over-discounted the negative prospects, having corrected by over 20 per cent in the past month.

We see value emerging in selective property counters with CapitaLand (TP: $3.00) and Wing Tai (TP: $1.30) as our top 'buys', and City Developments (TP: $8.10) as our top 'sell'.
During Q4 2011, foreign buyers accounted for about 21 per cent of overall non-landed transactions (excluding executive condominiums).

The recent property measures mainly target foreign buyers whose proportion has been increasing steadily from 11 per cent in Q3 2010 to 19 per cent in Q3 2011. We expect foreign buying transactions to slow down sharply in the coming quarters due to the increase in transaction cost by 10 per cent acting as strong deterrent.