DBS tips Singapore home demand and prices to climb

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Demand for Singapore’s private housing and average property prices are poised to rise amid an expected population increase, DBS said in a note this week.

With its assumption that Singapore’s population will rise to 6.3 million to 6.5 million by 2030, DBS projected annual demand for primary homes would come in at 13,000 to 16,000 units until 2023, before tapering off to average around 12,000-13,500 a year.

Singapore’s current population was around 5.61 million in 2016. DBS noted that over 2001-2017, an average of 12,000 units were transacted annually.

“We believe that the upgraders market will be a key driver with around 17,000 HDB households per year eligible to upgrade to the private sector after the five-year minimum occupation period,” DBS said. “A wild card will come from potential foreigner purchases, which are
not factored in our numbers, and could be as high as an additional 10 percent of total transactions.”

DBS also forecast that average property prices would rise to S$1.9 million to S$2.5 million by 2030, implying a compound annual growth rate (CAGR) of 1.5 percent to 3.2 percent over 12 years. But it added that in deference to “quantum sensitive” households, developers were likely to shrink the average home size by around 20 percent to 840 square feet.

DBS said that meant on a per square foot basis, prices would come in around S$2,300-S$2,900, from S$1,500 currently.

In its bull-case scenario of the population reaching 6.9 million in 2030, it estimated total home demand could reach 37,500 new units, split between 26,250 HDB units and 11,250 primary market units. In the bear-case scenario of a population at 6.3 million in 2030, the annual total home demand would be 20,000 units, with 14,000 of them HDBs, it said.

It tipped the stocks to ride the growth were City Developments with a S$15.40 target price, UOL Group with a S$10.23 target, CapitaLand with a S$4.35 target, Roxy Pacific with a S$0.63 target and Chip Eng Seng with a S$1.18 target. It rates all of them at Buy.