Singapore developer share price weakness is chance to buy, Maybank KimEng says

Singapore 50 dollar bill

The weakness in Singapore developers’ share prices is an opportunity to buy as the home price rally was set to continue, Maybank KimEng said.

While home prices are up around 7 percent year-to-date, developer stocks have fallen around 4 percent, the brokerage noted in a note earlier this week.

“With the demand-supply outlook still supportive of a housing recovery, we see this divergence as an opportunity to raise sector exposure,” it said.

It forecast annual net supply of only 5,300 units over 2018-20, compared with the market’s long-term absorption of 11,400 units. In addition, more than 6,000 households have been displaced by en-bloc deals since 2017, which will soak up a large part of the supply, it said, noting it expected lower vacancies over the next few years.

While developer sales for the first five months of the year were soft, it attributed that to a lack of new launches, not market weakness.

“We believe housing demand remains strong, as evidenced by healthy overall volumes, including secondary market transactions. We maintain our new-home sales forecast of 12,000 units for this year, expecting a stronger second half of 2018 to provide re-rating catalysts,” Maybank KimEng said.

It said it was Positive on the sector, with UOL its top large-cap pick and GuocoLand its mid-cap pick.

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