Singapore developer shares climb as property prices rise, launches see solid interest

Construction site in SingaporeConstruction site in Singapore

Shares of Singapore developers climbed on Thursday after reports of “large crowds” at launches and after the central bank may have signaled fresh cooling measures weren’t likely near term.

UOL was up 4.79 percent at 11:27 A.M. SGT, City Developments tacked on 3.57 percent, CapitaLand was up 1.28 percent, Wing Tai added 2.02 percent and Oxley was up 2.5 percent.

On Wednesday, Ravi Menon, Singapore’s central bank chief, said in a speech at the release of the Monetary Authority of Singapore’s annual report that the recovery in the property market was “welcome,” but that it shouldn’t decouple from economic fundamentals. He expressed concerns that if property prices rose too rapidly, it would outpace income growth and could create a “destabilizing” correction later, when additional supply enters the market.

But he didn’t mention any fresh cooling measures, saying only that the MAS, the Ministry of National Development and the Ministry of Finance were monitoring developments. The annual report said only that the current property market measures remained necessary.

That comes after preliminary data earlier this week from the Urban Redevelopment Authority showed Singapore’s private residential property index climbed 3.4 percent on-quarter in the second quarter after rising 3.9 percent in the first quarter.

Crowded launches?

Another factor that may be boosting interest in developer shares: DBS said in a note this week that new soft developer launches over the weekend were met with “large crowds.” The bank noted that at one, Park Colonial, located near the Stamford American International School, had a traffic jam turning into the showflat on Saturday.

“Anecdotal conversations with property agents seem to suggest that some viewers are interested buyers with ‘en-bloc money’, some were looking for investments and viewers who live around the area are looking to upgrade,” DBS said after visiting two showflats.

Recent share underperformance?

Developer shares have fallen recently, but RHB said it expected that to end.

It attributed the underperformance in part to the lower number of new launches in the first half of the year, due to timing differences between the completion of en bloc sales and the actual launches; RHB said while there have been fewer launches year-to-date compared with last year, more than 20 are expected in the second half.

“We believe a second leg of the rally in property stocks is likely in the second half of 2018 with strong takeup expected in the upcoming new launches, and with demand spilling over into the resale market,” it said in a note this week.

Land sales

RHB also said that the government land sale sites indicate plans to maintain steady land supply, with a balance approach to meeting demand while not flooding the market.

“We see this as a neutral stance and do not expect any further cooling measures in the near term,” RHB said.

RHB estimated residential property prices would rise by 5-10 percent in 2018 and 2019.

It kept an Overweight call on the sector, with APAC Realty and CapitaLand its top picks.

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