DBS Group Research analysts Derek Tan, Tabitha Foo, Rachel Tan have named listed developers CapitaLand Investment (CLI), City Developments Limited C09 (CDL) and GuocoLand F17 as their top picks among the Singapore-listed property stocks.
Despite the divergent property price trend that is expected to emerge, property in Singapore is “still one’s pot of gold”, say the analysts in their Dec 12 report.
“Contrary to market fears of a property price drop off in 2024, we see a ‘calming down’ in the Singapore property price index (PPI) – to 0% to +2% (from [around] 4.5% in 2023) on the back of lower transaction velocity, especially from foreigners/investors (deterred by high stamp duties) and a higher supply completion pipeline,” the analysts write.
To this end, luxury properties, which are mainly homes in the core central region (CCR), could bear the brand of the “calming down” of the index, with a potential price decline of up to -3% in 2024.
Next year, the analysts see home upgraders as the core pool of buyers in 2024 on the back of low overall unemployment rate in Singapore, stabilising mortgage rates and a healthy price performance among the HDB resale market.
As such, bright spots within the property sector are likely to come from executive condominiums (ECs), suburban condominiums in the outside central region (OCR) and rest of central region (RCR) and resale HDB flats.
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The rising new supply of houses is also seen as a “minor hump” in 2024 as well-capitalised households coupled with stabilised mortgage rates are supportive factors to negate any weakness in property prices. According to the analysts, mortgage rates have softened in recent months to around 3.0% to 3.1% from the peak of 4.25% to 4.5% at the start of 2023.
On the developer front, the analysts are convinced that most of the listed companies are “well-positioned” with a portfolio sell-through rate of over 85% for their launched projects.
“Most will likely pace out new launches through 2024, largely in the OCR/RCR region. We expect encouraging sell-through rates, implying developers’ earnings momentum will remain on an uptrend,” they write.
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They add: “Developers remain at an attractive tactical level at a 0.5x P/BV, trading at ‘recessionary levels’, at a -2 standard deviation (s.d.) P/B basis. We see the sector closing the P/BV gap as macro conditions stabilise.”
The sector’s catalysts will come from the strong presales of upcoming projects and a rebound in operational metrics for the hospitality and commercial portfolios.
Shares in CLI, CDL and GuocoLand closed $3.07, $6.50 and $1.48 respectively on Dec 14.
