Singapore government has just relaxed some residential property cooling measures on 13 March 2017, marking a reversal in stance since 2010 when it started introducing a series of measures to tighten the property market. We think the government move has big positive implications on Singapore developers and their share price performances. Already, we saw ample liquidity in the market, where sales volume has been on the rise for two consecutive years (2015 and 2016), and selling prices are expected to hit bottom this year. In our view, 2017 may just be the best window of opportunity to invest in property stocks. Below are 3 key reasons why this may be the case.
The change in stance by government may mark the start of the property easing cycle. If more regulations are lifted going forward, interested buyers who have been affected by cooling measures will be able to invest in properties. This will introduce a new class of buyers into the property market, hence boosting demand and sales.
A number of property developers are liable for QC/ABSD charges as they may not be able to sell off all the units at certain residential projects within a stipulated timeframe imposed by government. Developers are likely to capitalize on the improved sentiment to sell off the unsold units and avoid the penalties. Hence, the impact of QC/ABSD charges may not be as severe as market anticipated.
Our 3 local banks (DBS, OCBC and UOB) have just started a price war on home loans. OCBC’s latest offer works out to 0.7% for the first year, 0.65% for the second year, 0.60% for the third year and 0.55% for the fourth. After that, the rates are 1.55% a year. DBS and UOB, on the other hand, have offered customers zero-spread fixed-deposit home loan rates, meaning that they are not charging anything on top of their fixed-deposit home loan rates. Implication? Financing for home loans is more affordable for new home buyers, again boosting property sales.
For exposure to the Singapore property market, liquid names such as City Developments and CapitaLand are the market’s unanimous preferred picks. However, UOL and Frasers Centrepoint Ltd are also attractive stocks given that they are still laggards to the recent property sector rally.