Singapore Property Market Outlook

Articles:

JPMorgan says “2011 will likely be a volatile year for S-REITs sector with a total return expectation of 8.0%, dominated largely by the dividend yield.” 

It notes this compares with its return expectation of about 15% for the STI. It says while rental growth expectation for most commercial segments remains positive and physical market transactions will continue to pick up, the potential supply in the equity market through primary and secondary issuances will keep unit prices in check.

It adds, valuations are no longer compelling as S-REITs are trading at a forward dividend yield of 6.0%, P/B of 1.1X and 7.5% premium to house NPV estimates. It downgrades CapitaCommercial Trust (C61U.SG) to Underweight vs Neutral on lack of growth, deteriorating portfolio quality and rich valuation.

It also cuts CapitaMall Trust (C38U.SG) to Neutral vs Overweight “as we believe that constant cash calls from the sector would put pressure on the stock.

http://www.theedgesingapore.com/the-daily-edge/business/24866-s-reit-valuations-no-longer-compelling-jpmorgan-.html

My view:

In 2010, Singapore’s residential market grew by 18% YoY. Despite of the jump in the selling prices (especially in CBD area thanks to MBFC and Marina Bay Link, prices in the office market are highly affected), I still think the growth will be at the slower pace in 2011. I agree with the article above that said S-REITS industry will be volatile due to the high prices and more supplies in 2011. The price has already reached its peak (or at least it’s almost there) now, and I see the prices will slightly be adjusted in the 2nd half of the year.  In my view, the adjustment would be at the residential market as the government has few projects in hand at the moment to increase the supply in the HDBs and Condos, starts with Waterfront Isle at Bedok Reservoir Road. However as for the office market, even though they are planning to build more offices this year, Singapore, as the main financial hub in South East Asia will continue to attract foreign companies to open their business in Singapore with CBD area as their main target location of offices. With circle line to be completed soon in some of the prime areas such as Holland Village, it is interesting to see how the residential prices will move (believe me, it is already overpriced! You don’t easily find SGD $2,500 per month in that area). And I also believe the election that will happen this year will indirectly affect the property prices in Singapore.

That’s it from me. Tell me what do you think about it? What’s your view? Do you think Singapore will still be attractive to foreigners to own property here? Do you think REIT Industry will still perform well in Singapore? I’d love to see some views and comments from all of you!

~ by extendasia on January 17, 2011.