by winston » Tue Apr 21, 2020 3:04 pm
Singapore Residential Sector – Headwinds from COVID-19 but trading near trough valuations
Although Singapore’s private residential market was resilient in 2019, we see strong headwinds from the widespread COVID-19 impact.
We are projecting Singapore’s private residential price growth to come in at -5% to -10% in 2020, and for private new home sales (ex. ECs) to range 5-6k units, implying a decline of 39-50%.
Notwithstanding the negative near-term outlook, we note that the Singapore residential market is less reliant on foreign demand than in the past, while economic headwinds may also lead to a recalibration of housing policies, in our view.
We also believe the medium-to-longer-term fundamentals for the property sector remain largely intact.
The FTSE ST Real Estate Holding and Development Index (FSTREH) is trading at a consensus forward P/B ratio of 0.43x, which is two standard deviations below the 12-year average of 0.75x and also slightly below the trough P/B ratio of 0.44x seen during the GFC.
We see bargain hunting opportunities in selected developers, but are cognisant that macro headwinds and significant volatility is likely to remain in the near-term.
Our preferred sector picks are CapitaLand Limited (CAPL SP) [BUY; FV: S$4.24] and City Developments Limited (CIT SP) [BUY; FV: S$12.01].
Source: OCBC
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