Morgan Stanley Research recently released its rankings of Asean property markets, with results saying that Singapore is the country to watch. Why are analysts so confident that Singapore’s property market will heat up in 2018, and which developers are likely to profit the most? Read on to find out!
8% increase in home prices in both 2018 and 2019
Whilst the property scene in Singapore did pick up towards the end of 2017, Morgan Stanley predicts that the market will be even more bullish in the next two years. We’re talking an 8% increase in home prices in 2018, and again in 2019. Morgan Stanley puts this down to rising buyer demand outweighing a “tight supply of unsold inventory”. This means that new home sales growth is likely to accelerate from 40% in 2017 to nearly 50% in 2018.
The impact of 2017’s en bloc fer
If you’re wondering if this has anything to do with the en bloc fever we witnessed in 2017, you’re spot-on. According to Morgan Stanley, the surge in en bloc activity means that there will be fewer units for sale in the secondary markets. This will channel more home buyers to the primary market, and drive take-ups for newly launched projects.
Singapore’s developers to watch
Morgan Stanley’s top Singapore developer stock pick is none other than City Developments (CDL), which it says is the “best proxy to the sector upturn”. CDL has the largest land bank among the developers that Morgan Stanley covers, as well as the largest earnings exposure. CDL’s latest ultra luxury project New Futura was launched earlier in January 2018.
For these reasons (and more), Morgan Stanley predicts that a 5% increase in Singapore residential average selling prices will lift CDL’s 2018 earnings per share by an impressive 11%. In comparison, CapitaLand and UOL are likely to see a 1%-5% increase in earnings per share under the same circumstances.
Outlook for the other Asean markets
Singapore aside, Morgan Stanley also is also optimistic about the property market in the Philippines. Both its residential and office segments do not look likely to be priced in yet, according to Morgan Stanley.
As for Thailand, the price-to-earnings multiple for listed developers did increase in 2017, but things aren’t looking quite as rosy for 2018. More specifically, Morgan Stanley expects Thailand’s growth in presales is expected to moderate from 30% to 17%.
Last but not least, presales growth in Indonesia is also said to be in for a “cyclical slowdown” this year. Factors to consider include the recent interest rate increases, as well as the somewhat muted home-buying sentiment whilst consumers are gearing up for the 2018 regional elections and the 2019 presidential election.
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