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29/06/2011

Double-digit falls seen amid fears of further govt measures

 
PROPERTY counters have suffered a bruising drop in price in the past two months, even though blue-chips have largely stayed on an even keel despite the sluggish market conditions.
 
Since May 9, just after the general election, GuocoLand - which is developing Singapore's tallest high-rise residential complex in Tanjong Pagar - is down an alarming 21.7 per cent.
 
Other property giants which have suffered double-digit percentage drops include CapitaLand which has dived 13.4 per cent and Keppel Land, which is down 11.4 per cent in the same period.
 
In contrast, the benchmark Straits Times Index is down only 1.5 per cent in the same period, even though investors' appetite for stocks has been spooked by a renewed flare-up of the sovereign debt crisis in Europe.
 
The only property counters to buck the bearish trends are upmarket developers such as Wing Tai Holdings and Wheelock Properties, whose prices have stayed relatively unscathed by the sell-off.
 
Both counters are considered to be possible candidates for privatisation, following a move by sugar king Robert Kuok last month to buy the rest of Allgreen Properties and delist it.
 
Analysts have blamed the recent lacklustre performance of property counters on fears that the Government may take further measures to cool the red-hot residential market.
 
DBS Vickers analyst Lock Mun Yee noted in a recent report that investors are adopting a 'wait-and-see' stance where property counters are concerned.
 
'The market has shown some signs of cooling on the back of overhanging government policy risks, with some new launches seeing slower take-up rates,' she said.
 
Although the property sector is trading at a 32 per cent discount to its revalued net asset value, there is a lack of near-term catalysts to lure investors into buying property stocks.
 
What is dampening investors' appetites is a fear of over-supply in housing, following the Government's decision to ramp up the building of HDB flats.
 
'Inclusive of a targeted 26,000 units of public housing for sale this year, medium term supply, particularly of low-end private housing and HDB apartments, is on the rise, and this is likely to cap the upside to this segment of home prices,' said Ms Lock.
 
But Citi Investment Research analyst Wendy Koh believes that the increase in new supply of HDB flats and private homes will not result in a housing glut in two or three years, contrary to what most investors are fearing.
 
'We estimate that the deficit in housing units is in excess of 50,000 currently and that this under-supply situation will likely take several years to clear, just like the over-supply situation in the early 2000s,' she said.
 
Even with the new HDB supply and an increase in income ceiling for new HDB flats from the current $8,000, possibly to $10,000, she estimated that HDB resale transactions would be reduced by only 7 to 15 per cent.
 
'The impact on the private property market would be even smaller,' she said.
 
Ms Koh is also optimistic that the demand for small units and mass market units as investments will stay strong, as 'occupancy rates for mass-market properties are at an all-time high of 97.5 per cent, and offer yields averaging 4.2 to 4.5 per cent versus mortgage rates of just 1.2 to 1.6 per cent'.
 
Yet, despite her optimism that there will be no housing glut, even she could find few reasons for property counters to shake off their lethargy.
 
'Although property stocks appear to be cheap, they traditionally outperform when property prices are on the rise. With any property price rise likely to be met with more policy measures from the Government, we see little room for Singapore residential developers to outperform,' she said.

SOURCE: STRAITS TIMES



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