Nomura: Five Possible Singapore Property Surprises
Nomura tipped overweighting Singapore property developers this year in its annual list five possible sector surprises with solid potential risk-reward.
The list was published before Monday’s surprise announcement that CapitaLand will be acquiring two Ascendas-Singbridge holding companies in a deal with an enterprise value of S$11 billion.
1. Nomura predicted property developers’ share prices would gain an average 30 percent this year. «Given the bearish market expectation at the start of the year, we think there is ample room for developers’ stock performance to surprise on the upside in 2019,» Nomura said.
2. It forecast primary home sales volume would climb 25 percent on-year, noting more than 60 projects with a total of 25,000 units are due to be launched in 2019, which marks a 60 percent on-year increase from 2018’s around 16,000 units launched. «Even an initial take-up of 30 percent would represent 75 percent of developers’ total sales in 2018,» it said. It added that a 25 percent increase, or to 12,500 to 13,000 units, would imply average monthly sales of around 1,000 to 1,100 units, or around 2017 levels.
3. Residential property rents could rise 10 percent on-year, Nomura forecast, noting only 13,200 private condo and apartment units are expected to be completed over 2019-2020, the lowest since 2005-07, when rents gained an average 19 percent per annum.
4. Singapore REITs will likely underperform developers, with the Singapore 10-year government bond yield set to end the year over 2.5 percent, Nomura forecast.
5. Nomura pointed to the potential for changes to REIT regulation in the city-state, with existing tax concessions due to expire in March 2020. The changes could include letting the concessionary withholding tax rate of 10 percent on distributions to non-individual non-resident investors expire, Nomura said.
- This article has previously been publish on financial website Shenton Wire.
