Singapore property expected to stabilize

Singapore property expected to stabilize

SINGAPORE (Reuters): Singapore's property sector is expected to stabilize this year following a price collapse of more than 40 percent since mid-1996, analysts said.

But recovery is expected to be patchy with mid- and lower- range private home prices showing more buoyancy than the high end. In the commercial sector, prices are continuing to fall because of a growing overhang of unleased space.

"We think the downside from here is limited. On the residential side...in the higher end, prices are still a bit fluid," said Lam Wei Siong, property analyst at Morgan Stanley Dean Witter.

Many analysts said the price falls and lower interest rates had led to a sharp increase in new home sales. Latest data from the Urban Redevelopment Board show developers sold almost 3,000 new homes in the last quarter of 1998, up 200 percent over the third quarter.

"I think this suggests that the property market has bottomed, especially for the lower end," said Ng Yeow Tong, analyst at G.K. Goh Research.

But a sharp recovery is not expected any time soon.

URA data put supply at the end of 1998 at 16,568 units. Analysts expect new home sales to remain flat to 10 percent more than 1998's 6,000.

"If developers don't push up prices too quickly, I think sales momentum should be sustained this year. The lower end of the market is very price sensitive," Ng said.

The expected turnaround in the property sector has prompted some broking houses to switch to overweight in selected property stocks despite the fact that almost all will report record losses for 1998.

Most brokers like City Developments, a clear leader in the sector with a large and cheap land bank and one of the few property firms to report a profit for 1998.

"It has a very strong balance sheet," said Gregory Lui, analyst at SG Securities.

CityDev's blue chip status also means it is trading at a premium to the company's net asset value, which analysts put at slightly more than S$6 a share.

"Based on valuations, it is hard to justify a buy for CityDev given the cycle that the property market is in at the moment," Lam said.

Some broking houses recommend First Capital Corp as it is a leader in the lower-end housing market which is seeing the most activity.

"We believe FCC to be the biggest beneficiary of strong demand for entry-level private housing," Salomon Smith Barney analyst Soon Ching Voon said in a report.