HLIB Research said the month of November saw record-breaking home sales in Singapore.
PETALING JAYA: Local property developers like IOI Properties Group Bhd
(IOIProp) and Sunway Property which have exposure to the Singapore market stand to benefit from a rejuvenated market in the island-state.
In a report to clients, Hong Leong Investment Bank (HLIB) Research said the month of November saw record-breaking home sales in Singapore, highlighting a resurgence in the country’s property market.
This was driven by strong launches, pent-up demand and declining interest rates.
“Developers like IOIProp and Sunway stand to benefit,” HLIB Research said.
It has maintained its “overweight” rating on the property sector with IOIProp, OSK Property, Sime Darby Property Bhd and Sunway as its top picks.
In the report, the research house noted that in an earlier report, it had projected that Singapore developers were likely to record the highest private home sales in over a decade in November.
“This has now been confirmed by data released by the Urban Redevelopment Authority (URA) on Dec 16.
“According to URA, developers sold 2,557 private homes (excluding executive condominiums) in November, marking a 246.5% month-on-month and 226.1% year-on-year increase.”
This was the highest monthly sales figure since March 2013, where 2,793 units were sold and also represents the first time in over 11 years that monthly sales surpassed the 2,000-unit mark, it added.
In the report, the research unit also pointed out that the resurgence has at the same time, also raised concerns about potential government cooling measures, especially with a Singapore general election expected within a year.
On one hand, the government may seek to address voter concerns over housing affordability, while on the other hand, it might refrain from introducing new policies that could heighten uncertainty and disrupt market stability, it said.
“In our view, it remains premature to anticipate government intervention as the market has only begun to recover following an extended lull period previously.
“The government is likely to wait for more data points to assess whether the market is genuinely overheating.
“In the third quarter of financial year 2024 (3Q24), private home prices declined 0.7% quarter-on-quarter.
“The upcoming 4Q24 private home price data will be a critical indicator to watch.
Early signs suggest a price rebound, with developers raising launch prices amid overwhelming responses (for example Chuan Park launched at higher prices than those indicated in marketing materials).”
HLIB Research also said the Federal Reserve’s (Fed) rate decision tomorrow will play a pivotal role in shaping sentiment and impacting developers’ interest costs.
Citing CME FedWatch, it said there was a 97.1% probability of a 25 basis points (bps) rate cut.
“If this materialises, further decline in Singapore’s three-month Singapore Overnight Rate Average (Sora) is anticipated.
“This should benefit IOIProp, whose Singapore debt is pegged to floating rates based on three-month Sora plus a fixed margin.
“Since the Fed began its rate-cut cycle, the three-month Sora had been steadily declining.”
It noted that since early September, the three-month Sora had dropped by approximately 43 bps, signalling reduced borrowing costs for IOIProp.
