Singapore Banks

Singapore Banks: Maybank-KE notes that the property market could get worse but there should be no repeat of 1998. The house weighs in on trends: 1) vacancy rates for non-landed private homes, excluding ECs, have risen to 8.3%, the highest in eight years. 2) Currently seemingly high rental yield spreads could reverse when interest rates start to rise when interest rates start to rise in 2015. Additionally, a massive supply of new homes (63,000, 6,038 unsold) could tip the balance in 2015 as household formation tapers off. To absorb the supply, property prices and rentals will have to weaken, a consensus view. The house forecasts up to a 15% decline in home prices from mid-2014 to end-2015. Foreign investors have been snapping up Singapore homes, accounting of 13.8% of 1Q05-4Q11, led by the Chinese and Malaysians. While these appear high risk, the house believes a protection is a lower loan-to-value ratio for these buyers. Singapore’s improved position as one of the international wealth-management centers also suggest some of these are long-term investments. Meanwhile, the default cases at luxury projects are not reflective of the broader market, the house views. Banks are expecting a minimal impact. Maybank-KE maintains Neutral on the sector, with a preference for DBS (Buy, TP of $23.40), UOB (Hold, TP of $25.30), and OCBC (Hold, TP of $10.10)