Property

Property: Maybank-KE opines that Singapore’s residential market may bottom faster than its office market.

Home prices have already fallen for 9 consecutive quarters, and the house believes that prices could fall another 4-6% in 2016, which could set the stage for a progressive loosening of policy measures in early 2017; given such, developer stocks may start rallying in 2H16.

Wing Tai (33%) and CityDev (26%) have the largest exposure to Singapore’s residential market and may be re-rated the most on any policy loosening. A worsening economic environment may just prompt the government to loosen faster.

Meanwhile on the Office side, the house expects office rents to fall another 7% in 2016, and it’s too early to raise office exposure as the sector may only
trough in 2018.

A few developers under our coverage remain major landlords and could be affected to some extent by this weakness. Ho Bee (40%) and OUE (32%) have the largest Singapore office exposure among developers under coverage.

The house reiterates its Positive call on Developers, and Neutral call on Office REITs. CityDev (Buy, TP $9.33) remains the house’s top pick.

Maybank-KE also has the following ratings for Developers/ Office REITs:

Ho Bee Land (Buy, TP $2.84)
CapitaLand (Buy, TP $3.71)
Wing Tai (Buy, TP $1.91)
OUE (Hold, TP $2.04)
CCT (Hold, TP $1.25)
Keppel REIT (Hold, TP $0.88)