Singapore’s property stocks have surged on average 48 percent so far this year, far outstripping the 15.5 percent gain on the broader Straits Times Index, and analysts say there is still more upside for the sector.
Low mortgage rates, little impact from recent credit-tightening measures and still relatively cheap valuations make these counters a buy, analysts told CNBC.
“We think the current environment of super-low interest rates and high liquidity is likely to continue,” said Barclays’ analyst Tricia Song in a report on Wednesday. She added that this would lead to strong demand for homes.
Singapore’s property market has seen prices surge over the past few years, driven partly by foreign buying, prompting the government to take several cooling measures.
It has introduced higher taxes for overseas buyers, lowered loan limits and earlier this month set a cap on the tenure of a home loan.
Singapore is one of Asia’s most vibrant property markets, and home prices have gained more than 50 percent over 2007 to 2011.
According to Song, property developers like CapitaLand , City Developments and Keppel Land should continue to ride the market. The sector is now trading at an average price to earnings ratio of 14.4 after this year’s gains, which Song said was not expensive, compared to about 15 for the Straits Times Index .
She expects CapitaLand shares to rise about 25 percent over the next 12 months. City Developments and Keppel Land, which are trading at 65 percent and 49 percent of their 2007 peaks, also have more room to gain, she added.
For Japanese brokerage Nomura, Keppel Land is its top pick among Singapore residential developers. Analyst Sai Min Chow expects the stock to gain 40 percent from now until June next year.
Maybank Kim Eng’s property analyst Wilson Liew favors developer Wing Tai , for which he sees a 12-month upside of 27 percent.
“Wing Tai is our top mid-cap pick to gain exposure into the high-end segment, backed by a sound balance sheet,” Liew said.
Still, some analysts warn of risks to the housing sector, despite the resilience, and advise investors to look beyond this segment.
“A moderating pace of immigration and rising supply will result in subdued new home sales going forward. We prefer commercial landlords,” Wong Yew Kiang, property analyst at CLSA said.
He likes CapitaMalls Asia , a developer of shopping malls in the region, and Global Logistics Properties, a warehouse owner and operator that is 50.6 percent-owned by Singapore’s sovereign wealth fund.
—By CNBC’s Jean Chua.