Investment summary

Based on URA’s flash estimates released, Singapore’s private residential property price index grew 3.1% QoQ in 1Q18 (transactions up till mid-Mar). This was the third consecutive quarter of sequential growth and also represents the highest QoQ increase since 2Q10 (+5.3%). We deem this as a strong set of numbers as we were previously projecting residential prices to grow 3% – 8% this year. We now expect the full-year growth figure to come in at the upper-end of our forecast or even potentially exceeding it. As a breakdown, prices of non-landed private residential properties jumped 5.0% QoQ in Core Central Region (CCR); prices in Outside Central Region (OCR) rose 3.8% while prices in the Rest of Central Region (RCR) increased by 1.1%. We view sector valuations as compelling and maintain a Strong Buy on the Singapore residential sector.

Our top picks are City Developments Limited [BUY, FV: S$15.91], UOL Group Limited [BUY, FV: S$10.63] and CapitaLand Limited [BUY, FV: S$4.26].

We are seeing the strongest growth in this market since 2010 and buyer sentiment remains firm.

3.1% QoQ growth in 1Q18 URA flash estimates

Based on URA’s flash estimates released yesterday, Singapore’s private residential property price index grew 3.1% QoQ in 1Q18 (transactions up till mid-Mar). This compares to the 0.8% QoQ increase registered in 4Q17 and was the third consecutive quarter of sequential growth. We deem this as a strong set of numbers as we were previously projecting residential prices to grow 3% – 8% this year, while 1Q18’s flash estimates also represent the highest QoQ increase since 2Q10 (+5.3%). We now expect the full-year growth figure to come in at the upper-end of our forecast or even potentially exceeding it.

Increase driven largely by Core Central Region

As a breakdown, prices of non-landed private residential properties jumped 5.0% QoQ in Core Central Region (CCR); prices in Outside Central Region (OCR) rose 3.8% while prices in the Rest of Central Region (RCR) increased by 1.1%. We believe the firm CCR price increase was driven largely by City Developments Limited’s (CDL) New Futura and GuocoLand’s Martin Modern. We note that buyer sentiment remains buoyant. CDL announced late last month that The Tapestry project sold 70% of the 450 units released (total: 861 units) over the first weekend of launch (as at 5pm on 25 Mar) at an average selling price of S$1,310 psf. Upcoming launches such as Park Place Residences (second phase) by Lendlease would likely generate keen interest.

Valuations remain compelling for developers

The FTSE ST Real Estate Holding & Development Index (FSTREH) is currently trading at a blended forward P/B ratio of 0.67x. We view this as compelling as it comes in at 0.84 standard deviations below the 10-year average (0.80x). Maintain overweight on the Singapore residential sector. Our top picks are City Developments Limited, UOL Group Limited and CapitaLand Limited.