Analysts Anticipate Market Slowdown
Morgan Stanley’s specialists have indicated a possible cessation of Singapore’s most prolonged private housing price surge since the 1980s. They predict a market deceleration due to a mismatch of demand and supply, along with elevated stamp duties that are likely to dissuade foreign investors and hinder upgrades from public to private housing.
Following an unforeseen price increment in the third quarter of 2023, it’s projected that the investor count will diminish. This is attributed to an unprecedented amount of land scheduled for sale, the most in over a decade. In a contrasting move, Hong Kong has initiated measures to rejuvenate its property market by reducing housing taxes.
The team at Morgan Stanley projects a 3% dip in housing prices by the year 2024, a downturn they expect to persist for a couple of years. The ST All-Share Real Estate Index has witnessed a 13% decline this year, outpacing the 3.3% drop in Singapore’s equity benchmark.
A recent note from Morgan Stanley on Tuesday also conveyed downgrades for prominent property developers City Developments Ltd. and UOL Group Ltd., in light of the anticipated market shifts. There looms a possibility of both UOL and City Developments being excluded from the MSCI Singapore Index. This scenario, combined with elevated borrowing costs, might impact their market valuations. Today, the stock prices for both developers have seen a downturn exceeding 2%, as per the data on relative returns gathered by Bloomberg.
The real estate segment has not performed as well as the Straits Times Index this year. Steps have been taken to temper the overheated market, and a reduction in home rents is on the horizon. The analysts have shown a preference for asset managers and real estate investment trusts, which they believe face less structural and cyclical challenges compared to other groups.