mr funny
23-04-07, 06:16
April 23, 2007
Analysts divided over whether property bull run has more to go
Some think the party is largely over; others believe fundamentals are still strong
By Fiona Chan, PROPERTY CORRESPONDENT
WITH the property market upswing well under way and a stock market that's sizzling, it is no surprise that property stocks have soared in the past six months.
Almost all of them have hit record highs in recent weeks, from property giants such as CapitaLand and City Developments to smaller players including GuocoLand and Hotel Properties.
In general, these counters are riding on the buoyant property market, where all guns are firing and prices for all types of properties are rising across the board.
The potentially million-dollar question is: Is it too late for a slow-moving investor to get in on the action now?
Analysts are divided over this issue.
Some believe the party is largely over, while others argue that the strong fundamentals of property stocks will continue to win the day.
Mr Winston Liew of OCBC Investment Research is among those who think that property stocks have generally risen so much and so quickly that they carry limited upside now.
'Valuations are not cheap anymore, especially for the big ones,' he said, adding that property stocks have soared so much that prices of physical properties 'need to catch up' with them.
In the past six months, CapitaLand's share price has surged 60 per cent, while City Developments shares have gone up 40 per cent.
The stocks of smaller developers GuocoLand, SC Global and Hotel Properties have more than doubled in price.
In contrast, private home prices have risen by only 8.6 per cent in the same period. Office property values for the whole of last year went up 17 per cent.
'Unless property prices catch up more than the market expects, there isn't much more upside,' Mr Liew said.
He thinks it is unlikely that prices will catch up enough, as that would imply 'fairly lofty asset inflation'.
'I do not anticipate that happening, and even if it does, it will also mean rampant speculation, which could and would encourage government intervention, so it would not be sustainable,' he said.
Although Mr Liew said property prices will continue to rise, he noted that they were unlikely to reach the levels implied by the stock market, which would require them to jump '30 to 40 per cent over the next year or two'.
'There's not much point in going in now and trying to squeeze out another 5 to 10 per cent increase in share prices,' he added.
'For new investors, I think it's a little bit too late at the current valuations.'
But other analysts are more optimistic.
Mr Wallace Chu from DBS Vickers believes that the fundamentals for developers, whether their business is mainly in Singapore or overseas, remain strong.
He likes companies that have large Singapore land banks and those that are expanding in Vietnam and, to a certain extent, India.
He also thinks that, barring any unforeseen circumstances, the earliest time for a market slowdown will be in 2009.
This is when 'the next peak of upcoming completions would be', he explained.
But even then, Mr Chu expects that the impact of a slowdown on developers 'should be limited' as they would have already locked in profits from pre-completion sales.
'The fundamentals are still strong; the wave is not over,' he said.
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Analysts divided over whether property bull run has more to go
Some think the party is largely over; others believe fundamentals are still strong
By Fiona Chan, PROPERTY CORRESPONDENT
WITH the property market upswing well under way and a stock market that's sizzling, it is no surprise that property stocks have soared in the past six months.
Almost all of them have hit record highs in recent weeks, from property giants such as CapitaLand and City Developments to smaller players including GuocoLand and Hotel Properties.
In general, these counters are riding on the buoyant property market, where all guns are firing and prices for all types of properties are rising across the board.
The potentially million-dollar question is: Is it too late for a slow-moving investor to get in on the action now?
Analysts are divided over this issue.
Some believe the party is largely over, while others argue that the strong fundamentals of property stocks will continue to win the day.
Mr Winston Liew of OCBC Investment Research is among those who think that property stocks have generally risen so much and so quickly that they carry limited upside now.
'Valuations are not cheap anymore, especially for the big ones,' he said, adding that property stocks have soared so much that prices of physical properties 'need to catch up' with them.
In the past six months, CapitaLand's share price has surged 60 per cent, while City Developments shares have gone up 40 per cent.
The stocks of smaller developers GuocoLand, SC Global and Hotel Properties have more than doubled in price.
In contrast, private home prices have risen by only 8.6 per cent in the same period. Office property values for the whole of last year went up 17 per cent.
'Unless property prices catch up more than the market expects, there isn't much more upside,' Mr Liew said.
He thinks it is unlikely that prices will catch up enough, as that would imply 'fairly lofty asset inflation'.
'I do not anticipate that happening, and even if it does, it will also mean rampant speculation, which could and would encourage government intervention, so it would not be sustainable,' he said.
Although Mr Liew said property prices will continue to rise, he noted that they were unlikely to reach the levels implied by the stock market, which would require them to jump '30 to 40 per cent over the next year or two'.
'There's not much point in going in now and trying to squeeze out another 5 to 10 per cent increase in share prices,' he added.
'For new investors, I think it's a little bit too late at the current valuations.'
But other analysts are more optimistic.
Mr Wallace Chu from DBS Vickers believes that the fundamentals for developers, whether their business is mainly in Singapore or overseas, remain strong.
He likes companies that have large Singapore land banks and those that are expanding in Vietnam and, to a certain extent, India.
He also thinks that, barring any unforeseen circumstances, the earliest time for a market slowdown will be in 2009.
This is when 'the next peak of upcoming completions would be', he explained.
But even then, Mr Chu expects that the impact of a slowdown on developers 'should be limited' as they would have already locked in profits from pre-completion sales.
'The fundamentals are still strong; the wave is not over,' he said.
[email protected]