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21-02-17, 18:58
http://www.businesstimes.com.sg/companies-markets/real-estate-sector-outperforms-overall-sti-early-in-2017
Real estate sector outperforms overall STI early in 2017
Wednesday, February 15, 2017
LISTED property developers and operators have returned 12 per cent since the beginning of this year, beating the Straits Times Index (STI)'s 8 per cent, according to SGX My Gateway.
The price-to-book (P/B) ratio of the real estate sector has also risen, albeit less drastically, the investor education portal said in an update report on Tuesday.
A metric used to compare market value to book value and gauge whether a market is undervalued or overvalued, the P/B ratio of the FTSE ST real estate holding and development index hovered near or below 0.66x throughout most of 2016. Despite a small rise to 0.71x, it remains near one standard deviation below the long-term average of 0.83x.
Real estate management and development stocks led the sector in the first six weeks of the year, overtaking the real estate investment trusts which led the sector in 2016.
"There are five Real Estate Management & Development stocks with market capitalisation above S$1 billion listed on the SGX with substantial exposure to the Singapore property market. These five companies have returned an average of 14.6% in the year thus far," said the SGX My Gateway report.
Other real estate stocks also generated gains in the same period, with the 20 non-STI stocks with the largest market capitalisation returning an average of 10 per cent. The top performing stock was Oxley Holdings, with a total return of 32.8 per cent. Both STI and non-STI real estate stocks continue to show similar dividend yields and P/B valuations.
Factors that may continue to drive the sector in the near future include a possible review of cooling measures that have been in place since 2013, stabilising prices in private residential property, a forecast property supply decline, and increases in interest rates.
Industry players have recently pushed for relaxation of a set of cooling measures set in place in 2013 by the Monetary Authority of Singapore.
The Urban Redevelopment Authority (URA) reported that the Singapore Private Residential Price Index declined 3 per cent year-on-year in 2016. As it is a more gradual decline than the 4 per cent and 3.7 per cent drops seen in the previous two years, analysts expect a flat to low single-digit decline in prices for 2017.
The URA also forecasts a drop in the number of private residential and executive condominium units completed in the next two years. About 26,000 units were completed in 2016, and this figure is expected to drop significantly to about 18,000 units this year and nearly 14,000 in 2018. Office space is likely to peak before reaching a trough in 2019.
Finally, Singapore interest rates are sensitive to movements in the US, and the three-month Singapore Interbank Offered Rate has increased by about nine basis points to 0.96 per cent since the US elections last November. The US Federal Reserve raised interest rates in December 2016 and indicated three more hikes in the coming year.
Real estate sector outperforms overall STI early in 2017
Wednesday, February 15, 2017
LISTED property developers and operators have returned 12 per cent since the beginning of this year, beating the Straits Times Index (STI)'s 8 per cent, according to SGX My Gateway.
The price-to-book (P/B) ratio of the real estate sector has also risen, albeit less drastically, the investor education portal said in an update report on Tuesday.
A metric used to compare market value to book value and gauge whether a market is undervalued or overvalued, the P/B ratio of the FTSE ST real estate holding and development index hovered near or below 0.66x throughout most of 2016. Despite a small rise to 0.71x, it remains near one standard deviation below the long-term average of 0.83x.
Real estate management and development stocks led the sector in the first six weeks of the year, overtaking the real estate investment trusts which led the sector in 2016.
"There are five Real Estate Management & Development stocks with market capitalisation above S$1 billion listed on the SGX with substantial exposure to the Singapore property market. These five companies have returned an average of 14.6% in the year thus far," said the SGX My Gateway report.
Other real estate stocks also generated gains in the same period, with the 20 non-STI stocks with the largest market capitalisation returning an average of 10 per cent. The top performing stock was Oxley Holdings, with a total return of 32.8 per cent. Both STI and non-STI real estate stocks continue to show similar dividend yields and P/B valuations.
Factors that may continue to drive the sector in the near future include a possible review of cooling measures that have been in place since 2013, stabilising prices in private residential property, a forecast property supply decline, and increases in interest rates.
Industry players have recently pushed for relaxation of a set of cooling measures set in place in 2013 by the Monetary Authority of Singapore.
The Urban Redevelopment Authority (URA) reported that the Singapore Private Residential Price Index declined 3 per cent year-on-year in 2016. As it is a more gradual decline than the 4 per cent and 3.7 per cent drops seen in the previous two years, analysts expect a flat to low single-digit decline in prices for 2017.
The URA also forecasts a drop in the number of private residential and executive condominium units completed in the next two years. About 26,000 units were completed in 2016, and this figure is expected to drop significantly to about 18,000 units this year and nearly 14,000 in 2018. Office space is likely to peak before reaching a trough in 2019.
Finally, Singapore interest rates are sensitive to movements in the US, and the three-month Singapore Interbank Offered Rate has increased by about nine basis points to 0.96 per cent since the US elections last November. The US Federal Reserve raised interest rates in December 2016 and indicated three more hikes in the coming year.