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Published December 16, 2010

Credit Suisse upbeat on residential market

Its view goes against trend as several research houses flag risks in sector

By EMILYN YAP


ANALYSTS from Credit Suisse are positive on Singapore's residential property market, going against the tide as a few other research houses flag risks in the sector.

In a report on Monday, Credit Suisse said that it expects home prices here to increase by 15 per cent year-on-year this year, and by another 5 per cent in 2011 and 2012 each.

'The low interest rate environment, historical high rate of GDP growth as well as continued population growth should propel growth in the Singapore residential property market,' it explained.

Credit Suisse acknowledged that there were potential risks such as capital inflow controls or more anti-speculation measures from the government.

But it pointed out that the average valuation of Singapore property stocks is still below the historical average, and the residential sector is 'reaching the peak with decelerating growth momentum'.

Credit Suisse has an 'outperform' call on City Developments (CDL) and set the target price at $17.16. The counter closed at $13 yesterday after gaining four cents.

'While the market could be concerned that 37 per cent of its RNAV (revised net asset value) is in residential, the landbank had been mostly acquired at low costs, and we estimate 56 per cent is in the luxury sector, which has lagged the mass market segments,' Credit Suisse said.

It also has an 'outperform' call on Overseas Union Enterprise (OUE) with a target price of $4.20. OUE lost six cents to end trading at $3.31 yesterday.

Credit Suisse's views on the Singapore home market differ from those of several other research houses - many are expecting further government intervention to weigh down on the sector.

Analysts from Nomura said in a report on Monday that 'policy overhang should translate into a flattish outlook for home prices in 2011'. One measure the government might consider is the restriction of property purchases by foreigners, they suggested.

'Underlying housing demand and overall liquidity conditions are still keeping the property market relatively buoyant, despite the government's efforts hitherto to cool the market.'

Just yesterday, official data showed that developers sold 2,084 private homes (including executive condominiums) in November - 31 per cent more than in October.

CIMB also issued unfavourable views on the residential sector last week. A large supply of homes in the pipeline and a tighter immigration policy could hit the market, it said. It has an 'underperform' call on CDL, and prefers Keppel Land and OUE.

Credit Suisse is positive not just on Singapore's residential property market, but also on those in Hong Kong and Japan. 'We believe the low interest rate environment and ample liquidity will drive residential property markets higher,' it said.

It is cautious only on China, where the government is determined to control property prices and capital inflows are subject to restrictions, it said.