April 29, 2009
S'pore property stocks 'cheap, but not hot'
By Joyce Teo
STOCKS here are cheap now but there is nothing to support any aggressive buying of Singapore property firms, says asset manager Henderson Global Investors.
Hong Kong and mainland China are the region's best bets for now, it said.
At the moment, Singapore property market fundamentals just do not look as good as these alternative markets.
'There is an oversupply issue in Singapore and the balance sheets of developers and to some extent, the real estate investment trusts (Reits), are more stretched,' said Mr Patrick Sumner, who heads Henderson's property equities team, at a media briefing yesterday.
Indeed, Singapore developers and Reits are still looking to raise quite a lot of funds, said Mr Frankie Lee, Henderson's co-head of property equities (Asia).
'We need to see some sort of stabilisation in the banks, in manufacturing, a bit of growth in jobs before we can see confidence come back into the property market. So, stocks are cheap.. but are we having a new driver of economic growth?' asked Mr Lee.
Private home prices in Singapore may fall by another 15 per cent before hitting the bottom - and recovery may only come in the second half of 2010, he said.
Vacancies in the home and office sectors have yet to peak, he added.
Hong Kong and mainland China, however, 'have emerged from a bruising 2008 with some resilient production numbers since the start of the year,' said Mr Lee.
'We think both will continue to outperform in the long term, relative to both developed and emerging Asia property markets. We believe that the sector fundamentals are gradually improving rather than deteriorating.'
Asian stocks that Henderson favours include Sun Hung Kai Properties, China Overseas Land and Yanlord Land.
Globally, the outlook is generally not rosy. While property has outperformed general equities, the global property total return index is back where it was at the start of the new millennium, said Mr Sumner. This will be a year of rights issues, uncertainty and opportunity for property firms, he added.