Stocks on Roll as Singapore Property Demand Rises

Singapore property stocks are set for their best annual performance in five years, and strategists believe the rally is far from over.

With an expected pickup in real estate following the easing of housing curbs, developers are expected to be the bright spot in Singapore equities as gains in the city-state’s stocks may be limited for the rest of the year, Bloomberg reported.

 “The residential property market has seen a marked improvement in sentiment,” said Desmond Loh at JPMorgan Asset Management, who helps manage the second-best performing Singapore fund this year. Developers that have started buying land for new projects stand to benefit, he said, adding that vacancy rates are expected to decline over the next few years.

The city-state’s government sparked renewed interest in the Singapore real estate market after it rolled back some curbs in March following a 3 1/2-year slump in home prices, the longest stretch of declines since the data was first published in 1975. In the same month, housing sales surged to the highest in nearly four years as developers sold more than twice the number of homes compared with the previous year, government data showed.

Property stocks including City Developments Ltd. and UOL Group Ltd. are already driving gains in Singapore stocks so far this year, with developers and property trusts making up half of the 10 best-performing stocks on the Straits Times Index. The city-state’s benchmark measure has climbed 12% this year, while the gauge tracking 42 Singapore real estate stocks has jumped 16%, heading for its biggest annual gain since 2012.

City Developments rose as much as 1.4% in Singapore on Monday, its first daily gain in six days. UOL Group advanced as much as 0.9% while CapitaLand Ltd. climbed 0.8%.

“Prices are moving upwards again, albeit in a more gradual direction, market interest is more positive in terms of transactions,” said Andrew Gillan, head of equities for Asia excluding Japan at Janus Henderson Group, which has about $330.8 billion assets under management globally. “That’s going to bode relatively well for earnings,” he added, pointing to developers that have accumulate land at “reasonable” costs.

Government land sales are drawing investor interest. A residential plot last month fetched a record price in a government sale, with a Chinese consortium bidding S$1 billion ($723 million). Other developers are adding land by buying up existing apartment buildings for redevelopment in so-called en-bloc sales. Four of these deals—where a group of owners band together to sell entire apartment blocks at a hefty premium—have been struck this year, with a combined value of S$1.5 billion.