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The property market is about to hit bottom.
Policy-battered property developers will likely heave a sigh of relief once 2015 draws to a close. Analysts expect that some cooling measures might finally be eased in 2016, which in turn might provide a much-needed boost to beaten property stocks.
Private property prices have fallen by about 8% from their peak in 2013. Analysts expect that some cooling measures will be eased once prices have fallen by 12% to 15%, which is likely to occur either in the second half of 2016 or early in 2017.
“While government officials have been hinting that property-cooling measures will not be lifted soon, we continue to see 2016 as a possible time for a change,” noted a report by Maybank Kim Eng.
“We believe the government will not want to rock home prices too much, as this will have wider economic implications,” Maybank Kim Eng noted.
Meanwhile, analysts at RHB note that the property market is likely to hit bottom soon, as property sales volumes have already hit record lows.
“In past property cycles, volume troughs typically precede price troughs by 2-4 quarters. This also corroborates our view that a bottoming-out in 2016-2017 appears imminent,” said RHB.
RHB believes that property stocks are likely to rebound in 2016.
“The performance of property stocks precedes that of physical property prices by 2-3 quarters due to liquidity, ie there is a lag between the time it takes to sell physical properties vs stocks. The likelihood of a rebound in 12-18 months for property stocks certainly stacks up, in our view,” said the report.
Analysts at UOB Kay Hian believe that developers are unjustifiably cheap, and note that prices will rally once the government tweaks policy.
“Impetus exists for the government to calibrate overall home prices beyond severe downshifts. We believe the authorities will continue fine-tuning policies to avert home prices from plummeting beyond 20%. We believe this would entail a price fall of 12-15%, which should prompt the government to relax some of the property cooling measures. This could happen towards 3Q16 or 4Q16,” UOB Kay Hian said.
Source: Singapore Business Review 4th December 2015