It is of no coincidence that the Straits Times rightly mentioned about 'Property Stocks Outperform(ing)' in the Saturday's (29 June) papers; this is something that I had been highlighting since end May and even more strongly in the last 2 weeks.
- "Focus on the supply & demand + momentum" - Strong real estate supply and demand 25 June
- "Weekly stock call - Ho Bee Properties" - 19 June
- "Weekly stock picks - CapitaMalls Asia and Ezion Holdings" - 11 June
- "Weekly stock picks - Yangzijiang and Capitaland" - 28 May
Again, acutely pointed by the article is that the FTSE property index is up 20% YTD. I have also plotted all key indices in a plot below that clearly illustrates the outperformance of the property stocks index as well as highlight some other outstanding and (possibly) undervalued sectors.
If we go deeper into the reasons for this strong showing by the property sector, it is also not difficult to derive its strong fundamentals and technicals (supply and demand).
- If you buy the fact that the STI is rebounding pretty strongly, with large cap counters beginning to re-challenge its first half of the year highs, there is a strong premise to do so with the property counters as traditionally, they are the leaders of any bull rally/rebound/correction.
- Past week of property news have focused on the resilient residential prices, rebounding commercial and industrial rental yields. To put it simply, despite all the cooling measures, demand for property is still very very high from the spare liquidity in the hands of Singaporeans. Some may argue that the commercial sector still faces a tough time ahead while prime residential is still reeling from the recent stamp duty imposed on foreign buyers, they are really just smaller issues in the bigger sphere of this property sector. Here are some of the published articles between 25 June to 30 June on the property market
- (iOCBC Research) SG Residential Sector: Upgrade to Overweight - Mass-market prices to stay buoyant
- (ST) Bigger homes making a comeback after shoebox craze
- (ST) Healthy demand for good class bungalows here
- (ST) Private resale home prices inch up again in May
- (PropertyGuru) Suburban condo prices resilient: NUS study
- (ST) Industrial sites draw new players
- Cooling measures are meant to prevent a bubble from occuring and not to cause a huge deterioration in prices (a hard landing). The finance ministry will not allow that to happen either. More importantly, the absence of a property bubble gives further insurance to everyone albeit slower capital yields that the market has incidentally overdiscounted.
- Over the last 12 months, the overall new and resale property prices are still higher by almost 5%. Source: PropertyGuru
Fundamentally, the sector is strong with key counters having huge diversification across segments (residential, commercial and industrial). They are also big players around the regions with strong balance sheets and cash kitties. Technically, proposition of property counters doing well has been well and truly validated by the stock market over the last 2-3 weeks and there is little sign that they will be headed for a crash as many predicted after the last cooling measures.