The analysts&rsquo report comes after a fresh set of cooling measures were announced in the late hours of Dec 15. A few hours later, property counters on the Singapore Exchange (SGX) saw red as share prices dived.

However, the analysts note that the Singapore Developer Index (FSTREH Index) is currently trading at a multi-year low at close to 0.6 times price-to-net asset value (P/NAV), which is deemed attractive.

 

&ldquo This level is close to its 10-year low and below the support levels over the last two sets of cooling measures in 2013 and 2018,&rdquo write the analysts in a Dec 16 report.

Calling the latest round of cooling measures a &ldquo timely brake&rdquo on the rise of property prices, the analysts say that the rules are generally targeted at investors instead of owner-occupiers, given the differentiated approach in the changes in the additional buyers&rsquo stamp duty (ABSD) rates.

 

&ldquo We anticipate that prospective buyers, especially the investors, now faced with higher ABSD rates, will most likely hold back their purchase decisions. This should result in a drop off in transaction volumes for upcoming launches,&rdquo they write.

In addition, the anticipated wave of foreign buyers coming in upon the recent launch of the vaccinated travel lanes (VTL) will most likely cool. This is due to prospective buyers now facing a 10-percentage point hike in stamp duties.

&ldquo [They will now have] to reconsider their purchase decisions, especially when they will have to cough up almost 30% (vs 20% before) of the property price in the form of taxes,&rdquo say the analysts.

&ldquo For a $2 million property, that will mean up to $100,000 more in taxes to be paid,&rdquo they add.

 

Amid the higher number of transaction volumes, which stood around 10,000 in 9M2021, above the average of 9,000 to 10,000 units per annum seen in recent years, the analysts expect volumes to take a hit and fall back to the average 7,500 to 8,500 units.

Property indices are also likely to have peaked for the near term.

 

The property price index (PPI) has risen by some 8.4% to date since March 2020, while the HDB resale index has risen by almost 13% over the same period.

&ldquo With anticipated cooling in transaction volumes and sellers&rsquo asking prices (which have been very buoyant recently), we believe that the PPI has peaked for the near term,&rdquo say the analysts.

The reduction in the total debt servicing ratio (TDSR) to 55% from 60% is seen as a positive for households in the longer-term, as it &ldquo further encourages financial prudence&rdquo , say the analysts.

 

&ldquo The lower rate will prevent households from over-leveraging themselves in the midst of possible rise in interest rates which will have an impact on their mortgage servicing burden,&rdquo they add.

 

&ldquo In addition, the cut in the loan-to-value (LTV) for HDB housing loans from 90% to 85% will mean higher cash outlays from buyers of new or resale HDB homes, implying that sellers will likely need to cut asking prices while cash-over-valuations (COV) will likely drop off, implying that upgraders will have less upfront cash to roll into their next property purchase,&rdquo they continue.

What will happen to the en-bloc market

 

The en-bloc market, which is starting to heat up, may see limited interest moving forward, as the government releases more land banking options to developers.

On Dec 16, the government released a total of 13 sites under the 1H2022 Government Land Sales (GLS) Programme.

 

The move is done to ensure a &ldquo sufficient supply of private housing to meet demand and ensure market stability&rdquo , says the Ministry of National Development (MND) in a press release dated Dec 16.

&ldquo GLS sites are typically faster to market given that the process from bidding to award is more straightforward and less time consuming when compared to en bloc,&rdquo note the analysts.

INDUSTRIAL real estate investment trusts (Reits) should look into redevelopment projects or asset enhancement opportunities as their " next leg of growth" , DBS Group Research said.

 

In a report on Wednesday (Dec 1), the research team said industrial Reits should shift their focus to assets which are undervalued or with lower in-place occupancy rates and room for asset enhancements, to create value through higher rental rates in the future.

 

Although industrial Reits have benefited from investing in new-economy assets such as logistics, data centres and business parks, DBS noted that the Reits are increasingly being " crowded out" by investors willing to accept lower yields on their real estate investments amid a low interest rate environment.

 

A possible oversupply of industrial space in FY2022 - due to construction delays amid the pandemic - could also weigh on rental growth prospects.

 

Hence, DBS said it prefers large market capitalisation industrial Singapore Reits as they are better positioned for redevelopment and asset enhancement initiatives, with access to acquisition pipelines from sponsors.

 

The research team named Frasers Logistics and Commercial Trust (FLCT), Keppel DC Reit and Mapletree Industrial Trust (MIT) as its picks for the sector.

 

FLCT Frasers L& C Tr: BUOU +0.68%, after its annual portfolio revaluation exercise, has a sizeable debt headroom to fund future acquisitions, and it can also tap its sponsor' s portfolio of new-economy assets as it shifts to more development projects.

 

The research team also likes FLCT for its exposure to logistics facilities and business parks in the developed markets of Australia and Europe.

 

Units of FLCT were trading at S$1.46 as at the midday break on Dec 1, down S$0.01 or 0.7 per cent.

 

For Keppel DC Reit Keppel DC Reit: AJBU +1.28%, DBS forecasts a more than 8.5 per cent rise in its FY2022 distribution per unit (DPU), driven by acquisitions and asset enhancement initiatives completed this year, implying an attractive 4.6 per cent yield.

 

Keppel DC Reit units were trading at S$2.37, up S$0.02 or 0.9 per cent.

 

As for MIT Mapletree Ind Tr: ME8U 0%, the research team is estimating a " very attractive" DPU compound annual growth rate of more than 6.8 per cent between FY2020 and FY2022, with redevelopment projects underway, on top of a possible increase in MIT' s concentration in data centres to 58 per cent, from the current 53 per cent.

 

Units of MIT were trading flat at S$2.64.

 

DBS expects earnings growth of industrial Reits will normalise ahead, due to the lack of reversals of retained earnings, lower acquisition yields leading to more marginal DPU accretion, and gradual earnings from development projects embarked on in FY2021.

 

But the growth is still " too attractive to ignore" , with an overall DPU growth of 3.1 per cent compared with the average annual DPU growth of 2.1 per cent in the past decade.

 

Through a gradual overseas diversification and a pivot towards new-economy assets, industrial Reits have also transformed into stable income-generating vehicles with significant earnings growth potential and room to unlock value within their portfolio, DBS said.