SINGAPORE'S housing market could shift towards oversupply from 2016, with prices bottoming out in 2018/19 due to record-high supply, tight immigration policies and rising interest rates that dampen demand, BNP Paribas said in a report.
The excess supply could build up and peak in 2020, before easing, analyst Chong Kang Ho said of the base case scenario.
"We expect physical prices to continue their fall and bottom out in 2018/19E (c17 per cent fall from peak to trough) ahead of supply peaking in 2020E," Mr Chong said.
For the base case, BNP Paribas expects the oversupply cycle to be milder than in the 1997-2006 cycle, given its assumption of proactive supply cuts, barring external shocks.
"As we forecast physical prices to be falling in 2016/17E, we expect property stocks to range-trade during this period,'' said Mr Chong, who has kept a neutral outlook on the property sector as he believes that developer stocks have largely priced in the upcoming oversupply.
BNP Paribas has cut its target price of CapitaLand by 4 per cent to S$3.94 a share, but kept its "buy" call for its diversified earnings base and attractive valuations. The stock is trading at 51 per cent discount to its revalued net asset value.
The research house has kept its "hold" call on City Developments as its overseas projects will take time to contribute to earnings. BNP Paribas has cut its target price for City Developments by 7 per cent to S$8.73.