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Broker's Take: UOB bullish on residential, office segments; mixed on industrial
ANALYSTS at UOB Kay Hian have maintained that the property sector in Singapore is overweight. But they were bullish on the outlook for the residential and office segments, despite a mixed outlook on the industrial segment.
They noted the strong pick-up in sales momentum and pricing in the residential sector in 2017. This was led by the luxury segment (transactions above S$3,000 per square feet), which first showed signs of recovery in early 2016.
The residential recovery was also driven by "pent-up" demand arising from the implementation of the Total Debt Servicing Ratio in 2013, they added.
The effect of interest rate hikes subduing the property recovery is likely to be overblown. "Mortgagors can easily switch over from floating to fixed rate schemes which have been benign," they said.
Strong performance of technology, real estate, and co-working buoyed the office segment in 2017, despite a record new supply and increases in shadow spaces. "At the current pace of expansion, these players may extend their presence to outside of CBD area," UOB added.
Their sentiments on the industrial sector remain mixed.
Led by the recovery in electronics, the sector saw an increase in demand but there was still an increasing supply of spaces, leading to declining rates of occupany, they said.
However, UOB noted there was an increasing demand for rental spaces in business parks as some firms have relocated their back-end operations to such parks, amid increases in office rentals.
The brokers indicated a preference for stocks with exposure to the residential, hotel and office segments, with their top picks being City Developments, Wing Tai, CDL Hospitality Trusts, CapitaLand Commercial Trust and Ascendas Reit.