SINGAPORE – Morgan Stanley believes that the recovery in private home prices has started in the third quarter of 2017. While the Urban Redevelopment Authority (URA) only releases its third-quarter flash estimates in October, analyst Wilson Ng expects Singapore home prices to rise 2 per cent this year, and another 8 per cent in 2018 .
This is a positive change to his earlier forecast of prices falling 4 per cent and rising 5 per cent, respectively. Morgan Stanley’s new projection is among the most bullish of analysts’ forecasts.
Morgan Stanley surprised the market earlier in April when they forecasted that Singapore’s property prices would double by 2030. Ng is holding on to his earlier forecast.
Part of the bullish sentiment is a result of en-bloc deals starting from May this year. With seven collective sale projects already awarded, some 1,500 home owners will be displaced, each averaging a newfound wealth of about S$1.8 million, he estimated.
“With leverage, this adds up to S$13 billion of potential capital inflows that could find their way back into the property market, more than the entire value of developer sales in 2016. More en-bloc deals could follow, with 50-60 more currently under discussion,” he added.
Other leading indicators that convince him include expectations of improvements in GDP growth figures; an approximately 12 per cent year-on-year increase in the Straits Times Index (which is typically a six-month leading indicator for the property market); as well as a 56 per cent year-on-year increase in developer sales volume in the first seven months of this year.
But whether or not prices will double sooner than the 2030 timeline, Mr Ng said he is unable to tell, because new supply from en-bloc redevelopments could result in further market shifts.
“It is a time period of about 13 years, so it could be more than one cycle. Could be up-cycle, down-cycle, up-cycle . . . Micro-markets historically have moved in cycles, so I wouldn’t be surprised if it’s a cyclical move to 2030.”