Crumbling economic conditions will hasten policy loosening, say analysts

Singapore’s home market will bottom before its office market.

Investors may want to keep a keen eye on the Singapore residential market in 2016. According to a report by Maybank Kim Eng, Singapore’s home market may bottom faster than its office market.

Despite the tapering of home price corrections, crumbling economic conditions could weigh prices down by another 4-6% this year. This could set the stage for a progressive loosening of policy measures in early 2017; developer stocks may start recovering in the latter half of 2016. Further, a deteriorating economic landscape may push the government to loosen policies even faster.

The report also noted that climbing vacancy rates may depress office rents this year. Though oversupply has long been expected, waning demand may not have been fully considered—net absorptions could disappoint. Maybank Kim Eng sees prime office rents dropping by another 7% in 2016, and it believes it may be too early to heighten office exposure as the sector may only bottom in 2018.

Maybank Kim Eng further suggested stock positioning before this residential market prices are triggered by loosened policies. It championed Wing Tai and CityDev in particular, as the two firms have the largest exposure to Singapore’s residential market and may be re-rated the most on any policy loosening.