Is an easing of property cooling measures on the heels of relaxed car loan curbs?

Prices are about 40% above 2009’s lows.

With recent easing of car loans restrictions, the market has been abuzz with hopes that property curbs will soon meet the same fate. Analysts argue, however, that a relaxation of restrictions on the Singapore residential market is a pipe dream for now.

According to a report by DBS, current prices—as measured by the Property Price Index (PPI)—are down 9.4% from its peak, and are therefore still far from a correction.

The government has remained firm that prices in the property market are still on modest, controlled decline given that prices are still close to 40% above the lows seen in 2009, while income growth has lagged that. This is especially when interest rates are low and any policy cooling could lead to an unintended price spike.

DBS believes that easing will come on back of a systemic risk seen in the economy, or a further pullback of about 13%-15% percent in price. This would plausibly happen in the end of 2016, or the first half of 2017.

On the other hand, sentiment towards property developers should improve.

“We believe that the perceived policy loosening stance by the government will boost sentiment for developers who have been trading in a range close to 0.7x P/NAV (near the GFC lows) under the weight of a weak operating environment,” DBS states.

Among developers, City Developments, Wheelock, and Wing Tai have the biggest portion of RNAV exposed to the Singapore residential market. DBS reveals its top picks are CapitaLand and UOL for the firms’ diversified and high recurring earnings profile.