Khaw Boon Wan warns of decline in property prices

In his words: “sharp property price increases cannot go on forever “, “unsustainable, rapid price increase brings with it enormous risks”. To tame the runaway property market, the government will be selling vast chunks of land this year for building residential homes.

Under its 2H2011 government land sales programme, it plans to release 43 sites, of which 30 sites are earmarked for residential purpose, yielding 14,215 homes on both the confirmed and reserve lists. Overall land sales for the year will reach at least 17,510 for private homes and EC. Including sites from the confirmed list and potential supply from recently sold GLS sites and residential homes currently under construction, this will bring the total number of units in the pipeline to 53,000.

Minister Khaw also highlights the risk of demand from foreign buyers falling off in the event of an external shock and the risk of interest rate hikes. Clearly, taming the residential market remains the government’s top priority. We remain cautious on the residential sector and are selective buyers of developer stocks where we think policy risks have been priced in and where earnings visibility is underpinned by substantial unbilled sales.

We also favored the commercial sector where policy risk is lower. Our key picks in the S-REIT sector are Frasers Centrepoint Trust and CDL HT. FCT will benefit from organic growth with its on-going asset enhancement initiatives of Causeway Point and potential acquisition of Bedok Point, while CDL HT is a play on a multi-year tourism boom in Singapore with tight room supply over the next few years.