In one of the more significant news surrounding the local property scene in 2019, government has announced a reduction of the supply of private housing in second half of 2019. This is at the back a record (as much as 60) new launches in 2019 as a result of a slew of en bloc in 2018. As much as not wanting to see a runaway real estate price which is achieved via the government cooling measure implemented in July 2018, the government also do not want to risk to see the market tank as a result of over supply situation coupled with the cooling measure.
Please refer to the following website for more details on the release of government land sale in second half of 2019: https://www.ura.gov.sg/Corporate/Media-Room/Media-Releases/pr19-25
As mentioned in my update on the real estate market at the beginning of the year, any relaxation of government cooling measure could be a catalyst on developer shares.
2018 property market review and what property asset class to be in as we welcome 2019
Developer shares which is beaten down in recent weeks arising from the heighten US – China trade tension reacted accordingly with City Development and UOL rising by 5.9% and 2.88% respectively. You could relook at my investment thesis above on why I think these 2 shares are a great value addition to your stock portfolio at the correct price.
Personally, I am quite lucky to be able to add a small position of City Development at $8.31 2 weeks back when Mr Market was feeling a bit depressed over City Development recent foray into China.
I will leave readers on some quotes from interview with Minister of National Development which happened before the announcement on the reduction in supply of government land sales. Some of his comments are similar to the observation made through my various sharing on the Singapore real estate market in 2018.
“The property market last year, before the cooling measures were put in place, we saw prices rising very sharply,” “There was a very real risk that prices would outpace fundamentals, and I think if that had happened, then eventually it would lead to a destabilising correction, and I think everybody would be worse off.”
“It was, as we had stressed then, not to bring down prices but to stabilise and moderate the cycle, and I think we have achieved that effect.” “We welcome investors to our property market, but what we want to ensure is that demand, regardless of whether it is local demand or foreign demand, doesn’t cause the prices to move at a pace that outstrips fundamentals,”
Incidentally, the relaxation on the supply of government land sale was announced a few days after the above interview which gave market strong comfort that government will manage the real estate market with its array of policies to ensure a gradual appreciation in the real estate market.
PS: The author is vested in UOL and City Development