» Property sector seen more resilient than in 2008/09

	Business Times: Fri, Dec 02
ASSET values are expected to be more resilient than in the 2008/2009 days and the situation within the office space may not be as gloomy as consensus paints it to be, says Credit Suisse. In-house research analyst Tricia Song commented: 'While developer uptake could slow by 12 per cent to 15 per cent to 14,000 from the current 16,000 in 2012 on market uncertainties, we expect physical prices of properties that are well located to hold up on low speculation, genuine and pent-up demand, low interest rates, and strong household balance sheets.' On property speculation worries, Ms Song opined that such activities are likely to have been 'weeded out' following multiple rounds of 'demand-side' measures which comprised harsh stamp duty penalties for sellers. In fact, the implemented measures have proved to be highly effective with subsales falling to just 7 per cent of all transactions, she said. Concerns over a supply glut may also be unfounded, as a relaxation of immigration policies arising from the need to buffer a tight labour market could well quell the matter by 2014. The Swiss-based house expects Singapore to register positive GDP (gross domestic product) growth of 3.5 per cent in 2012, lending further weight to its view, as GDP and residential prices tend to share a strong historical correlation. Cash calls are also unlikely in current times, with average gearing levels of developers standing at about 26 per cent as opposed to 56 per cent back in 2008, leaving adequate debt headroom for any attractive acquisitions that may come by. On the office front, the sector also seems to be standing on firmer legs as compared to the 2008 to 2009 period. With prime office rents still 40 to 50 per cent below pre-sub-prime peaks and 50 per cent lower than Hong Kong's central rents, coupled with 'benign yet- to-be committed supply' in the Central Business District (CBD) over 2012 to 2014, Ms Song expects prime office rents to be 'at worst, flat' in the times ahead. Highlighting a preference for top quality Prime Grade A office space, Ms Song noted: 'Recent transactions came in at better-than-expected capital values, despite global uncertainties, suggesting demand for prime offices remains strong and that unlike the 2008 to 2009 sub- prime days, where private funds were more active and highly leveraged, there are fewer such desperate sellers in the market today.' Should the European Central Bank be pressured into quantitative easing, the property sector may benefit from increased liquidity which may flow into Asia, supporting domestic property prices and the sector's stocks. Notably, the risk-reward profile for certain developers and real estate investment trusts (Reits) - such as City Developments, CapitaLand, CapitaCommercial Trust, K-Reit, and CDL Hospitality Trusts - were deemed by the analyst to be particularly attractive. Source: Business Times