ST : High-end property prices could appreciate: UBS

Jun 25, 2010

High-end property prices could appreciate: UBS

By Jonathan Kwok

THE buoyant economy and low interest rates mean property prices are not heading south anytime soon, according to Swiss bank UBS.

While prices of mid-range and lower-end units could stay at current levels for at least the next 12 months, high-end homes could even go higher.

'Luxury properties such as those at Sentosa, Nassim Road and Ardmore Park, where condominiums go for above $3,000 per sq ft, could see further upsides,' said Mr Kelvin Tay, chief investment strategist at UBS Wealth Management Singapore.

'From now until the end of the year, a 5 to 8 per cent price appreciation is not difficult. The lower luxury segment, at districts 9, 10 and 11, might see some positive flows because of the luxury end moving up but I think that will be muted.'

The luxury-end is 'not a sector that the Government is keen to control', said Mr Tay, who added that the rest of the market is likely to be flat.

Late last month, flash estimates from the National University of Singapore showed that its price index for non-landed private homes rose 2.5 per cent in April over March, meaning a rise of about 6 per cent since the end of last year.

Mr Tay said an extended period of low interest rates would support the market. He thinks Singapore's interbank rate may climb to about 1 per cent at the most in the next year, well under the long-term historical average of about 4.5 per cent.

The high cash savings of households here, coupled with the low unemployment rate, will also prop up prices. Mr Tay said the proportion of Singaporeans' cash savings - when compared to total assets - is higher now than before the Asian financial crisis of 1997.

The stock market could also see more upsides, said Mr Tay, with the benchmark Straits Times Index possibly hitting 3,200 by the end of the year - around 12 per cent above yesterday's close.

Mr Tay said he prefers high-yield stocks such as the real estate investment trusts (Reits) over property developers.

'We don't expect property prices to move very sharply up from here, so there is less incentive to be invested in a developer. But the Reits are still very attractive with their high yields.'

Mr Tay was speaking at a briefing on Wednesday on his bank's outlook for the rest of the year.

He said that economic fundamentals remain solid in Asia, making a double-dip recession unlikely.

The Korean won, Singapore dollar and Philippine peso rank as UBS's favourite Asian currencies, led by the continuous and gradual appreciation of the Chinese yuan.


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'From now until the end of the year, a 5 to 8 per cent price appreciation is not difficult. The lower luxury segment, at districts 9, 10 and 11, might see some positive flows because of the luxury end moving up but I think that will be muted.'

Mr Kelvin Tay, chief investment strategist at UBS Wealth Management Singapore