Real Estate Sector Posted Strong Returns in the Year To Date
Source: Bloomberg (data as of 5 July 2017)
Sector Valuations Remain Below Long-Term Historical Average Despite Rally Post the year-to-date rally, Singapore property developers stocks are trading at 0.75x PB, below the longer term average of 0.83x (see chart below). As seen in the chart, Singapore property developers traded at +1 standard deviation above their long-term average in 2010, before the government’s introduction of many cooling measures to deter speculative demand.Historical PB Ratios of FTSE ST Real Estate Holdings and Development Index
Source: Bloomberg (data as of 5 July 2017)
Note: FTSE ST Real Estate Holdings and Development Index was used as it captures a longer trading history.
Key Drivers of the Real Estate Sector Population growth and rising affluence – Singapore’s population (current at 5.6 million) is expected to hit 6.9 million by 2030 and an increase in population size will boost housing needs. A better-educated population and more dual-income married couples may potentially result in higher rates of home ownership as affordability increases. Government Cooling Measures – Property cooling measures imposed by the government over the years such as stamp duties and loan restrictions have helped stabilise increasing demand over the years. Some major measures were the raising of seller stamp duties (SSD) and additional buyer stamp duties (ABSD) in 2011, and further ABSD changes and the introduction of a total debt servicing ratio (TDSR) in 2013. Land supply – Government Land Sales (GLS) have been declining since 2H2012, resulting in a depletion of land banks of Singapore property developers over the last few years and a reduction of GLS for bidding. Interest rates– Higher interest rates result in higher borrowing costs for home owners. Consensus expects three rate hikes from the Federal Reserve in 2017, which could be a potential headwind for physical real estate demand and REITs. For more, please refer to the SGX Real Estate sector presentation. SGX’s Real Estate Sector SGX has 104 companies categorised within the Real Estate Sector by the Global Industry Classification Standard (GICS®) with a combined market capitalisation of almost S$190 billion. The sector is diverse with property developers and Real Estate Investment Trusts (REITs) across a variety of property assets from hospitality, industrial, office to retail. Singapore’s REIT Sector is made up of 32 REITs and six Stapled Trusts with a combined market capitalisation of S$79 billion, one of the largest in Asia excluding Japan. Together, the 38 trusts have a market capitalisation weighted average total return of 16.2% in the year to date and distribute an average dividend yield of 6.4% (one of the highest globally). Over 70% of the trusts own offshore assets across Asia Pacific, South Asia & Europe. The 10 largest constituents of the SGX Real Estate Index are listed below, sorted by index weighting. Click on each stock to visit its profile page on SGX StockFacts.Name | SGX Code | Weight % | Market Cap S$B | Price S$ | Total Return YTD % | Total Return 1 Yr % | P/B | ROE % | Dvd Ind Yld % | Gearing %* |
Hongkong Land Hldgs | H78 | 10.1 | 24.1 | 10.337 | 15.0 | 26.9 | 0.6 | 11.2 | 2.7 | 12.5 |
Global Logistic Properties | MC0 | 9.5 | 13.2 | 2.850 | 29.5 | 62.5 | 1.1 | 9.1 | 2.1 | 42.4 |
CapitaLand | C31 | 9.0 | 14.9 | 3.540 | 20.4 | 21.6 | 0.8 | 7.7 | 2.8 | 61.8 |
Ascendas REIT | A17U | 6.7 | 7.5 | 2.600 | 18.2 | 12.2 | 1.3 | 7.4 | 6.8 | 33.4 |
CapitaLand Mall Trust | C38U | 5.4 | 7.0 | 1.970 | 7.5 | -4.1 | 1.0 | 6.9 | 5.7 | 32.0 |
Suntec REIT | T82U | 4.8 | 4.9 | 1.860 | 16.0 | 10.7 | 0.9 | 4.8 | 5.4 | 36.4 |
City Developments | C09 | 4.8 | 9.7 | 10.670 | 30.3 | 33.6 | 1.1 | 7.1 | 0.8 | 49.0 |
CapitaLand Commercial Trust | C61U | 4.2 | 5.0 | 1.695 | 18.1 | 17.9 | 1.0 | 5.1 | 5.4 | 33.0 |
UOL Grp | U14 | 4.1 | 6.2 | 7.620 | 29.9 | 39.9 | 0.7 | 3.6 | 2.0 | 26.8 |
Mapletree Commercial Trust | N2IU | 3.1 | 4.5 | 1.590 | 17.4 | 16.6 | 1.1 | 10.3 | 5.4 | 36.4 |
Average | 20.2 | 23.8 | 1.0 | 7.3 | 3.9 | 36.4 |
Name | SGX Code | Analyst Coverage | Buy | Hold | Sell |
Hongkong Land Hldgs | H78 | 15 | 8 (53.3%) | 3 (20.0%) | 4 (26.7%) |
Global Logistic Properties | MC0 | 11 | 1 (9.1%) | 10 (90.9%) | 0 |
CapitaLand | C31 | 22 | 17 (77.3%) | 5 (22.7%) | 0 |
Ascendas REIT | A17U | 22 | 12 (54.5%) | 9 (40.9%) | 1 (4.5%) |
CapitaLand Mall Trust | C38U | 21 | 11 (52.4%) | 10 (47.6%) | 0 |
Suntec REIT | T82U | 21 | 0 | 15 (71.4%) | 6 (28.6%) |
City Developments | C09 | 23 | 16 (69.6%) | 6 (26.1%) | 1 (4.3%) |
CapitaLand Commercial Trust | C61U | 23 | 9 (39.1%) | 11 (47.8%) | 3 (13.0%) |
UOL Grp | U14 | 14 | 11 (78.6%) | 2 (14.3%) | 1 (7.1%) |
Mapletree Commercial Trust | N2IU | 14 | 11 (78.6%) | 2 (14.3%) | 1 (7.1%) |
Name | Stock Code | Price | Historical Total Return % |
Phillip SGX APAC Dividend Leaders REIT ETF (USD) | BYI | 0.95 | 1.5 |
Phillip SGX APAC Dividend Leaders REIT ETF (SGD) | BYJ | 1.31 | 1.9 |
NikkoAM-Straits Trading Asia Ex Japan REIT ETF | CFA | 1.07 | 6.3 |
Average | 3.2 |
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