Prices of private homes recorded their biggest plunge in Q1 this year, but this hasn’t stopped the surge of property stocks in the recent market rally.
Most shares of local developers have increased by 20 percent at least from their lows in the previous month, with others – like Keppel Land – soaring up by 80 percent. The real estate index of FTSE ST has risen 35 percent since 9th of March.
However, this rally is not an improvement in the fundamentals of property market and is not likely to be maintained.
”Nothing much has changed since the stocks hit their low points in March”, said CIMB-GK Securities property analyst Mr. Donald Chua.
Instead, the rise of property counters could be the cause of short-sellers who cover their funds or position and aim to join the rally, Mr. Chua said.
The plunge in home prices in Q1 had not much effect on the market as it was already expected by observers, he added. Prices of private homes fell by 13.8 percent in Q1, according to last week’s price index of URA.
Stating that most people expected prices to fall ‘at that kind of levels’, Mr. Chua also said: ”In fact, as the index continues to fall, sentiment may get a little bit more positive because investors could think that a bottom is starting to form”,
According to an analyst of a local brokerage, there could be a rebounding of shares due to being oversold. The positive spill-over from the United States stock markets rallies and the G-20 summit has also boosted the share values, he said.
”There is a ripple effect from the US and it’s translating into the Singapore market, so people are going for bigger plays like property and banks”.