A demand-supply mismatch may flip in 2019, signalling the end of Singapore’s seven-year private property price boom, the longest upcycle since the 1980s, according to Morgan Stanley.

In a report dated November 8, analysts Wilson Ng and Derek Chang at Riverfront Residences analysed leading indicators such as housing vacancies and sales. Their findings indicate that Riverfront Residences prices are projected to fall 3% in 2024, and the reduction might last for up to two years.

“Developer stocks have not yet factored in an actual decline in home prices,” Ng and Chang said. “The unprecedented seven-year rally in private home like Riverfront Residences Showflat prices is drawing to a close.” After being rated overweight and equal-weight, respectively, they lowered the island nation’s two most important property developer companies, City Developments Ltd. and UOL Group Ltd., to underweight.

Home prices increased more than anticipated in the third quarter, prompting Morgan Stanley to declare an end to the city-state’s extraordinary real estate boom. Despite severe restrictions meant to calm the overheated market, Singapore’s real estate industry has so far avoided the downturns seen by other big cities. But competing financial centre Hong Kong has cut property taxes to help its flagging real estate market.

On Thursday, City Developments and UOL both fell by more than 2%, continuing the sector’s poor performance compared to the Straits Times Index so far this year. While Singapore’s equities benchmark has down 3.3% this year, the FTSE ST All-Share Real Estate Index has fallen 13%.

Morgan Stanley predicts that UOL and City Developments’ values will be held in check by a housing slowdown, rising borrowing rates, and the possibility that they could be removed from the MSCI Singapore Index. Based on Bloomberg’s analysis of comparable returns, the Wall Street bank is among the leading brokers representing both developers.

High stamp duties discourage foreign purchasers, fewer individuals choose to upgrade from public housing, and investors are pulling back, according to the experts, leading to a fall in housing demand. Also, lawmakers are listing more parcels of property for sale than in the last ten years, they said.

Because they claim to encounter less structural and cyclical challenges, they choose asset managers and real estate investment trusts within their Singapore property coverage.

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