This Singapore property stock is ‘having very good run’

‘Good run’ depends on what hat you are wearing

  1. Bullish/bearish?
  2. Short term/long term?

If one bought in at $7 and rode to $9 it would be a very good run indeed. (In fact City Development is 8th best performer for Q1 2016 among 30 STI constituents. It managed to return 6.8% gain for the quarter. However it was 1 of 8 losers for Q4 2015. It also lost >20% in the horrific Q3.)

C09 City Development daily chart year to date

C09 City Development daily chart year to date

To a long term investor who bought in any time from 2010 – H1 2015, this would mostly be a money losing coaster-roller.

C09 City Development weekly chart early 2009 - present

C09 City Development weekly chart early 2009 – present

So when your friend tells you this and this stock is wonderful, always take a look and personalise the information to yourself. Your friend’s investment motive, time frame, risk tolerance may not be the same as yours. While you are getting warmed up, ready to buy after your friend said so, he might be just getting ready to take profit/exit.

In the meantime, some headlines.

Singapore property investment sales tumble 74% to $1.75b in Q1 from previous quarter: DTZ

SINGAPORE – Real estate investment sales fell 74 per cent to S$1.75 billion in the first three months of the year from S$6.7 billion in the final quarter of 2015, said consultancy DTZ.

In terms of volume, or number of investment deals in Q1 2016 was the lowest since the third quarter of 2009, which was during the global financial crisis. Investment sales hit a low of S$192 million in Q1 2009, said DTZ in its report released on Monday (April 25).

 

Almost 1 in 3 high-end Singapore condos sold at a loss in Q1

While 86 per cent of transactions in the first quarter were still profitable, the average gains have also thinned, from S$443,533 in 2014 and S$381,472 in 2015 to S$326,992 in tandem with the overall downtrend in prices. Holding periods for these deals averaged 8.4 years.

The decline was observed across all segments. The biggest fall of 30 per cent was seen in the mass-market segment where the average gain has dipped from S$375,082 in 2014 to S$258,902 in the first three months of this year. In the high-end and city-fringe segments, average gains have fallen by just over 20 per cent over the same period.

 

Stock market blues and property prices

Studies indicate that the real estate and equity markets track each other closely.

Take, for instance, a paper by the late Singapore Management University professor Winston Koh and others, in an examination of the Thai, Indonesian, Singapore, Hong Kong and Malaysian markets when real estate prices boomed and collapsed in the 1990s. The authors found a close correlation between stock market capitalisation and real estate prices during the period.

More recently, a study here by Cushman & Wakefield found the residential property price index (PPI) has tracked the STI from 1988 to date, with the PPI performance lagging by about three months.

The lag may be explained by the fact that the STI reflects, in part, levels of wealth created or destroyed here, said Ms Christine Li, research director at Cushman & Wakefield. “Generally, if people make money from the stock market, they might want to re-invest the capital gains into physical assets which can yield some stable income.” But when the stock market performs badly, people are “poorer” with capital stuck in shares, and they have less incentive to look at alternative investments, she said.

Importantly, equity markets also affect sentiment, and the property market is sentiment-driven.

 

Bonus chart: Residential Property Price Index and STI Index overlaid


source: tradingeconomics.com

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."
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