Residential prices could increase 10-15% by end-2018: The recent release of theURA private residential Property Price Index (PPI) flash estimates show that pricesincreased +0.5% in 3Q2017 (vs. -0.1% in 2Q2017) after 14 quarters of declines(since 3Q2013). The uptick isn’t a surprise to us (please see our note dated 30 June2017, Singapore Property: Too little residential in the GLS programme), as anecdotalevidence already suggested a market bottom as early as the beginning of 2Q2017.    Our secondary market channel checks suggest sellers have raised asking prices by5-10% and comparable transaction prices are also higher (in low single digits). Withdemand outstripping completions for the next few years and given that it will taketime to bring supply to the market, we think this upcycle is sustainable in the near tomedium term barring extraneous events and that prices could increase 10-15% byend-2018 (the URA index, which lags, could take longer to register this).    En bloc sales have gained in momentum; trend to remain intact near-term: Asprojected (please see our note dated 30 June 2017, Singapore Property: Too littleresidential in the GLS programme), en bloc sales have gained momentum with anadditional SGD4.3bn in deals done in the past three months to bring the y-t-d tally toSGD5.8bn (all since May 2017). With developers running low on land inventory andthe Government Land Sales programme proving inadequate in terms of options formany developers (too many bidders, the lack of pure residential sites, the lack ofsites in choice locations and some sites tendered based on design as well aspricing), we think the trend of en bloc sales could remain intact in the near term. Ourindustry checks suggest that there are an additional 50-60 developments that are invarious stages of the en bloc process (expected to close over the next 18-24 months).    Stay positioned in Singapore developers: The upper end of policy-makers’tolerance with regard to the quantum and pace of price increases remains unknown,but if prices spiral up, policy tightening cannot be ruled out. However, as the uptick isonly in its initial stages and as the URA index (followed by policy-makers as a keygauge) tends to lag, any policy-related risks are somewhat away (late 2018/early2019), in our view. Given this backdrop, we advise investors to stay positioned inSingapore developers for now.

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