• U/G to OVERWEIGHT from Neutral; Top Picks: City Developments, APAC Realty. The residential market is making a comeback with a sharp pick-up in buying interest seen at new launches (4Q24), indicating a change in buyer sentiment on the back of easing mortgage costs, a healthy labour market/wage growth, and pent-up demand from the lack of new launches. We expect momentum to continue into 2025, supported by a slew of attractive launches and strong GDP growth. Real estate agencies will be direct beneficiaries while developer stocks should see the narrowing of steep trading discounts.
• The key risk to our call remains another round of stringent cooling measure targeting the private property market, such as across-the-board increases in Additional Buyer's Stamp Duty (ABSD) and the lowering of loan-to-value (LTV) ratios. However, we do not rule out the possibility of targeted measures to tackle rising Housing & Development Board (HDB) resale market prices and a potential increase in sellers' stamp duty and holding period (from three years currently) to curb speculative purchases and overheating if prices continue to rise at a faster clip (ie >3% per quarter).
• New home sales momentum to continue into 2025. We expect primary volumes of 9,000-10,000 units this year (up 30-50% YoY), driven by lower mortgage rates, resilient household balance sheets, and an increase in new launch supply of >13,000 units (double that of 2024). Demand, however, is expected to remain selective, price-sensitive, and skewed towards the mass market and mid-tier segments. This follows a marked turn in buying interest in 4Q24, which saw 3,500 new homes being sold (more than the entire 9M24). Developers sold a total of 6,560 units in 2024 (+2% YoY). The healthy interest in new launches is likely to spill over into the secondary market segment, as there remains a significant (30-50%) price differential, with a 10-15% YoY increase in private resale transaction volumes expected.
• Residential prices to continue moderating 1-4% in 2025 as higher supply and choices in the market, coupled with price-sensitive demand and ABSD deadlines will likely limit developers' pricing power. This is especially noticeable in the high-end segment, where the developer of One Bernam recently dangled discounts of 15-27%, resulting in a near sell-out of remaining units. Based on Urban Redevelopment Authority (URA) flash estimates, the private residential index rose 3.9% in 2024 (2023: 6.8% and 2022: 8.6%).
• Developers to maintain cautious bidding stance amid ramp-up in land supply over the last three years via government land sales (GLS) programmes. For 1H25, GLS has been raised to 8,505 units (2H24: 8,140 units), comprising 5,030 units (2H24: 5,050) in the confirmed list. Notably, there will be three executive condominium (EC) sites in the confirmed list, yielding 980 units (75% higher than the previous half) to cater to rising EC demand. We expect developers to remain selective and measured in their bids as development margins remain thin (5-15%) amid increasing cost pressures. This, in our view, could lead to a more stable and sustained property market recovery in 2025.

Source: RHB Research - 16 Jan 2025