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PropNex Limited’s View of the Singapore Residential Real Estate Market

PropNex Limited (SGX: OYY) is Singapore’s largest real estate service provider with over 7,300 sales professionals. It has four business segments, namely, real estate brokerage, training, property management, and real estate consultancy. The company operates its real estate agency through its wholly-owned subsidiary, PropNex Realty Pte Ltd.

Last week, PropNex announced its maiden set of financial results after listing in July this year. For the three months ended 30 June 2018, PropNex’s revenue surged 60.3% year-on-year to S$121.7 million while net profit improved by 3.9% to S$4.2 million.

The growth in revenue was largely due to higher commission income from agency services and project marketing services. A “more active Singapore residential property market” had led to higher demand from both services.

The Singapore real estate industry showed an uplift in property prices for the first two quarters of this year because of strong land bids at Government Land Sales and collective sales. This resulted in private home prices increasing by 3.4% in the second quarter of 2018 and by 3.9% in the first quarter.

However, the robust growth in private property prices could slow down in the future, following the additional property cooling measures announced by the Singapore government in July.

In its 2018 second quarter earnings update, PropNex said that the impact of the latest cooling measures would probably only be felt in the second half of 2018. At recent launches, the company noticed developers reducing their property prices to factor in the increase in the additional buyer’s stamp duty that property buyers will incur.

PropNex expects “subdued demand in the coming quarters from buyers, who will evaluate their options post-cooling measures.” But, PropNex also commented that the private resale market is expected to do well in the third and fourth quarters of 2018 as owners of properties that have undergone en-bloc sales are looking for replacement homes. The company is expecting the total transaction of private homes in Singapore to range between 24,000 and 25,000 units for 2018. In 2017, the figure stood at 25,010.

As for the public housing resale segment, PropNex thinks that it should show more resilience than the private property segment as it is not affected by the new cooling measures. PropNex added that this segment “will also benefit from the demand from some en bloc owners considering bigger-sized resale flats as their replacement homes in the second half of the year.”

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.