SINGAPORE (Sept 21): Despite the resale market remaining vibrant in August, with 750 caveats lodged, OCBC Research is maintaining its “neutral” call on the property sector, citing physical oversupply for 2016 to 2017.

In August, primary sales took a beating, dropping to 473 units after July’s bumper sales of 1,091 units (excluding executive condominiums). This could be attributed to the effect of the lunar seventh month, notes lead analyst Eli Lee in a Tuesday flash note.

Year-on-year primary sales were also down, but Lee attributes this to the absence of new launches. The market still remains in a state of physical oversupply, with forecasts for private home prices to dip 5% to 15% over the next two years, as well as persistent pressures on rental rates. The number of private home sales – 5,239 units (excluding ECs) – is in line with forecasts of 6,000 to 9,000 units sold in 2016, notes the analyst.

As for property curbs, Lee notes that the authorities has clarified that the tweaks of refinancing rules under the Total Debt Servicing Ratio (TSDR) rules is not considered an easing.

Any uplift from irrational buying has been tempered with the clarification, however the tweaks to TSDR give existing buyers flexibility in managing their debt obligations at lower rates while adding stability to the balance sheets of borrowers. This is a positive for both the balance sheets of the market and banks, notes Lee.

OCBC Research continues to favour diversified blue chips with healthy balance sheets and strong business models, with “buy” calls for top picks Capitaland (Target Price: S$3.68), City Developments (TP: S$9.98) and Global Logistic Properties (TP: S$2.37).

Other stocks with “buy” calls include Hotel Properties (TP: S$4.83), KSH Holdings (TP: S$0.61), OUE (TP: S$2.17), UOL Group (TP: S$7.30) and Wing Tai Holdings (TP: S$2.37).

As at 10.12am, shares of Capitaland are down 1 cent at S$3.10. OUE is trading flat at S$1.60 while KSH Holdings is down 1.8% at 55 cents.

City Developments shares are down 8 cents at S$8.88, Global Logistic Properties is down 1 cent at S$1.84, UOL Group is down 4 cents at S$5.60 and Wing Tai Holdings is down 0.3% at S$1.665.

Shares of Hotel Properties are up 5 cents at S$3.47.