Rating agency Moody’s summarized its take on the Singapore property market. Moody’s said that the credit quality of rated REITs and large property developers will remain stable through 2023. Companies with quality office assets, such as CapitaLand Integrated Commercial Trust (CICT), City Developments Limited (CDL), GuocoLand Limited and UOL Group Limited, will be well positioned to capture the demand recovery in this space. The rated REITs with retail and office assets in Singapore – CICT, Frasers Centrepoint Trust (FCT) and Mapletree Commercial Trust (MCT) are particularly well positioned to benefit from the recovery in real estate demand, Moody’s noted. Besides, the earnings of CICT and MCT are also set to increase substantially due to recent M&A transactions. Given that the demand for retail space will grow as retail sales rise, the need for rent rebates has fallen. Also, vacancy rates improved to 8.3% in 1Q 2022, from a high of ~10% in 2020.
In terms of leverage, rated REITs’ net debt/EBITDA will rise temporarily this year, but interest coverage and debt/deposited assets will continue to be strong, they noted. Aggregate debt/deposited assets for rated REITs will increase to ~40% in 2022-23, but below the 50% regulatory threshold. Moody’s added that for large developers, earnings recovery at investment properties and hotel operations will help improve aggregate leverage and interest coverage. For residential properties, it said that lower sales volumes will drive weaker contracted sales in 2022-23.