Staying “overweight” on the sector, Natarajan’s top picks are City Developments (CDL) and co-living operator Coliwoo Holdings, which listed last November.
CDL has been accelerating the pace of its asset divestments, which totalled $2 billion last year. This is the right strategy that addresses market concerns about high debt levels and subpar returns on equity, writes the analyst. “We believe CDL is poised to deliver healthy shareholder returns in 2026. Its share price is still trading at a hefty more than 40% discount to our RNAV estimates.”
Meanwhile, Coliwoo is Singapore’s market-leading co-living operator, he writes, with a total of 2,933 rooms across 25 properties (20% market share) and plans to grow to 4,000 rooms by the end of the year.
“Coliwoo is currently in an attractive growth stage and commands superior net and gross margins due to its ability to turn old underused assets into co-living apartments,” says Natarajan. “As a result, we expect 2025-2028 net profit CAGR of 30% and patmi to double by FY2028.”
See also: Launch of Newport Residences a possible catalyst for CDL's share price: DBS
ERA owner Apac Realty’s share price more than doubled last year on the back of a strong pickup in primary residential sales, which resulted in more than doubling in 1HFY2025 earnings, notes Natarajan.
“However, we believe the share price has run up slightly ahead of fundamentals — Apac Realty is trading at a hefty 16 times FY2025 price-to-earnings (P/E). Additionally, earnings are expected to decline slightly in FY2026, as volumes are likely to be slightly lower. A dividend yield of 5%, though, mitigates downsides.”
Pent-up demand in play
Natarajan notes a “strong surge” in new home sales last year — at 10,951 units, excluding executive condominiums (ECs).
However, average developer sales in the previous four years (excluding ECs) stood at 7,904 units, which is 16% below the 10-year average demand of 9,443 units.
“This, we believe, is due to a combination of buyers postponing home purchases during the 2022-2024 period amid elevated interest rates and lower market supply — only an average of 7,620 units were launched over the last four years, 10% below the 10-year average supply,” says the analyst.
Natarajan attributes the release of pent-up demand in 2025 to sharp declines in domestic interest rates last year, coupled with healthy economic growth and booming equity markets.
He expects the above trend to continue in 2026, with RHB economists forecasting 3% GDP growth for Singapore in 2026 and cumulative policy rate cuts of 50 basis points by the US Federal Reserve this year.
Goldilocks conditions
The three-month Singapore Overnight Rate Average (Sora), a key benchmark used for housing mortgages, declined sharply by some 185 bps in 2025, from 3% at the start of the year to 1.2% by December 2025.
This has resulted in banks offering new home loan fixed rate packages as low as 1.55%–1.6%, down nearly three percentage points from 2022 and 2023.
As Singapore does not have an implicit interest rate policy, the benchmark interest rates tend to closely track the US Fed’s fund rates, albeit with a lower amplitude and lag of between three and six months.
However, this relationship has been broken since early 2025 due to US President Donald Trump’s tariff policies and de-dollarisation effects, says Natarajan.
“Consequently, we have seen a flush of liquidity at local banks and, coupled with benign inflation rates, has pushed Singapore dollar interest rates lower. This trend is likely to continue, with the Sora three-month rate, which is expected to end the year at below 1% levels.”
Historically, periods of steady declines in interest rates and economic growth have coincided with continued rises in Singapore’s residential prices.
The Goldilocks real estate market conditions, coupled with equity-market value-unlocking measures, have led investors to turn their focus to developer stocks.
That said, this gap has narrowed sharply since 2Q2025, notes Natarajan. “But we still retain the view that the sector has room to run higher by 20%–30%.”
Fewer unsold units
Natarajan notes that unsold units at launched projects remain “well below [the] long-term average”.
Inventory levels as at end-3Q2025 eased 8% q-o-q to 17,019 units after a slight increase in the previous quarter.
“This came on the back of a pick-up in sales volumes from a sharp drop in interest rates since 2Q2025. Current inventory levels are 23% below the last 10-year average of 21,975 units,” says the analyst.
Based on an estimated annual demand of 8,000–9,000 units, this will take two years to clear, which Natarajan says is “not high”.
This continues to support residential price uptrends across new launches. Breaking down unsold inventory by segment, the high-end segment has the highest unsold inventory (38% of the total), followed by the mid-tier (33%) and mass market (29%) segments.
Demand has been “slowly broadening” from the mass market to mid-tier and high-end segments, says Natarajan. “Local homebuyers are starting to see value emerging in some high-end projects, given that the price gap across segments has sharply narrowed due to steep rises in the mass-market segment’s new launch prices over the years.”
Upcoming new launches
In the 2026 launch pipeline, an estimated 12,000 new private residential units are expected from 24 projects, including five ECs.
Excluding the ECs, a total of 9,640 units are expected to be launched this year, 16% lower than the estimated 11,435 units launched last year (also ex-ECs).
Natarajan believes some developers may launch the site that they will acquire from the 1H2026 Government Land Sales (GLS) earlier, such as towards the end of 2026, to capitalise on favourable market conditions.
The bulk of this new supply is in the mass market (70%), where demand and take-up have been fairly robust and are likely to continue, he adds.
“We expect launch weekends take-up rates across most of the Outside Central Region/Rest of Central Region project new launches to be healthy (more than 50%) — with a good, attractive mix of new launches expected across the island,” writes Natarajan.
Some of the key launches he is “watching out for” include Pinery Residences by Hoi Hup Realty and Sunway Development, and the coming launches at the former Thomson View and on the GLS sites at Chuan Grove, Upper Thomson Road and Holland Link.
Natarajan expects strong demand for these upcoming launches.
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