Macquarie Equities Research said it prefers Singapore real estate investment trusts (REITs), particularly those in the office and industrial sectors, to developers.
For REITs, Macquarie expects capital returns of 21%, with distribution per unit growth of 1.3% and sector yield of 6.6%. It added that gearing remains comfortable at 35%.
Its top picks include CapitaCommercial Trust and Mapletree Industrial Trust.
Macquarie prefers developers with a higher gearing to China, where it is still anticipating policy loosening in the second quarter of 2012. Its top picks include CapitaLand and CapitaMalls Asia.
Private home sales in Singapore hit a new record in the first quarter of 2012 despite government efforts to cool the market and analysts are concerned authorities may take new steps to dampen sentiment.
The FT ST Real Estate index has risen 21% so far this year, outperforming the 12% gain in the broader Straits Times Index.
But Macquarie downgraded Keppel Land to neutral from outperform and cut its rating on City Developments to underperform from neutral.
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