Singapore property stocks are set for their best annual performance in five years, and analysts believe the rally is far from over.

With an expected pick-up in real estate following the easing of housing curbs, developers are likely to be the bright spot in Singapore equities as gains in the nation's stocks may be limited for the rest of the year.

"The residential property market has seen a marked improvement in sentiment," said Mr Desmond Loh at JPMorgan Asset Management.

Developers that have started buying land for new projects stand to benefit, he said, adding that vacancy rates are likely to decline over the next few years.

The Government sparked renewed interest in the real estate market after it rolled back some curbs in March following a 31/2-year slump in home prices, the longest stretch of declines since the data was first published in 1975.

That same month, housing sales surged to the highest in nearly four years as developers sold more than twice the number of homes compared with the previous year, government data showed.

Property stocks including City Developments and UOL Group are already driving gains in Singapore stocks so far this year, with developers and property trusts making up half of the 10 best-performing stocks on the Straits Times Index.

The benchmark index has risen 12 per cent this year, while the gauge tracking 42 Singapore real estate stocks has jumped 16 per cent, heading for its biggest annual gain since 2012.

"Prices are moving upwards again, albeit in a more gradual direction, market interest is more positive in terms of transactions," said Mr Andrew Gillan, head of equities for Asia excluding Japan at Janus Henderson Group.

"That's going to bode relatively well for earnings," he added, pointing to developers that have accumulated land at "reasonable" costs.

Government land sales are drawing investor interest.

A residential plot last month fetched a record price in a government sale, with a Chinese consortium bidding $1 billion.

Other developers are adding land by buying up apartment buildings for redevelopment in so-called collective sales.

Still, the recovery in home sales has not been consistent. Government data last week showed Singapore home sales fell 34 per cent last month as fewer new projects were marketed.

And a further increase in housing transactions may also prompt more curbs or slow the relaxation of them.

The risk is "if volume really starts to pick up quite strongly, then we will see more measures from the Monetary Authority of Singapore", said Nomura's South-east Asian equity strategist Mixo Das, referring to the central bank. "That's... certainly a possibility."

The Singapore property stock index is trading at a price-to- book value of 0.89, and last traded at par four years ago, according to data compiled by Bloomberg.

The optimism over home sales this year also comes as investor sentiment improved in Singapore on the back of a recovery in export demand that prompted the Government to give an upbeat outlook on the economy last month, saying it will probably expand more than 2 per cent this year.

"We're in a recovery phase at this point," said Mr Sean Gardiner, an equity strategist at Morgan Stanley.

"There are a number of macro prudential measures that are still weighing on the real estate market but we are definitely up from the bottom we saw early last year."

BLOOMBERG