SINGAPORE - CIMB Research downgraded Singapore's property development sector to underweight from neutral on Tuesday, citing weaker economic and jobs growth as a recession in 2012 becomes highly likely.

"We believe these indicators will precipitate in falling housing demand and office rents," said CIMB in a report.

It is projecting a 22-26 per cent decline in capital values for both segments in 2012, and estimates property "stocks still has a 34 per cent downside to first quarter 2009 trough levels."

The brokerage has lowered its rating for Keppel Land to underperform from outperform and cut its target price to S$2.15 from S$3.90.

Keppel Land, which has 23 per cent of its gross asset value from China, may see some share price overhang due to a potential broad-based slowdown in China's property sector, CIMB said.

It has also downgraded Southeast Asia's largest developer CapitaLand to neutral from outperform and lowered its target price to S$2.51 from S$3.62, to reflect higher risk premiums due to its China exposure.

However, CIMB noted that CapitaLand is in a stronger financial position in this cycle to tap on acquisition opportunities.