Wednesday, December 19, 2012

Home sales in Singapore hit an 11-month low

But guess which developer made the biggest sale?

According to Maybank Kim Eng, excluding Executive Condos (ECs), developers sold 1,087 homes sold in Nov, which was an eleven-month low. It was a 44% decline from the previous month.

Here’s more from Maybank Kim Eng:

In fact, the units launched by developers reached a 3-year low at 773 units, as they exercise caution a month after the government introduced new measures to curb the tenure of home loans. This brings the number of new homes sold to 21,288 units YTD, on track to reach our estimated 22,000 units for the full year.

With the new restrictions on home loan tenures, it appears that activity largely surrounded the projects where there is perceived value. The best-selling project was Eco Sanctuary, a project by Malaysia-listed SP Setia. 140 units were sold at a median price of SGD1050 psf, which was slightly below the median price of SGD1120 psf for units transacted at Foresque Residences nearby.

This was followed by CapitaLand's D'Leedon, where 300 new units were released for sale, of which 133 were sold at a median price of SGD1431 psf, slightly lower than the YTD median transacted price of SGD1,519 psf. In the high-end segment, the unlisted Far East Organisation still managed to sell another 10 units at The Scotts Tower for >SGD3,000 psf each. Their median price was SGD3,459 psf, which suggests that high-end property prices remain fairly firm.

We see signs that the marginal buyers are increasingly trading down, potentially turning their attention to the EC segment if they satisfy the monthly household income eligibility of not more than SGD12,000 per month. The various cooling measures are also turning investors' attention to projects where value appears to be surfacing, such as those mentioned above.

However, as it is merely a couple of months since the last round of cooling measures, it may be too early to suggest that the property market has effectively cooled to the government's satisfaction. Looking forward, we expect the government to remain steadfast in ensuring ample supply via the Government Land Sales (GLS) programme unless developers start to put in tepid bids. Just last week, the 1H13 GLS programme was announced, with the government putting up sites sufficient to yield ~14,000 homes. The 13 sites on the Confirmed List can potentially yield 6,935 residential units, out of which 3110 will be for ECs.

We are not ruling out further rounds of cooling measures, especially if the demand rebounds significantly without a corresponding improvement in economic conditions. In our view, one possible measure would be to restrict existing HDB owners from buying private property if they want to still hold on to their HDB units, even if they have fulfilled their Minimum Occupation Period (MOP) of five years. YTD, purchasers of new non-landed private property with HDB addresses make up 54% of all transactions, up from 48% in 2011 and 38% in2010. There are a few implications and potential impact from such move, if implemented.

Firstly, it will prevent Singaporeans from being overly exposed to the property market by owning both HDB and private property. Secondly, as HDB units are generally accepted to be the affordable option for the general public, compelling owners to sell their HDB units if they wish to upgrade to private property may potentially free up more HDB units in the resale market.

Hence, resale prices and cash-over-valuation may come down over time to more affordable levels. Last but not least, as a matter of principle, many buyers of HDB units obtain various grants which effectively subsidise their HDB purchases at the point of purchase. By subsequently upgrading to private property and renting out their old HDB units, this could be perceived as inequitable as the owner would have benefitted from the original government subsidies and now making attractive investment returns by renting the unit out.

Overall, we still expect the mass market segment to face the greatest downside risks, correcting by up to 10% in 2013, while high-end property prices should hold firm as more investors seek out relative value.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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