LAST month's buoyant residential sales, which defied market-cooling measures that came into effect on Jan 12, have failed to give much of a boost to listed property counters
The Straits Times - February 23, 2013
LAST month's buoyant residential sales, which defied market-cooling measures that came into effect on Jan 12, have failed to give much of a boost to listed property counters.
Data from the Urban Redevelopment Authority showed that 2,013 new private homes were sold last month, far higher than December's 1,410 sales.
But analysts are fearful that the January sales may just turn out to be the last hurrah, before the full impact of the latest curbs hits home.
This concern was reflected in a muted reaction among investors of property counters to the data.
For the week, City Developments fell about 1.75 per cent, while Keppel Land slumped 1.42 per cent. CapitaLand rose 3.9 per cent initially, thanks to positive reaction to its new Iskandar joint-venture in Johor, but ended the week flat.
Maybank Kim Eng analyst Wilson Liew said: "Considering that January's figures are likely to include forward demand from investors looking to beat the cooling measures' deadline, we reiterate that the feat is unlikely to be repeated in February and March."
The figures are also likely to be skewed by the best-selling 810-unit La Fiesta project, whose developer had brought forward its launch date and extended sales hours the night before the cooling measures took effect, to allow buyers to beat the deadline.
Looking ahead, he expects demand to fall as marginal investors are likely to be squeezed out by the onerous upfront cash requirements and higher additional buyer's stamp duty.
He is expecting full-year home sales to fall to between 14,000 and 16,000 units - from last year's record sale of 22,290 units.
Concurring, OCBC Investment Research is expecting this month's residential sales figure to fall, owing to the traditionally quiet Chinese New Year season and the limited number of launches.
"Further ahead, we see sales volumes in 2013 moderating 30 to 50 per cent due to the impact of the latest cooling measures and the effect of coming off a high base," it added.
So what should investors do?
Citi Research analysts Adrian Chua and Ivan Lim suggest that they should stick to developers such as CapitaLand that have diversified their residential exposure into China.
These developers can be expected to benefit from any improvements in average selling prices and any pick-up in sales volume, especially in second-tier mainland cities.
But Daiwa analyst David Lum believes that the market may not have fully accounted for the headwinds faced by CapitaLand in the local property market, notwithstanding the boost it may get from its overseas projects.
He said: "The market could be underestimating the downside risk from the broad-based government cooling measures announced in January, or overestimating the annual homes required in future years in the light of the Government's population White Paper."
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