Singapore Property

Kim Eng on 16 Aug 2012

Strong primary sales in July. Developers sold 1,943 new homes (2,067 incl. EC units) in the month of July, marking a remarkable rebound from two consecutive months of declining sales, according to the latest figures from URA. This brings 7M12 total new home sales to 14,197 units (16,776 incl. ECs), setting the tone for 2012 to be a record year. Barring another round of cooling measures, we now expect new home sales to hit the 20,000-unit mark for the full year.

Suburban projects remain top sellers. Mass market projects, particularly those in Punggol and Tampines/ Pasir Ris, garnered the strongest buying interest. Parc Centros at Punggol Central developed by Wee Hur was the bestseller, with 492 units sold at a median ASP of SGD924 psf. This was followed by Parc Olympia at Flora Drive by Koh Brothers, which sold 204 units at a median ASP of SGD874 psf.

V for the voracious? One of the top-selling projects which stood out was V on Shenton, which is the redevelopment of UIC Building on Shenton Way. Of the 190 units launched, 144 were sold, achieving a median price of SGD2,061 psf. 43% of the units are 732 sq ft or smaller, with investors presumably attracted by the “live, work and play” environment.

Sales remained sluggish at the luxury end. Only eight units with ASPs of more than SGD3,000 psf were sold in July, comprising three units each at Hilltops and The Scotts Tower, and one unit each at The Laurels and The Orchard Residences. The unit at The Orchard Residences achieved the highest price at SGD4,381 psf, followed by one of the units at Hilltops which achieved SGD3,971 psf. Sales may be sluggish, but prices continue to show little signs of easing.

Momentum may not carry through. One possible explanation for July’s strong sales is that several developers timed their project launches ahead of the Hungry Ghost Month, which begins on 17 August. For the rest of the year, we expect potential homebuyers and investors to stay increasingly on the sidelines, especially when economic confidence continues to wane, and serious buyers turning increasingly to the secondary market for better bargains. With monthly sales likely to average at 1,000-1,200 units per month for the rest of the year, we estimate full-year new home sales to be around 20,000 units.

Catch-22 situation for local developers. We believe that if sales volumes remain at elevated levels, the government is likely to introduce more cooling measures to moderate buyers’ exuberance particularly when economic headwinds persist or even mount. If the buying dries up significantly, the unsold inventory of 80,000 units may pose a problem in future. We continue to prefer CapitaMalls Asia (BUY; TP:SGD2.09)
for its retail mall exposure, and CapitaLand (BUY; TP:SGD4.12) and Keppel Land (BUY; TP:SGD4.04) for their diversified portfolios.