Aug 13’s new home sales rose 54% MoM (-48% YoY) to 742 units, reversing the fall of 73% in Jul 13. Including executive condominiums (ECs), 1,468 units (+147% MoM, -5% YoY) were sold. 8M13 volumes of 11,174 units represent a YoY decline of 27%. Developers launched 1,819 units, up 227% MoM.
 
Macquarie Equity Research (MER) issued a report on Singapore Property on 16 September. Here are more excerpts from the report.
 
2 newly-launched ECs saw strong demand, i.e. Ecopolitan (335 units at S$793 psf; 65% take-up) and Lush Acres (311 units at S$790 psf; 82% takeup). Aside from The Tembusu (218 units at S$1,547 psf; 65% take-up) and Kensington Square (61 units at S$1,511 psf; 43% take-up), 5 other private projects launched in Aug 13 drew subdued take-up of 5-26%. The most expensive project was Hamilton Scotts, where 1 unit was sold at S$4,246 psf.
 
Mass market dominated as sales in Outside Central Region (OCR) tripled MoM to 1,271 units, accounting for 87% of total volumes. Core Central Region (CCR) improved 96% to 88 units (half from Allgreen Properties’ RV Residences), representing 6% of total volumes. The remaining 7% was attributed to Rest of Central Region (RCR), where transactions were down 23% to 109 units. 54% of homes were transacted below S$1,000 psf, with 17% (S$1,000-1,500 psf), 28% (S$1,500-2,500 psf) and 1% (>S$2,500 psf).
 
Secondary market remained tepid as only 411 resale units (-30% MoM, - 71% YoY) were transacted in Aug 13, continuing the trend in Jul 13 (-13% MoM, -52% YoY). This suggests more people are buying properties for potential capital value upside, than for immediate occupation/rental purposes.
 
35% decline in volumes. MER is now forecasting a 35% YoY decline in 2013 new home sales to 14,500 units (16,000 units previously), which imply 850 units/mth for the Sep-Dec 13 period. While the negative real interest rate and positive carry will continue to draw potential buyers, the Total Debt Servicing
Ratio (TDSR) has resulted in a longer loan approval period and smaller ready pool of buyers. Launches in Sep 13 have already factored in 4-8% price discounts, which could provide upside risk to MER’s sales projections. MER expect at least 4-6 major launches by year end, with a few delayed till 2014.
 
Prices to fall 3-5% in 2013. From 2014, prices could move in line with GDP growth rates of 2-3%. The risk to this estimate is the record number of completions in 2013-15. As most of these are from buyers seeking tenants, there will be pressure on rental yields. If this happens, yield spreads will be narrowed and weaker holders might be tempted to sell, in order to lock in gains as prices remain 4-7% higher vs. 3 years ago when they were bought.
 
Action and recommendation 
 
Listed developers under MER’s coverage continue to lose market share, from 26% in 2009-12 to 15% currently. Amid the rising competition for land, there is possibility of overpaying for land, which results in lower pre-tax margins. Among developers, MER like names with less Singapore residential exposure, i.e. CapitaLand, CapitaMalls Asia and HK Land. However, MER’s preference for Singapore REITs over developers remains unchanged. MER’s large-cap picks are CapitaMall Trust, Ascendas REIT, CapitaCommercial Trust, Suntec REIT and Mapletree Commercial Trust.

Source: Macquarie Research - 19 Sep 2013