According to URA’s flash estimate of the price index for private residential property, overall prices rose 0.4% QoQ (+3.8% YoY) in 3Q13, a slower increase compared to +1.0% in 2Q13. YTD, prices are up 2.0%, vs. full-year 2012’s rise of 2.8%. Prices remain at an all-time high.
 
Macquarie Equity Research (MER) issued a report on Singapore property prices and their potential impact on property developers on 1 October. Here are some excepts from the report.
 
Price increase solely due to mass market, as prices in Outside Central Region (OCR) rose 2.1% albeit slower than 2Q13’s +3.8%, while prices in Core Central Region (CCR) and Rest of Central Region (RCR) fell by a respective 0.5% and 1.1% (first quarterly decline since 1Q12). YTD, CCR and RCR prices are down 0.1% and 0.7%, respectively, reversing the rise of 0.8% and 1.6% in 2012. OCR prices are up 7.4% YTD, steeper than 2012’s +6.5%.
 
Public housing prices down for the first time since 1Q09, as HDB’s flash estimate of the 3Q13 Resale Price Index showed a quarterly decline of 0.7%, reversing the rise of 0.5% in 2Q13. Nonetheless, prices are up 1.1% YTD, compared to the +6.6% in full-year 2012.
 
Price outlook for 2013E. While the index is showing a 2% increase, MER believe effective prices are down 3-5% after factoring in developers’ discounts to compensate for the Additional Buyer’s Stamp Duty (ABSD). MER expect overall private residential prices to fall 1-2% in 2013, underpinned by high-end (-5%) and mid-range (-4%) though mass market should record a rise of 5-6%. Prices should stabilise in 4Q13, due to an expected lack of major launches (aside from Nine Residences in Yishun) and traditionally slower fourth quarter.
 
From 2014E, prices could move in line with GDP growth rates of 2-3%. The risk to this estimate is the record number of completions in 2013-16. As most of these are from buyers seeking tenants, we believe there will be pressures 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. three years ago when they were bought.
 
Volumes to fall 35%. We are forecasting a 35% YoY decline in 2013E new home sales to 14,500 units, which imply 850 units/mth for the Sep-Dec 13 period. So far, four major launches in Sep 13 have generated mixed receptions, with the 694-unit Sky Vue and the 445-unit Thomson Three at 62% and 56% take-up, and the 726-unit The Glades and the 420-unit The Skywoods selling 80+ units and 45 units, respectively. 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.
 
In view of declining market share among listed developers under MER’s coverage, rising competition for land and narrowing pre-tax margins, MER prefer players with less Singapore residential exposure, i.e. CAPL, CMA and HKL. However, MER’s preference for SREITs over developers remains unchanged. MER’s large-cap picks are CT, AREIT, CCT, SUN and MCT.

Source: Macquarie Research - 3 Oct 2013