Singapore’s home prices fell at a faster pace in October, dropping 1.2% from the previous month. This could be a signal that the government’s efforts to cool the property market are working.
 
On Nov 15, the URA released data which showed that home sales fell 19% in the month of October as compared to a month earlier. Comparing it to a year ago, home sales plunged 48%. Macquarie Equities Research (MER) released a research report the same day the data was released. Some excerpts can be seen below.

Impact
53% of sales came from newly-launched projects, including top 3 sellers – The Inflora (388 units at S$952 psf; 98% take-up), Nine Residences (96 units at S$1,107 psf; 52% take-up) and The Venue Residences (39 units at S$1,457 psf; 15% take-up). 7 other new projects mostly drew subdued take-up of below 10%, except Grandview Suites (37 units at S$1,301 psf; 71% take-up) and Liv On Wilkie (24 units at S$2,519 psf; 30% take-up).

Mass market dominated, as sales in Outside Central Region (OCR) rose 3% MoM to 815 units, accounting for 74% of total volumes. Rest of Central Region (RCR) fell 74% to 212 units, representing 19% of sales. The remaining 7% was from Core Central Region (CCR) where 81 units (+65%) were transacted. 46% of homes were transacted below S$1,000 psf, at 40% (S$1,000-1,500 psf), 10% (S$1,500-2,500 psf) and 4% (>S$2,500 psf).

Secondary market continued to be tepid, as only 437 resale units (flat MoM, -73% YoY) were transacted in Oct 13, which implies more investors are buying properties for potential capital value upside or future rental purposes, rather than immediate genuine owner-occupiers.

Listed developers under MER’s coverage gained market share, accounting for 57% of total sales and led by CIT’s 45% and CAPL’s 7%. In 9M13, their market share was 34%, but MER expects this to normalise to 20-25% in 2014 due to their less successful landbanking strategies YTD. MER’s estimated launch pipeline over the next 6 months stands at 8,100 units.

Price and sales outlook. MER is forecasting a 35% YoY drop in 2013E new home sales to 14,500 units and prices to inch upwards by 2%. While the negative real interest rate (less impact though due to lower inflation) and positive carry will draw potential buyers, the Total Debt Servicing Ratio (TDSR) should continue to be a drag on volumes. Developers’ rush to launch projects at discounted pricing of 5-10% have yielded moderate initial take-up of 30-40% so far, a level which MER thinks is the new norm going forward. Coupled with rising vacancies, MER is forecasting new home sales of 14,000 units (-3% YoY) in 2014, with a 4% drop in overall private residential prices underpinned by high-end (-5%), mid-range (-4%) and mass market (-3%).

Outlook
In view of declining landbanks, narrowing pre-tax margins and marginal price declines in 2014, MER prefers players with less Singapore residential exposure, i.e. CAPL and CMA. Amongst SREITs, MER likes those with strong FY14-15 DPU growth, i.e. SUN, CCT, CT, MCT and AREIT, while MER’s small-cap picks are AAREIT, CACHE and ARA.

Source: Macquarie Research - 29 Nov 2013