On Monday, Singapore released statistics on November home sales which rose 15% from the previous month (MoM) and 13% from the same period a year ago (YoY) to 1,228 units. This reversed October’s drop of 14%. Including executive condominiums (ECs), 1,714 unit (+42% MoM, +35% YoY) were sold. The total volume of 14,678 units for the year up till November represents a YoY decline of 30%.

Impact
73% of sales came from newly-launched projects, including top 4 sellers – DUO Residences (600 units at S$1,999 psf; 91% take-up), Skypark Residences (271 units at S$800 psf; 54% take-up), Alex Residences (171 units at S$1,706 psf; 40% take-up) and Waterwoods (131 units at S$801 psf; 35% take-up). 5 other new projects drew subdued take-up of 5-18%.
 
High-end recovered, as sales in Core Central Region (CCR) surged to 662 units (Oct 13: 81 units) due to DUO Residences. Rest of Central Region (RCR) rose 29% MoM to 352 units but Outside Central Region (OCR) fell 18% to 700 units. OCR, CCR and RCR comprised a respective 41%, 39% and 21% of total sales. 30% of units were transacted below S$1,000 psf, with 14% (S$1,000-1,500 psf), 54% (S$1,500-2,500 psf) and 1% (>S$2,500 psf).
 
Secondary market continued to be tepid, as only 351 resale units (-30% MoM, -69% YoY) were transacted in November 13, which implies there are more investors who are buying properties for potential capital value upside or future rental purposes, than immediate genuine owner-occupiers.
 
Listed developers under MER’s coverage lost market share,accounting for only 14% of total sales versus 61% in October 13. While their market share for the year up till Novemberis at a higher 34%, MER expects this to normalise to 20-25% (in line with 6-year mean of 25%) in 2014 due to less successful landbanking strategies year-to-date.
 
MER has adjusted upwards their 2013E new home sales to 15,200 units (previously 14,500 units) to factor in a better-than-expected Nov 13, which equates to a YoY decline of 32%. The key attractions of buying properties, which are negative real interest rate and positive carry, will diminish in 2014 due to lower inflation and heightened difficulty in securing tenants unless asking rents are lowered. Coupled with the Total Debt Servicing Ratio (TDSR) and rising vacancies, MER is forecasting new home sales of 14,000 units (-8% YoY) in 2014, with a 4% drop in overall private residential prices underpinned by high-end (-5%), mid-range (-4%) and mass market (-3%).
 
Launch update. While MER’s estimated 6-month launch pipeline is at a sizeable 8,000 units, listed developers could delay some of their projects should their landbanks continue to decline and buying sentiments taper off.
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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. CapitaLand and CapitaMalls Asia.
 
MER’s ratings
MER has an Outperfom rating on both CapitaLand and CMA, with a 12-month target price of $4.11 for CapitaLand and $2.40 for CMA.

Source: Macquarie Research - 18 Dec 2013