The Urban Redevelopment Authority (URA) announced that June 2014 new home sales fell 68% month on month (MoM) and 73% year on year (YoY) to 482 units, reversing May 2014’s 95% increase yesterday. Including executive condominiums (ECs), 531 units (-66% MoM, -75% YoY) were sold. 1H14 new home sales of 4,476 units represent a YoY decline of 55%. Macquarie Equities Research (MER) released a research report on the same day stating their preference for developers with less local exposure.

Impact
The only 2 new projects launched saw subdued demand, namely 469-unit The Crest (35 units at S$1,682 psf; 7% take-up) and 222-unit Trilive (19 units at S$1,605 psf; 9% take-up). The top 2 sellers came from projects launched earlier, namely Coco Palms (55 units at S$1,014 psf) and The Panorama (49 units at S$1,287 psf).
 
Mass market and mid-range deteriorated, as sales in Outside Central Region (OCR) and Rest of Central Region (RCR) fell by a respective 68% MoM and 67% to 318 units and 167 units. However, Core Central Region (CCR) improved 12% to 46 units. OCR, RCR and CCR accounted for 60%, 31% and 9% of total sales, respectively. 12% of units were transacted below S$1,000 psf, with 59% (S$1,000-1,500 psf) and 29% (S$1,500-2,500 psf).
 
Secondary transactions fell 17% MoM to 406 units, representing the second consecutive month of decline after May 14’s -8%. Resale and subsale transactions were down 14% and 37% to 374 units and 32 units, respectively.
 
MER expects new home sales to decline 33% YoY to 10,000 units in 2014E, due to 2 main factors: (1) the government is unlikely to relax its existing cooling policies in the near term; and (2) continued price declines, albeit marginal and rising vacancies, will prompt prospective buyers to adopt a wait-and-see approach. While developers appear to be expediting their launches, MER expects moderate initial take-up of 20-30% unless generous price discounts are offered. MER expects overall prices to fall 7% YoY in 2014E, underpinned by high-end (-10%), mid-end (-7%) and mass market (-5%).
 
MER’s outlook
In view of declining landbanks, narrowing pre-tax margins and price declines in 2014, MER prefers players with less Singapore residential exposure, i.e. Global Logistics Properties and CapitaLand. SREITs have risen 7.9% YTD, with office the top performer at +14.0%. While office SREITs continue to offer 7% total return, MER sees more share price upside from industrial and retail SREITs. MER’s top picks are Ascendas REIT, Mapletree Logistics Trust, CapitaMall Trust and Mapletree Commercial Trust.

Source: Macquarie Research - 16 Jul 2014