Sep 2012 had the highest sales in 6 months; sales YTD has already exceeded our full year estimates. Developers sold a total of 2,621 private residential units (excluding ECs) in September 2012, the highest in 6 months. This was a sharp spike of 84% MoM, which we attribute to 1) pent'up demand following the 'hungry ghost' month; 2) a near'double of 98.9% MoM of new units launched; and likely 3) higher speculation activity on expectation of rising property prices following news of unlimited QE dated 14 Sep 2012. Total sales in 9MCY12 was 18,226, which had exceeded our full year estimate of 18,000 for 2012. We raise our estimates by 22% to 22,000.

Unit sales grew most in OCR ' 132% MoM.  Sales growth was mainly driven by those from the OCR. Sales growth in CCR paled in comparison  at 15% MoM, whilst that of RCR contracted by 16% MoM. Large mass'market projects launched in the month'Eco (748 units), Kovan Regency (393 units) and Riversails (920 units) ' were well'received with 54%/94%/22% take'up rates.

New cooling measure unlikely to put a damp on demand, but will keep buyers with higher credit/default risks out of the game. Sep's strong sales and rising average tenure of new bank loans likely brought about the new cooling measures'which were in the form of loan tenure caps, and higher LTV ratios for >30'year bank loan tenure or loans extending beyond the retirement age. Cooling measure keeps out 2 main types of buyers: 1) middle'aged or older, cash'trapped upgraders/speculators; and 2) speculators of any age whose cash margins (rental income  'monthly debt installments) will be diminished with a shorter loan tenure, albeit with the same 80% LTV ratio. We think this cooling measure could be a good safeguard against asset bubble risks, by keeping property buyers who have higher credit/default risks (those who have inadequate cash on hand and low future potential income) out of the game.

A crash in property prices unlikely; next few months are crucial. We are more inclined to think that a crash in property prices is highly unlikely, because major property demand determinants in Singapore seem strong. Demand is a major function of Singapore's economic foundation, demographics, plans and the macro environment'population to hit 6mil in  2016 (~3% CAGR), low unemployment rates (2%), a growing GDP per capita (3.7% 5'yr CAGR), a low interest rate environment and high liquidity. We take the view that unless there are major demand shocks, a crash in property prices is unlikely. The next few months will be crucial in judging demand and the overall impact of the cooling measure on prices.

Buy into the resilient luxury property play'SC Global (S$1.98, BUY). We like SC Global for its concentrated exposure in luxurious residential property, a segment that we think will be least a'ected by the cooling measures and will continue to have the most resilient or consistent demand. We transfer the property coverage from Lau Wei Chong to Sarah Wong 

Source: AmFraser