Singapore Property: Residential demand still healthy

By Foo Sze Ming
Wed, 16 Jun 2010, 08:59:22 SGT

For the month of May, property developers launched fewer non-landed property units in comparison to April. The number of new launches fell 44% MoM to 1,119 units. The decline in new launches was seen in all three regions. A total of 1,065 non-landed property units were sold by developers in May, a sharp MoM decline of 50%. We view this as a result of the fewer units launched by developers, as well as the euro-zone crisis, which could have dented buying sentiments in the market. Nevertheless, take-up rate in May was still strong, at 95.2% and this supports our view of healthy demand for new property launches. We expect this trend to continue in the coming months, supported by the low interest rate environment. However, we are wary that any worsening of the euro-zone crisis could lead to a sharp slow down in property sales. We reiterate our NEUTRAL rating on the overall property sector, with a positive view on the residential segment.

New property launches fell 44% MoM in May. For the month of May, property developers launched fewer non-landed property units in comparison to April. The number of new launches fell 44% MoM to 1,119 units. Decline in new launches were seen in all three regions. The Rest of Central Region (RCR) saw the steepest MoM decline of 66.9% but this was after an exceptional month in April, when a record number of 1,128 units were launched in the region. Mass market projects dominated the new launches as 48.4% of the units launched were in the Outside Central Region (OCR). Some of the key launches in OCR included The Minton (Developers: Kheng Leong/Low Keng Huat; 300 units launched) and Flamingo Valley (Developer: Frasers Centrepoint; 120 units launched).

50% MoM decline in new units sold. A total of 1,065 non-landed property units were sold by developers in May, a sharp MoM decline of 50%. We view this as a result of the fewer units launched by developers, as well as the euro-zone crisis, which could have dented buying sentiments in the market. Nevertheless, the take-up rate in May was still strong at 95.2%, but the number of launched but unsold units edged up by 3.5% MoM to 3,365 units. In RCR, the large supply of new units that entered the market in April continued to be well-absorbed by the market. Sales of luxury properties (>S$2,500 psf) were also slower, with just 49 units sold (April: 91 units sold) and the most expensive property sold in May was a unit at Orchard View that fetched S$3,641 psf. Projects that achieved the highest sales in May were The Minton (Developers: Kheng Leong/Low Keng Huat; 204 units sold), Casa Aerata (Developer: Ecco Realty; 78 units sold) and The Cascadia (Developer: Allgreen Properties; 72 units sold).

Demand to remain healthy but euro-zone crisis a potential dampener. The sharp decline in property sales is not a major concern. We view the take-up rate as a more meaningful figure that reflects the supply-demand dynamics and unsold inventory trend in the property market. The strong take-up rate in May supports our view of healthy demand for new property launches and we expect this trend to continue in the coming months, supported by the low interest rate environment. However, with memories of the global financial crisis still fresh in people’s minds, we are wary that any worsening of the euro-zone crisis could lead to a sharp slow down in property sales. We reiterate our NEUTRAL rating on the overall property sector, with a positive view on the residential segment.

Disclaimer for Research Report

This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without our written consent. This report should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities mentioned herein. Whilst we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from a financial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives, financial situation or particular needs, before making a commitment to invest in the securities. OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations together with their respective directors and officers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking and other investment or securities related services for the corporations whose securities are mentioned in this report as well as other parties generally.

Privileged/Confidential information may be contained in this message. If you are not the addressee indicated in this message (or responsible for delivery of this message to such person), you may not copy or deliver this message to anyone. Opinions, conclusions and other information in this message that do not relate to the official business of my company shall not be understood as neither given nor endorsed by it.

For and on behalf of OCBC Investment Research Private Limited:

Carmen Lee
Head of Research

Co.Reg.no.:198301152E