Property: Pre-sales momentum continued to slow in June

By Meenal Kumar
Fri, 16 Jul 2010, 08:47:36 SGT

Property developers stayed cautious in Jun 2010, with launches of non-landed property units falling 10.9% MoM to 991 units, the lowest number in 2010. Buying sentiment also ebbed with sales at the lowest level for 2010, down 23.2% MoM to 804 units. Part of the decline can be explained away by the limited launch activity as well as the school holidays and “World Cup effect”. Nevertheless, we believe buyers have had a bit of a reality check with headlines dominated by the mixed economic data in the US and the sovereign debt crisis in Europe. Cumulative unsold inventory of 3,424 units (non-landed only) takes us back to March 2009 levels. There has been some positive newsflow in Jul, however, with strong sales reported for 368 Thomson (developer: City Developments) and Terrene (developer: UOL Group). With a change in analyst coverage, we are reviewing our assumptions and estimates for the property companies under our coverage. As such, our previous ratings are under review. Still, we retain our NEUTRAL view on the broader property sector.

Launches continue MoM decline. Property developers stayed cautious in Jun 2010, with launches of non-landed property units registering the second consecutive month-on-month decline. The number of launches fell 10.9% MoM to 991 units, the lowest number in 2010. The biggest decline was in the city or Core Central Region (CCR), where the number of units launched plunged 45.6% MoM to 111 units, also the low for 2010. Launches in the suburbs or Outside Central Region (OCR) also fell 19.7% MoM to 435 units. Conversely, launches in the city fringe or Rest of Central Region (RCR) increased 21.6% to 445 units. Key projects releasing inventory in Jun included The Cascadia (RCR, developer: Allgreen Properties), The Minton (OCR, developer: Kheng Leong / Low Keng Huat), and Waterfront Gold (OCR, developer: Frasers Centrepoint / Far East).

Sales of new units also on a downtrend. Buying sentiment also ebbed with sales at the lowest level for 2010, down 23.2% MoM to 804 units. The monthly take-up (units sold in Jun versus units launched in Jun) rate of 81.1% was also the lowest for the year. The biggest decline in sales was in the city fringe or Rest of Central Region (RCR), with just 275 units sold (-38.5% MoM). Suburban property or OCR was the “best” performer with the smallest 7.5% MoM decline to 396 units sold. Projects with the highest sales in Jun included The Minton, La Brisa (RCR, developer: Tiara Realty), and Waterfront Gold. Part of the decline can be explained away by the limited launch activity as well as the school holidays and “World Cup effect”. Nevertheless, we believe buyers have had a bit of a reality check with headlines dominated by the mixed economic data in the US and the sovereign debt crisis in Europe.

Rising inventory a concern. Cumulative unsold inventory is now at 3,424 units (non-landed only), up 7.6% MoM. This is not only the highest level for the year, but also takes us back to March 2009 levels (which recorded 3,432 units). There has been some positive newsflow in Jul, however, with strong sales reported for 368 Thomson (developer: City Developments) and Terrene (developer: UOL Group). With a change in analyst coverage, we are reviewing our assumptions and estimates for the property companies under our coverage. As such, our previous ratings are under review. Still, we retain our NEUTRAL view on the broader property sector.

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