Weekend Comment Mar 16: Higher Feb private home sales raises cooling risk

AS CONFIDENCE RETURNS to the market and consumers begin to spend more freely once again, local home buyers are returning to the showrooms, looking for smaller but more affordable units.

Despite the higher number of residential property launches, demand was robust with home sales up by 51% in the month of February compared to January.

In Feb, buyers snapped up a total of 3,138 units, the highest number since July 2009. Excluding the sale of executive condominiums (EC) during the month, private home sales rose by about a third to 2,413 units m-o-m with demand for both old and new properties going strong at 1.1 times.

 

Of the transactions that took place during the month, about 75% were within the Outside Central Region areas, with about 1,830 units sold. Demand for condo units at new launches such as Bartley Residences (174 units at $1,260 psf) and Casa Cambio (155 units at $1,393 psf) as well as older projects including Parc Rosewood (380 units at $994 psf) were among the strongest. Indeed, Parc Rosewood saw all of its smaller 1-2 bedroom units snapped up, while three EC projects -- Rainforest, Trilliant and Twin Waterfalls -- also saw strong sales.

 

Meanwhile, 527 homes were snapped up in the Rest of Central Region, with more than half the units sold taking place at the Guillemard Edge at $1,215 psf. Guillemard’s units -- which combine bedrooms with an office -- were sold out in February, “with significant investment interest due to its good facilities and small total quantum,” analysts at CIMB note.

 

HIGH POLICY RISK

However, the red hot property market could lead to another spate of cooling measures by the government in the months ahead, analysts warn. “We expect supplies to increase from the configuration shift in favour of smaller units,” writes CIMB in a March 16 note. “As developers dangle more carrots to entice buyers, we see strong volumes as warning signs for tightening measures.”

 

Analysts at DBS Vickers agree. With sales in January and February already breaching 4,200 units – which represents a third of their home sales estimates in 2012 – and sales in March looking good with at least four mass- to mid-market projects up for launch this year, the risk of the government implement tighter policies is high. The upcoming launches -- Seletar Park Residences and Ripple Bay and Palm Isle in Pasir Ris and Sky Habitat in Bishan -- are expected to add another 1,800 units to the market.

 

“Registration of buyers’ interests is currently ongoing for the preview of the projects and initial feedback seems to suggest take-up should be relatively decent,” DBS Vickers writes. “Meanwhile, increasing number of public and private housing completions should accelerate from 2H12 and could be a drag on price outlook. Hence, we are maintaining our expectation for a 5% drop in average selling prices for this year.”

 

In that light, the brokerage is recommending buys on CapitaMalls Asia, CapitaLand and Global Logistic Properties to ride out the potential dip in the property market. “Given the higher risk in the residential sector now, we would avoid stocks with greater residential exposure and prefer those with non-residential or diversified focus,” they write.