Strong January home sales: A blip or a trend?

Analysts see weakness ahead.

URA reported that a headline total of 2,269 new private homes were sold in Jan 2013, which was up 2% MoM and 9% YoY.

Excluding EC and landed-units, 2,003 units were sold in the month or 47% MoM rise and 7% YoY with a sustained above- par take-up rate at 111% (versus 144% in Dec 2012).

Here is how analysts view the results:

LOCK Mun Yee, analyst DBS Vickers

The strong demand was recorded on new offerings largely in the first half of the month (prior to the government’s cooling measures) while subsequent aggressive marketing and promotion activities by developers in the form of price discounts and rebates after the cooling measures also led to continued interest.

Going into February, we expect primary home sales to slow down during the Lunar New Year. In the light of a policy driven environment, we expect developers to remain cautious post the latest round of measures and are likely to time their launches to market and continue to provide attractive discounts and rebates.
This will likely cap upside to prices. As such, we continue to maintain our projection for a 5% drop in private home prices this year.

Donald Chua, analyst, CIMB

The numbers were swayed by large launches prior to the roll-out of tightening measures, but the large number of units sold at projects after discounts reflected resilient demand and the effectiveness of price cuts/rebates.

We expect new upcoming launches to price units at a discount to/on par with neighbouring projects in terms of total quantum, and for substantially unsold older projects to introduce rebates to move units.

We think volumes persistently in excess of 2,000 units a month should continue to draw the attention of policy makers, and additional ABSD/tighter LTV rules are unlikely to be removed in the near term.

Wilson Liew, analyst MayBank KimEng

As the most recent round of cooling measures took effect only on 12 Jan, we believe these sales figures are unlikely to reflect true demand. Figures likely to be skewed.

The bestseller for the month was the 810-unit La Fiesta, by unlisted developer EL Development. The developer had brought forward its launch date and extended sales hours the night before the cooling measures took effect, with many buyers rushing to beat the deadline. Consequently, La Fiesta registered 404 units sold in January, at a median price of SGD1,163 psf.

This was followed by Q Bay Residences, which was the first project to be launched post-cooling measures. With some clever marketing and reported discounts of up to 22%, Far East Organization (FEO) sold 372 units at the 630-unit project at a median
price of SGD1,012 psf.

Considering that January’s figures are likely to include forward demand from investors looking to beat the cooling measures’ deadline, we reiterate that the feat is unlikely to be replicated in February and March, although it is still too early to determine if the cooling measures have indeed worked.

Nonetheless, we expect the marginal investors to be priced out of the market already, given the onerous cash requirements and higher Additional Buyer’s Stamp Duty. We estimate full-year new home sales to be between 14,000 and 16,000 units

Eli Lee, OCBC Investment Research

We expect Feb 2013 sales figure to fall MoM due to the traditionally quiet Chinese New Year season and a limited number of new launches. Further ahead, we see sales volumes in 2013 likely moderating 30%-50% from 2012 levels due to:

1) the impact of the latest measures, and 2) the effect of coming off a high base in 2012 (22.5k sold, excl. ECs/landed).

That said, an 11k-16k annual sales figure still points to a fairly firm market by historical standards.

Immediate data-points ahead are the launches at Trilinq (IOI Group) near the Clementi MRT Station and Urban Vista (Fragrance Group) near the Tanah Merah MRT station.