Cozy condos: Executive condo sales up 21% to 1,362 units

July sales firm, but focus is on Aug and beyond 21% increase in non-landed private homes sold. A total of 1,386 private residential homes and 568 EC units were sold in Jul 11. For a like-for-like valuation, we focus on the nonlanded private homes (excluding EC) market, where sales increased 21 MoM to 1,362 units.

The pace of units launched, however, was down 3.5% MoM to 1,420 units. The inventory of launched and unsold inventory in the market tracked up at a slower pace to 4,783 units - about 4 months of sales at the current rate.

Less bullish than headline number suggests. The key dynamic behind the MoM increase is a whooping 125% MoM jump in RCR sales to 510 units, mainly due to the successful launches at Skyline Residences (167 units sold) and Thomson Grand (108 units sold). Market talk is that very attractive mortgage packages (SIBOR + 0) were offered at the Skyline launch, which may have skewed sales upwards.

Overall, we think that the tone of the property market is less bullish than the headline increase suggests. At the main OCR segment, which constituted 54% of total sales, we saw a 7.4% MoM decline in sales. Sales at the CCR segment increased marginally to 117 units in Jul 11 from 105 units in Jun 11.

Undercurrent of strength in buyer demand. That said, the level of sales in Jul11, at above 1k units per month, continues to indicate an undercurrent of strength in buyer demand. We note that only 30% of units sold in Jul 11 were attributed to projects that were newly launched in the month.

In contrast, 40% to 50% of sales from Apr 11 to Jun 11 were attributed to newly launched projects (Apr 11: 48%, May 11: 40%, Jun 11: 50%). This implies that, in spite of the milder effect of new project launches in Jul11, sales were supported by continued interest at older projects.

Market focus has moved on to Aug 11 and beyond. We believe that the market is likely to view Jul 11 sales figures as positive. However, little weight could be placed on Jul 11 numbers since the focus has l ikely moved on to global uncertainties in recent weeks and the impact on the residential property sector in Aug 11 and beyond.

We expect developers and buyers alike to remain cautious for the remainder of 2H11 and sales volume to soften going forward. We continue to prefer UOL, which has limited domestic residential exposure and expect the group to replenish landbank as the acquisition environment cools down further. UOL is rated as a BUY with a fair value estimate of S$5.48 (at 20% discount to RNAV).