Singapore Property Companies: Treading on Thin Ice

- February home sales (excluding ECs) cross the 1,000-mark (excluding ECs), falling only 8.9% m-o-m to 1,101 units

- Further government intervention could be on the cards

- Prefer commercial and diversified players such as Keppel Land, UOL and Singland

Recovering from last month's small blip. Considering the introduction of the punitive seller stamp duty and lowering the LTV ratio to 60%, take-up was relatively decent at above the 1,000 mark, supported by a good flow of new launches. Home sales dipped just 8.9% mom (excluding ECs sales) to 1,101 units despite the third and fourth round of property measures that were four months apart. The drop in sales is less than the 28% mom drop in September when the third round of measures was announced. Homes in Outside Central Region, where new launches were skewed to, continued to sell well representing about 67% of the new home sales.

Policy vs Liquidity Recent news flow post the property measures, seems to suggest that buyers' interests remain sanguine. New launches have achieved decent take-up and developers are taking this window of opportunity to raise prices, albeit at a slower rate. According to the media, CDL has sold 150 of the 200 units released for its 521-unit H2O Residences over the weekend. Separately, Far East Organization sold another 17 units at its 561-unit Waterfront Isle in the 1st week of Mar, bringing the total sales to 370 units. Both developers have adjusted their prices slightly higher by about 1%.

Precariously small but beautiful We combed through the new-sale caveats lodged since Jan 2010 and found that the proportion of buyers who bought small units < 800sf, climbed from an average of 24% early last 2010 (Jan – Jun 2010) to 34% in Dec 2010, before falling only marginally to 33% in Jan 11. Channel checks confirmed that smaller size units remained popular. Whilst this could be a function of developers downsizing unit sizes to make them more affordable, we question the sustainability of the demand in the longer term. URA guidelines on more stringent show flat requirements and site plans could be a sign that new measures could target this market segment.

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